The mathematics of extinction. The demographic Ponzi scheme we're running right now, stealing our own hat

Romania is running a demographic Ponzi scheme, and the numbers are now mature enough to be told with precision.

Romania is getting old and empty. We've known this for twenty years. What we have never seriously discussed is what this means in terms of money, contributions, pensions and the choices we can no longer put off.

One pensioner, four workers. Then two. Then one.

In 1990, a Romanian pensioner was supported, in terms of contributions to the public system, by approximately four working people. Today, the ratio is almost two to one. According to Eurostat projections, Romania's demographic dependency rate — that is, the number of people over 65 compared to the active population will double in the future.

Translated into concrete language: if today two workers support one pensioner, in the future the same two workers will have to support two pensioners.

The total population will decrease from 19.04 million in 2022 to 15.02 million in 2070, according to the same projections. It's not a pessimistic working scenario — it's the baseline scenario, the one with no additional negative surprises.

The pension system: a contract that no longer has anyone to honor

Romania operates on a pay-as-you-go pension system: the contributions of those who work today pay the pensions of those who retired today. There is no accumulated fund. There is no individual account that grows. There is a continuous flow of money between generations—a flow that depends crucially on the ratio of payers to takers.

When this flow goes out of balance, there are, mathematically, four options: increase the contributions of those who work, reduce the value of pensions, raise the retirement age or borrow more to cover a larger budget deficit

Romania postponed all four scenarios, oscillating between partial measures, postponements and electorally motivated pension increases.

The result is visible in the current figures. Romania's budget deficit reached 9.3% of GDP in 2024 – the largest in the European Union, and increases in public pensions and salaries were explicitly identified by the IMF and the European Commission as the main factors of this deterioration. Pension spending accounted for 8.3% of GDP in 2023, with a clear upward trajectory in the coming years amid the entry into force of the new pension law.

The European Commission and the IMF warn that, without further action, the deficit will remain around 5% of GDP until 2030, with public debt rising to 70% of GDP. These are not crisis scenarios – they are central projections, considered reasonable.

Emigration: the tax cost of the one who left

The public narrative about Romanian emigration focused almost exclusively on the human dimension: separated families, empty villages, departed caretakers. The fiscal dimension has remained in the shadows, although it is just as real.

Romanian emigration was not random from a demographic point of view. It was concentrated in the 25–45 age cohort — precisely the people at the peak of their tax contribution. The one who leaves at the age of 30 and works for twenty years in Germany or Italy does not contribute to the Romanian pension system during that period. If he returns at 60 and retires at 65, he generates an obligation for the Romanian system without being adequately covered by his own contributions.

Remittances – money transfers sent home by Romanians in the diaspora – supported domestic consumption for decades. But remittances are consumption income, not investment capital, and do not enter the social contribution system. They alleviate individual poverty without solving the structural imbalance of the pension system.

A question that economists raise in other contexts, but which is missing from the Romanian debate: is the increase in GDP per capita recorded in the last twenty years partly a statistical artifact? If the numerator — economic output — increases, but the denominator — the working population — decreases through emigration, the per capita figure looks better than the actual situation in terms of fiscal sustainability.

What others have done: three lessons from Europe

Romania is not the only country that went through an accelerated demographic crisis, but it is among the few that systematically avoided drawing conclusions from the experience of others.

The Baltic states – Estonia, Latvia, Lithuania – lost between 15% and 25% of their population after joining the EU in 2004, through a wave of emigration similar to the Romanian one.

Their response included early structural reforms of the pension system (switching to individual accounts, combining the public and private pillars), raising the retirement age and, significantly, an active policy of attracting skilled immigrants from outside the EU. None of these measures were popular. But they all turned out to be necessary.

Poland started from the same point in 1989, but chose a different calendar for pension reform. The three-pillar system implemented at the end of the 90s — mandatory contributions to the public fund, private and voluntary funds — created a diversification of risk that Romania partially imitated, without bringing it to the end: Pillar II was frozen, reduced, politically reoriented several times.

Japan is the extreme case—an advanced economy that entered the deepest demographic transition and served as a global laboratory. The conclusion is not that aging is inevitably catastrophic, but that it requires early and sustained adjustments: higher productivity per worker (investment in automation and education), controlled immigration, pension systems with parameters anchored in demographic reality, not in the electoral cycle.

The ignored lever: immigration as a fiscal tool

There is one lever that Romania has hardly discussed publicly in economic terms: labor immigration. Not as a controversial social phenomenon, but as a fiscal variable with a relatively simple calculation.

An immigrant who arrives at the age of 30, works for thirty years in Romania and contributes to the public system, generating tax revenues without having consumed public resources in the first years of life – education, pediatric health, allowances. Its net fiscal value, calculated over a full life cycle, is substantially positive. This isn't an ideological argument for or against immigration—it's an equation.

Several Central and Eastern European economies—including the Czech Republic, Poland, Hungary—began importing labor from Vietnam, Nepal, Sri Lanka, the Philippines on a significant scale. Not because they have given up their cultural identity, but because labor shortages have become real bottlenecks in the economy. Romania has started to follow the same path, but without a coherent policy and without a serious public debate about what this means in the long term.

What we choose to put on the public agenda

Demographics are not new. The reports of Eurostat, the World Bank, the European Commission and the IMF describe the same picture for many years. What's missing isn't the information—it's its translation into a meaningful public conversation.

The Romanian press treats demography as a sad social news and leaves it alone. Public finances are covered as an immediate political drama – what percentage of GDP is the deficit, what Brussels says, what the Parliament voted. The connection between the two – the fact that demographic deterioration is one of the structural forces that make the fiscal crisis inevitable – rarely appears articulated in the same place.

Meanwhile, every year that the dependency ratio rises without a structural response means that the future adjustment will be tougher. The parameters of the pension system — retirement age, level of contributions, indexation — cannot be kept indefinitely out of demographic reality. Not because it is a political option, but because arithmetic does not negotiate.

Romania is not the first place in the world to face this problem. The small but real advantage of the latecomer is that he can see what worked and what didn't. The downside is that he's already lost time.