How long can Romania's economy last without a stable government. Economist Andrei Caramitru: “The story can end quickly”
The political crisis begins, slowly but surely, to turn into an economic crisis. The state borrows at “junk” interest rates, the leu fell more steeply on Thursday than when Călin Georgescu reached the second round of the presidential elections, and a prolonged period without a government with full powers risks causing damage that will be difficult to repair in the years to come.
PHOTO: Inquam Photos
Romania is going through a critical moment, where instability at the highest level adds a huge pressure on the shoulders of citizens and entrepreneurs. Inflation reached 9.9% in March 2026, a record at the level of the European Union. In parallel, the costs at which the state borrows rose suddenly to 7.4%, and the exchange rate exceeded 5.2 lei for one euro on the interbank market. Without a clear direction and without an executive capable of making decisions, the rating agencies and international financial institutions look with distrust towards the local market, and the bill of this blockage risks becoming unbearable for the state budget.
Without a clear, publicly assumed direction, and without an executive capable of making firm decisions, international rating agencies and large financial institutions view Romania with increasing distrust.
“We, in the current situation, had a financing contract with the European Commission and international banks and rating agencies, based on some mandatory measures that we had to take. We were in quasi-bankruptcy from the moment we reached almost a ten percent deficit. It was a kind of IMF agreement, but much lighter, signed and agreed with all the entities that finance Romania. At this moment, this contract was broken by us, we depend on their money. Basically, no we no longer have any real financing for Romania: money no longer comes in, but goes out”, explained the economist Andrei Caramitru for “Adevărul”.
Further, the economist draws attention to the huge capital requirement that the state must constantly raise just to stay afloat, pay current obligations and avoid collapse.
“We have 200 billion invested in government securities plus 100 or so billion in deposits, 300 billion liquid lei. Half of the government securities in lei are owned by international investors. If they decide that they no longer want to be exposed in lei, the story ends quickly. We don't even have enough euros in Romania to be able to move lei to euros. The state reserve is 60 billion, when you have 300 billion liquidity that can move”, detailed the specialist.
The only alternative to a government with a clear reform agenda is emergency intervention by international financial institutions. These institutions will certainly demand drastic austerity measures, much more severe than the adjustments initially discussed.
“Until you solve the deficit problem much more aggressively than what has been discussed, we are probably talking about hundreds of thousands of people who will lose their jobs, tens of thousands of companies who will close, just like what happened in 2008. We can't say that it won't be terribly hard when the government goes bankrupt. It will be a brutal adjustment through the markets and the International Monetary Fund, not that they are bad, but we go to them because we need money, because that we are in the pit”, he points out.
Business environment warnings
Employers and large business confederations in Romania confirm the severity of the situation described by analysts and bring to the fore numbers, but also perspectives that are at least as worrying. The representative organizations believe that the lack of concrete action and the permanent chaos on the public stage translate into heavy financial losses for absolutely all companies, from small workshops to large corporations.
The representatives of the Confederation of Employers Concordia estimate huge direct and measurable costs if the political instability becomes permanent, and the governors do not find a way of compromise and dialogue. A failure of the plan to reduce the budget deficit would inevitably lead to the loss of the country rating recommended for investment. This dark scenario, through which the neighboring state Hungary has already passed, would generate additional expenses with interests of over one hundred billion lei until the year 2030. This money will have to be recovered in some way from citizens and companies, either through an increase in value added tax by three percentage points, or through a sudden increase in all other taxes. It is a move that the real economy simply cannot afford at this moment of maximum fragility.
“First of all, political instability has a direct and measurable economic cost. It can be seen in the interest rates at which the state borrows, in the exchange rate, in the loan rates and in the PNRR funds, which Romania risks not having access to. Romania is already paying a daily penalty for the instability and the overlap of crises it is going through. The interest rates at which the state borrows have risen sharply, by almost one percentage point compared to the level in February, from 6.4%, to 7.31%. If the instability persists, this means higher costs for companies and higher monthly rates for the population. If this crisis compromises the reduction of the country's investment grade rating, Hungary has gone through a 3 percentage point increase in financing costs. Applied to Romania, such a scenario would generate additional expenses billion lei in 2026, +12 billion in 2027, +22 billion in 2028, +30 billion in 2029 and +33 billion in 2030, i.e. over 100 billion lei in five years”, the Confederation of Employers Concordia submitted.
Along the same lines of extreme alarm, the National Confederation of Women's Entrepreneurship brings up how the macroeconomic crisis is hitting directly at the grassroots level of society and at the level of small businesses. President Cristina Chiriac mentions that the economy is the very breath of a country, and the state has a fundamental obligation to stop unnecessarily complicating the existence and efforts of those who invest and work honestly. The accumulated pressure from the completely out of control costs of energy, fuels and from the sharp decrease in purchasing power hits entrepreneurs head-on. They represent the driving force of the national economy and the main employer at the country level.
“This is how the pressure on the real economy is built: not by a single shock, but by overlapping costs that are passed on from one link to another. More expensive or harder-to-predict energy raises the price of production and day-to-day operation. Fuel amplifies this pressure through transport, distribution and logistics, that is, through everything that makes a product reach from producer to consumer. Firms thus end up caught between two constraints: either they transfer part of the costs in prices, fueling inflation, or absorb them in smaller and smaller margins, reducing their capacity for investment, employment and development. At the same time, households react rationally: when prices rise faster than incomes, consumption is restricted, and the buyer becomes more careful, more selective, more defensive.” warns the confederation.
