Bolojan's legacy after 10 months: the reform of magistrates' pensions and the biggest fiscal correction in Europe, at the price of a VAT increase
Ilie Bolojan spent 10 months in the position of prime minister, during which the Government had to adopt tough actions to reduce the budget deficit, including the increase of the standard VAT rate, from 19% to 21%, a measure due to which he came into collision with the president Nicușor Dan. The executive also adopted the public administration reform, which provides for the dismissal of over 10,000 budget officers, as well as the one regarding the special pensions of magistrates.
Ilie Bolojan spent 10 months at the head of the Government PHOTO Mediafax
On June 23, 2025, Ilie Bolojan stepped into the Victoria Palace as prime minister. Romania had finished the previous year with a record budget deficit of 9.3%, and was rapidly moving towards the “junk” category of the financial rating agencies. The first measures aimed at increasing budget revenues by increasing VAT by two percentage points, from 19% to 21%, respectively from 9% to 11% of the reduced rate. Excise duties on fuel, alcohol and tobacco were increased, and dividend tax rose from 10% to 16%, and wages and pensions were frozen. The electricity price cap scheme was canceled on July 1, which removed an important burden for the state budget, but generated 70% price increases for consumers.
Health contribution for several categories of beneficiaries, including pensioners
A topic that has generated intense debates in the public space is the introduction of the social health insurance contribution (CASS), at a rate of 10%, applied to several categories of beneficiaries. Pensioners with incomes exceeding the threshold of 3,000 lei experienced a decrease in net income. The measure was adopted in the context of record pension increases in the 2024 election year, following the recalculation process, the contribution being applied exclusively to the amount that exceeds this ceiling. Among the categories of people for whom the exemption from the payment of the health contribution was eliminated were parents who benefit from leave and child-rearing allowance, the unemployed, persecuted people (beneficiaries of some reparative laws), respectively the beneficiaries of social benefits such as the minimum income of inclusion, but also for co-insured.
And several categories of budgets had their incomes cut. On June 30, the Government approved an Ordinance on capping at 300 gross lei the increase for dangerous or harmful conditions. Previously, this increase could reach up to 15% of the basic salary, but no more than 1,500 lei.
The reduction in the number of scholarships has angered students
And some of the teachers lost money in salary, as the didactic teaching norm increased from 18 to 20 hours a week. Also, from August 1, merit scholarships were awarded to a maximum of 15% of the students in a class, who have at least an average of 9. Practically, in a class of 30 students, the number of scholarships was reduced to a maximum of 5.
Until then, these were granted to 30% of the students in a class, a fact that generated revolting situations in which students in the corije stage became beneficiaries of merit scholarships. At the same time, the Bolojan government established that the 90% discount offered to students for train travel should only apply to routes between the city of residence and the one where the university is located.
At the end of August, the Government pledged its responsibility in the Parliament on the second reform package. It provided, among other things, the reduction of the number of members of the boards of directors of state companies, as well as the restructuring of the regulatory institutions – ASF, ANCOM and ANRE – by reducing salaries by 30% and the number of employees.
Also included in Package 2 was the increase in property tax by switching to a system based on the market value of the property. The measure entered into force on January 1 and generated tax increases of approximately 70%, a fact that generated discontent in society.
The budget deficit decreased to 7.9% of GDP
The effects of the austerity measures were seen immediately. The budget deficit fell significantly from 9.3% of GDP in 2024 to 7.9% of GDP in 2025, which represents a correction of 1.4 percentage points of GDP, above the initial expectations of markets and international institutions.
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The data published by Eurostat show that Romania has achieved one of the largest fiscal corrections in a single year among the economies of the European Union. Comparatively, other Member States have recorded more moderate adjustments or maintain high deficits, such as Poland with a deficit estimated at around 7.3% of GDP, Belgium with 5.2% of GDP and France with 5.1% of GDP, while Italy has made an adjustment of around 0.3 percentage points of GDP.
Romania remains, however, the state with the highest budget deficit in the European Union, which makes it necessary to continue the fiscal consolidation process and maintain strict budgetary discipline. The average deficit at the level of the European Union was around 3% of GDP, significantly below the level recorded by Romania.
However, Romania could not avoid entering into a technical recession. According to the National Institute of Statistics, in the 4th quarter of 2025, compared to the previous quarter, the Gross Domestic Product decreased by 1.9%. Compared to the same quarter of 2024, the Gross Domestic Product registered a decrease of 1.6%.
Also, the INS significantly rectified the previously announced data, with decreases of -0.4% for the first two quarters of 2024, a technical recession being recorded in that period as well. Also, the first quarter of 2025, initially announced with an increase of 0.1%, was corrected to -0.6%.
Dismissals of budget officers
After several months of tense negotiations in the governing coalition, the Government adopted, in February, the Emergency Ordinance for the reform of the administration. The measures will lead to the abolition of approximately 45,600 posts, of which almost 12,794 are currently filled. The stated goal is to reduce expenses by over 4.6 billion lei in the next 2 years.
In addition to job cuts, the normative act recalibrates the number of local police officers, depending on the size of the locality or county: one post for every 1,200 inhabitants for communes, cities and sectors of the Capital and one for every 6,500 inhabitants for counties and the municipality of Bucharest. A locality with less than 4,500 inhabitants can establish a local police service only if it finances it from its own revenues.
The Ordinance provides for the reduction by one of the number of personal advisers from the office of the dignitary at the level of the central public administration and the reduction of the number of advisers from the level of the local public administration depending on the number of inhabitants of each administrative-territorial unit. The measure will generate a reduction of over 6,100 positions of personal advisers from the offices of dignitaries in the central and local administration, from a total of 10,126 positions now provided for in the organization chart at the national level.
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The reform of the special pensions of magistrates, the great victory of Ilie Bolojan
Although, from an economic perspective, the effects are relatively limited and will be felt in stages in the coming years, the most significant measure of social justice promoted by the Bolojan government was the reform of the special pensions of the magistrates, insisted on in the public sphere. After 3 months of legal battle, the Constitutional Court finally rejected the referral made by the High Court of Cassation and Justice, led by Lia Savonea, thus opening the way for the law to come into force.
The normative act gradually increases the retirement age for magistrates up to 65 years similar to the public pension system and gradually introduces the condition of 35 years total length of service. The law also establishes a pension amount of 55% of the calculation base represented by the average of gross monthly employment allowances and increases for which social insurance contributions made in the last 60 months of activity before the retirement date were withheld, with the limitation of the net amount of the service pension to 70% of the net income had in the last month of activity, before the retirement date.
