Brussels – The economic situation of Bucharest is increasingly worrying the European institutions. Growth is at its lowest, the budget deficit is the highest in Europe, and the cost of borrowing exceeds 7 percent. At the end of November, the European Commission will present notes on the Romanian deficit situation. One possibility is to block part of the Recovery and Resilience Plan funds, as well as cohesion funds. In the context of negotiations between Brussels and Bucharest, the Bucharest office of the European Public Prosecutor’s Office unveiled an embezzlement of some 135,000 euros of EU funds.
The economy is in the red
The Eastern European country’s structural problems are numerous and call into question the European path started in 2007. In 2024, Romania’s budget deficit was the highest in the entire European Union, at 9.3 percent. At the end of the year, following a painful austerity package, the government expects a drop to 8.4 percent; however, EU obligations require it to be below 3 percent. To finance the deficit, Romania could turn to the markets, but the cost of borrowing remains high: a ten-year government bond offers interest rates above 7.3 percent, a threshold similar to that of Italy’s BTPs in November 2011, when Prime Minister Silvio Berlusconi resigned.
Growth can only be stagnant. According to forecasts, Romania is expected to grow by only 0.8 percent this year and 1.7 percent in 2026, which are relatively low numbers for a country that is still relatively poor. The only reassuring figure concerns the debt-to-GDP ratio: Romania still has room to take on debt, with a ratio of 54.8 percent, very low compared to Italy (138 percent) and France (113 percent). Greece, during the eurozone crisis of 2009, had a debt-to-GDP ratio of around 130 percent.
Silvio Berlusconi and Mario Monti, during the changeover of government (16/11/2011) (Photo: Imagoeconomica)The cancelled meeting
What brought the Romanian issue into the spotlight was a cancelled meeting. Yesterday, November 6, three parliamentary committees were scheduled to meet with Commission Vice-President Raffaele Fitto and Commissioner for Economic Affairs Valdis Dombrovskis. According to a parliamentary source consulted by Il Mattinale Europeo, it would have been “inappropriate” to publicly discuss Romania’s fiscal problems when the European Commission is busy negotiating the excessive deficit procedure.
Brussels’ calculations
The European Union is doing the math to figure out how to stabilize Bucharest’s economy. On November 25, the Commission will release its assessment of Romanian measures within the framework of the excessive deficit procedure. The Berlaymont Palace will clarify how Romanian public spending cannot grow by more than 2.8 percent. Otherwise, the government of Prime Minister Ilie Bolojan risks having its European funds suspended. At stake is part of the 50 billion between cohesion funds and the NRP.
The setback would be huge, as the growth estimates for 2026 are only positive thanks to the NRP money. However, due to corruption, long lead times, and administrative problems, the funds are only partially utilised.
During the negotiation period between Bucharest and Brussels, today’s news further exacerbates the crisis: The European Public Prosecutor’s Office in Bucharest has disclosed that the mayor of Sulina, a small town on the Black Sea, has allegedly misappropriated 135,000 euros from the Resilience Plan intended for the construction of mooring facilities. The works were declared finished before they even started; the equipment was installed only later. The mayor admitted his guilt in a deal with the prosecution and now faces up to seven years in prison.
Romanina Prime Minister, Ilie Bolojan (photo: European Council)
English version by the Translation Service of Withub