Romania is poised to lose €770 million in European Union funding due to ongoing political deadlock that has stalled legislation aimed at reforming public-sector wages and financially troubled state-owned companies. The European Commission set a deadline for these reforms by the end of June, as part of conditions tied to the Covid-19 recovery funds, which are available only through the end of 2024.
The political impasse began in May when the Social Democrats (PSD) withdrew from the ruling coalition, opposing the reform bills. Since then, no agreement has been reached on a new prime minister, leaving the government unable to move forward. President Nicuşor Dan has stated he will only appoint a prime minister who can secure enough parliamentary support to win a confidence vote, but current relations between PSD and the centre-right parties remain highly strained.
Siegfried Mureșan, the preferred candidate of the centre-right National Liberal Party (PNL), described the deadlock as a “political truth test” for Romania’s commitment to reforming a public sector inherited from the communist era. He argued the public-sector wage reform would address inequalities, reduce politically motivated privileges, and unlock the €770 million in EU funds. Mureșan also indicated that the episode has discouraged his party from future coalitions with PSD, which he criticized for cooperating with far-right factions to oust the previous liberal prime minister, Ilie Bolojan.
PSD defended its opposition by labeling the proposed reforms as excessively austere and argued that better terms should have been negotiated with the European Commission. The reforms directly challenge patronage networks that have long supported PSD’s influence over public administration and state-owned enterprises, where political appointments and subsidies remain prevalent decades after communism.
Among the state-owned firms facing difficulties is CFR, Romania’s railway operator, which is highly indebted and anticipated a loss of about €100 million in 2024. Its debt is projected to exceed €430 million by the end of next year. CFR has struggled to maintain and upgrade its aging infrastructure, with some services reportedly slower than in the early 20th century.
Deputy Prime Minister Oana-Clara Gheorghiu emphasized that without reform, these companies create economic "black holes" that hinder Romania’s growth. Public-sector wages currently amount to roughly €30 billion annually, and unions continue to demand increases that analysts warn may be unsustainable amid a budget deficit approaching 8% of GDP last year.
The political stalemate is occurring amid broader challenges, including economic pressures, security concerns related to the war in Ukraine and frequent drone incursions near the Romanian border, as well as rising energy prices connected to tensions in the Middle East. Analysts note that many Romanians view the country’s longstanding political elites as increasingly undemocratic and irresponsible, hindered by infighting at a critical juncture for national stability.
With parliament deadlocked and no clear path to forming a new government, Romania faces both immediate financial setbacks and prolonged uncertainty over structural reforms essential for its economic and political resilience.