Romania’s self-destructive austerity is the best gift the far right could hope for
Andrei Gudu
Romania’s government is facing a serious economic challenge: its budgetary deficit, the largest in the EU, is expected to exceed 8% at the end of the year. In order to tackle it, the government has started a crusade of austerity, cutting funding for the health, education and social services sectors. As always, these measures disproportionately hurt the most vulnerable of Romanians. Meanwhile, tax cuts to large companies and military spending going through the roof have undone all financial sacrifices made on the backs of the working class.
Evidently, the government’s actions have only led to popular resentment against the establishment, with the far-right benefitting most from this situation. In continuing this deeply unpopular – and ineffective – austerity program, the current government is poised to make the far-right a comfortable winner in the 2028 Parliamentary elections.
How did we get here?
Last year, presidential elections in Romania saw the meteoric rise of far-right candidates, with the independent candidate Călin Georgescu coming in first place in the first round. The second round never took place as the elections were annulled for alleged Russian interference, and Georgescu was banned from running. The new presidential elections organized again in May 2025 saw the unexpected victory of conservative independent Nicușor Dan in the face of far-right AUR candidate, George Simion. In the meantime, a sort of national unity government was formed by a wide coalition of all the parties in the Parliament meant to exclude the ones in the far-right.
The biggest challenge that the new coalition faced was a budgetary deficit that exceeded 9% of GDP last year and is projected to be over 8% this year. In order to reduce it, the government chose the path of austerity. Firing teachers and public sector employees, cutting public spending on health and the social system, reducing parental leave benefits, taxing pensions,
these are the measures that have been taken in the first months alone.
Unsurprisingly, while most of the population is set to suffer from the budget cuts, several sectors were spared the blight of austerity. The military saw promises for its budget to double over the next years, echoing Mark Rutte’s call for slashing the welfare state in favor of military spending . More so, the Romanian government signed a 2 billion dollars deal with Israel for the acquisition of air defense systems, indifferent to its complicity in genocide. Secret Services, seen by some as a sort of deep state more powerful than elected politicians, saw their budgets increase again, despite already being generously funded.
Last but not least, the government also passed tax cuts for businesses, such as cutting the 1% tax on corporate turnover, justifying that it will increase foreign investments.
Self-destruction for the establishment. Windfall for the far-right
Before all else, one thing must be made clear: Romania has a severe deficit problem not because it spends too much, but because it does not collect enough. In fact, when it comes to tax-to-GDP ratio, Romania is dead last in the EU (notwithstanding Ireland, which is a tax haven). That means that the money collected to the national budget through taxes out of the whole GDP is minuscule – only 27% in 2023, compared to a EU average of 40%. This translates to some of the worst funded educational and health systems in the EU, despite the national GDP seeing strong growth in the last two decades.
We’re not spending too much – in fact, we’re not spending enough. The problem isn’t that there is not enough money in the economy – Romania is actually a high income economy . The problem is that the state does not tax enough of it. And the main cause is not the corruption or the inability of fiscal authorities to collect taxes. It is because capital and wealth taxes are too low, significantly lower than the EU average. In fact, Romania’s backwardness and immense inequalities can be traced to this regressive system of taxation.
Not only does Romania not have a progressive tax system, but it punishes those who earn less and rewards high earners. A minimum gross wage earner of around 800 euros has to pay over 40% of it in taxes. A freelancer that earns a few thousands euros can legally evade those same taxes and pay a lot less in percentages (although, soon, even they will have to share more burdens of covering the budget deficit). As for the most millionaires, the state would be lucky to see a few percentages in taxes from them as tax evasion is the norm rather than the exception.
As much as political and corporate propaganda would want to convince you, Romania does not have an ”obese” state. For many companies, the country is a semi-fiscal paradise, with tax cuts and generous subsidies for some businesses, especially in the energy sector. But there is a whole other story when it comes to how it treats its day to day citizens.
Taking the recent austerity measures in the education system as an example, the government made major cuts, firing substitute teachers, merging schools, eliminating scholarships and other forms of aid. Despite disproportionately hurting the rural and the poor, the savings were up only to 74 million euros, that is 0,02 % of GDP. At the same time, cutting the 1% tax on corporate turnover alone will lead the state to lose around 1 billion euros in revenues. More than 13 times what was saved with education cuts. At the same time, the government can go deep into its pockets when it comes to the military, as it just recently bought a Turkish corvette for 223 million euros.
This approach has been criticised by several economists, some from the institutions that the government used to rely on for analyses. The head of the Romanian National Bank suggested that austerity should be avoided. The President of the Fiscal Council also stated that trying to fix the deficit through austerity is a fantasy.
It is clear that budgetary cuts are not the way to solve this, as thousands of academic papers and many failed experiments in other countries have proven so in the past. What Romania needs is to drastically raise its capital and wealth tax and create a progressive system of taxation. That way, it can re-start investing in reducing inequalities and regional disparities, which have exploded since the fall of socialism. Redistributing wealth helps development and brings prosperity. Wealth accumulation kills economic growth and brings stagnation.
Austerity not only hurts the economy and the working class, but it has also proven to be a windfall for far right parties. While support for the coalition parties has decreased, the Alliance for the Union of Romanians (AUR) has gone up in the polls. It now sits at 40%, up from 18% in the general elections in December 2024.
No one can predict the future, but if one was to choose the best-case scenario for the far right to win the general elections 2028, that would be it. Without a leftist party to capture the public dissatisfaction towards austerity, it is the far right that will capitalise on it. Although the far right is also in the pocket of capitalists and has an almost indistinguishable discourse when it comes to economics, being in opposition gives them the advantage of being on the offence.
Photo: The government of Ilie Bolojan is associated with the austerity measures period in which Romania has entered (source: YouTube)
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