Last week, Romania’s new government laid out a reform-heavy agenda for 2025-2028 that aims to modernise the state, stabilise public finances, and deliver more efficient services. With an emphasis on transparency, fiscal discipline, and digitalization, the program marks a decisive attempt to reset public governance and economic policy after years of persistent deficits, growing debt, and administrative bottlenecks.
The government’s plan outlines a broad institutional overhaul designed to make the public sector more coherent, functional, and cost-effective. Key measures include the restructuring of central public institutions, the merging or elimination of overlapping agencies, and the introduction of clear performance criteria for civil servants and public managers. Budget privileges and excessive bonuses will be reviewed or eliminated, as part of a shift toward merit-based employment and better accountability in public administration. This is viewed as an attempt at reset, not just a fiscal adjustment, but a transformation of how the public sector functions and how it interacts with citizens and businesses – something Romania (and a lot of other countries) desperately needs.
Romania’s tax revenues remain among the lowest in the EU relative to GDP, limiting the state’s ability to fund services and invest. The government aims to change this by overhauling the country’s tax collection apparatus, restructuring agencies to operate more independently and effectively, with digital tools and risk-based inspections becoming standard practice.
In parallel, the government will expand the tax base with activities like gambling, crypto transactions, monetised social media content, and short-term rentals, seeing increased or newly applied taxation. The plan also foresees a temporary excess profits tax for sectors like banking and a reassessment of existing tax exemptions, particularly in real estate, while companies receiving state aid will face tighter obligations to contribute fiscally in return. Naturally, banks, companies, and syndicates have all expressed their dissatisfaction with this line of reform.
With the public deficit reaching 9.3% of GDP in 2024 and public debt nearing 55%, the government’s commitment to fiscal consolidation is central to its economic narrative. The goal is to gradually bring the deficit below the 3% EU threshold by 2028.
To achieve this, the program includes recalibrated VAT rates, increased excise duties, higher taxes on dividends and large pensions, and a market-aligned property tax. An ecological tax is also on the agenda, tied to Romania’s PNRR (National Recovery and Resilience Plan) obligations.
On the expenditure side, salary and pension caps will be introduced to limit fiscal drift. These moves are meant to restore credibility with markets and EU institutions, especially as Romania remains under the Excessive Deficit Procedure (EDP).
Public investment, often fragmented or politically driven, will now be subject to stricter criteria. Projects will require co-financing from local authorities and will be evaluated using a national framework based on demographic and infrastructure indicators. The goal is to prioritise value-adding, export-oriented, or import-substituting projects over politically motivated or underperforming ones.
Moreover, changes are also planned for local governance, particularly in underperforming or fiscally fragile municipalities. Updated population data will guide administrative structures, and national salary grids will be introduced in places where local revenue can’t cover staff costs. The goal is to make local governments leaner, more capable, and more aligned with national priorities.
To support broader administrative reform, the government plans to update the status of civil servants and elected officials. The Labour Code is to be simplified, and reforms will target collective agreements and social dialogue laws that allowed excessive or inconsistent benefits to proliferate.
Moving on, Romania’s state-owned enterprises (SOEs) remain a weak spot in fiscal management. The new program aims to reduce bureaucratic sprawl in SOE boards, align pay with performance, and cut staff where needed or close persistently loss-making enterprises. Budget transparency is to be improved, and some companies may be partially listed on the stock exchange to increase scrutiny and market discipline. Any savings from these SOEs and institutions will either be redirected to the budget or reinvested with clearer mandates.
For this central administration reform, digital governance will become a core pillar. A new digital coordination unit will drive integration of IT systems and databases across ministries, improving interoperability and reducing bureaucratic friction.
Also, the healthcare system will undergo restructuring, mostly focused on performance, both in salary and staff appointments. The criteria for receiving sick leave, disability, and early retirement benefits are to be tightened, and social assistance decreased in order to increase labour market participation and ensure that benefits target those genuinely unable to work.
The special pension system, long a source of fiscal and political conflict, will be adjusted. The retirement age for magistrates will rise to 65, and non-contributory pensions will be capped. Payroll laws are to be streamlined to reduce litigation and misclassification, while sentencing and performance benchmarks will be introduced in the judiciary to improve transparency and alignment with public expectations.
As for the natural resource use, royalties on natural resource exploitation will be recalculated, and oversight will be strengthened. This aims to ensure that Romania captures appropriate value from its resource base and closes gaps in compliance.
To sum up, this governing program outlines a broad and detailed roadmap to reform Romania’s institutions, rebalance its public finances, and modernise the state’s capacity. While ambitious and complex, the effectiveness of the plan will ultimately hinge on its implementation, both politically and administratively. For 2025, a budget deficit is targeted at around 7.5% of GDP, with public debt stabilizing around 58%. Real GDP growth is forecast to be 1.4%, while inflation is forecast to be approximately 5%. This reflects the multifaceted problems Romania is dealing with, but the return of “political stability” after the turbulent and uncertain period revives hope for the successful consolidation of public finances. It is yet to be seen what the European Commission has to say on all of this.