Tensions of early autumn - new taxes and street protests

September brought to the forefront of the political scene one of the toughest confrontations between the Government, the opposition and society in recent years. The cabinet led by Ilie Bolojan entered at full speed into a succession of decisions and commitments that redefined the economic, fiscal and social climate of Romania, leaving behind not only figures and statistics, but also street protests, legal challenges and palpable unrest among the population.

The central act of the month was the adoption of the second package of fiscal and structural reform measures, a moment that the Government assumed in Parliament at the risk of major tensions. In an accelerated procedure, the Prime Minister presented the five draft laws - from the reform of special pensions and the reorganization of autonomous administrative authorities to the modification of corporate governance and the introduction of additional taxes for large fortunes and companies. The opposition reacted immediately, filing four consecutive motions of censure, but all were rejected by majority vote, after a tense parliamentary show, with banners, boos and sharp retorts. The challenge to the Constitutional Court was not long in coming, with opposition parties invoking procedural flaws and the lack of real debate, but the Government moved forward, betting on the message of firmness and the image of an executive capable of imposing reforms despite political obstacles.

If in Parliament the battle was fought over laws and articles, in the streets the confrontation was just as heated. The beginning of the school year coincided with a massive union mobilization, with over 30,000 teachers protesting in Bucharest against insufficient salaries and conditions in the system. Their march blocked traffic in the central area and stopped at Cotroceni, where union leaders discussed directly with President Nicuşor Dan. On the administrative level, however, the Government moved forward with the announced measures: the scholarship methodology was approved, with increased amounts for vulnerable categories, and the support program for disadvantaged students was expanded. At the same time, it was decided to allocate an additional financial package for the equipment of schools and the digitalization of some educational processes, in an attempt to balance the image of austerity with signals of investment in the future.

However, budgetary pressure remained the permanent background of the first month of autumn. The budget execution at eight months confirmed the deepening of the deficit, and the Ministry of Finance was forced to accelerate borrowing on domestic and foreign markets, with issuances of government bonds and investments intended to cover urgent expenses. The rating granted by Moody's, maintained at Baa3 but with a negative outlook, was a clear signal that investors are closely following the fiscal trajectory, while the National Bank warned of inflationary pressures generated by the reliberalization of the energy market and the increase in VAT and excise duties.

In energy, the Government continued its reform policy, presenting a memorandum aimed at restructuring the market and bringing, in the medium term, a reduction in consumer prices. In parallel, the Executive decided to extend the cap on commercial surcharges on basic foods until March 2026, a measure with a direct impact on the consumer basket, but criticized by the business environment for the distortions created in the market.

In this context, the budget rectification project put into decisional transparency by the Ministry of Finance at the end of September shows that there is additional pressure on public finances due to public spending that is to be increased by 27 billion lei and the deficit estimated at 8.4% of GDP for the end of 2025. Although Prime Minister Ilie Bolojan tried to send a message of responsibility and fiscal discipline, the figures in the budget rectification project speak of an imbalance that is difficult to correct in the absence of painful measures.

• New fiscal measures assumed in Parliament, motions of censure, challenges at the Constitutional Court

September began with one of the most controversial episodes of the current government: the adoption of the second package of fiscal and structural measures. Prime Minister Ilie Bolojan assumed responsibility on September 1, in the plenary session of Parliament, for five draft laws considered vital for the budgetary balance and for Romania's credibility before external partners. In the plenary, the atmosphere was explosive, with banners, boos and mutual accusations, transforming the assumption of the government into a real political marathon.

The measures aimed at the following: the reform of service pensions, with a cap at 70% of the last salary and the gradual increase in the retirement age to 65 for magistrates; the reorganization of autonomous administrative authorities, with massive staff reductions and cuts in benefits; the modification of the corporate governance of companies of state by limiting bonuses and the number of members on boards of directors; changes in the public health system; new rules for the capitalization of commercial companies and in the field of insolvency.

The opposition responded harshly: four consecutive motions of censure were filed, all of which were rejected by the ruling coalition's vote in the plenary session of Parliament on September 7. The challenge to the Constitutional Court came immediately, with the opposition invoking the lack of real debate and the accelerated procedure. However, the government chose to send a strong message: "reforms are painful, but necessary, and lost time costs more than impossible consensus". The CCR rejected the appeals filed by the political opposition in September and is due to rule in October on the appeal filed by the High Court of Cassation and Justice regarding the special pension reform.

• Education - start of the school year, teachers' protests and government measures

The 2025-2026 school year began on September 8 in a tense atmosphere. While over 2.8 million students were returning to their desks, the capital was blocked by a massive teachers' protest: over 30,000 teachers demanded decent salaries and real investments in schools. Their march crossed the center of Bucharest and culminated in Cotroceni, where unionists negotiated with President Nicuşor Dan. The absence of the Prime Minister and the Minister of Education was perceived as a gesture of contempt, fueling the anger of the street.

On the administrative side, however, the Government ticked off several major decisions. The methodology for school scholarships was approved: merit scholarships of 450 lei, social and technological scholarships of 300 lei and special scholarships for minor mothers of 700 lei, with a total budget of over 4 billion lei. In addition, the voucher program for disadvantaged students was expanded, and the educational support package includes resources for the digitalization of school processes and for equipping units with minimal equipment.

Even though the Government has tried to send a signal of social responsibility, the gap between measures and teachers' expectations remains major. The protest showed that fiscal reform and austerity cannot be separated from investment in human capital, and the tension in education risks becoming a recurring theme in the coming months.

• Budget execution has exacerbated the need for new loans

The execution of the general consolidated budget has confirmed an increasingly pressing reality: expenses are growing at an accelerated pace, while revenues, although increasing, are unable to cover the gap. The execution of the general consolidated budget for the first eight months ended with a deficit of 86.36 billion lei, equivalent to 4.54% of GDP, slightly better than in the same period in 2024, but insufficient to create room for maneuver. Total revenues amounted to 420.1 billion lei, up 11.8% on account of taxes on salaries and income, excise duties and European funds, while expenses reached 506.4 billion lei, up 10.9%. In this tense framework, the draft budget rectification clearly shows the tension between the need to finance interest expenses, pensions, salaries and social programs and the structural limitations of state revenues. It is an adjustment that attempts to maintain macroeconomic balances, but which, by deepening the deficit, also confirms structural vulnerabilities and the increasing pressure on public finances.

In these conditions, the Ministry of Finance accelerated the issuance of FIDELIS and TEZAUR government bonds, attracting billions of lei from the population and institutional investors. In parallel, external loans were contracted, including through agreements with the European Investment Bank for road infrastructure. This entire financing mechanism allowed the Government to breathe in the short term, but amplified the interest burden and confirmed the structural vulnerability of public finances.

• Moody's maintains our country rating, but warns us

The decision by Moody's agency in mid-September was received as a wake-up call, but also as a breath of fresh air for the Government. Romania maintained its sovereign rating at Baa3, i.e. in the "investment grade" category, but the outlook remained negative, confirming that structural vulnerabilities persist. The agency's report highlighted several key points: large and recurring budget deficits, which are leading public debt on an upward trajectory that is difficult to stabilize; uncertainty regarding the implementation of fiscal measures undertaken by the Government, especially the special pension reform and the fight against tax evasion; high dependence on external financing, with increased costs amid the maintenance of high interest rates; social tensions, highlighted by protests in education and reactions to austerity; the strategic opportunity offered by membership in the European Union and the PNRR , but conditional on the effective absorption of funds and administrative capacity.

Moody's stated that maintaining the rating is justified by membership in the EU and NATO, the prospect of stable capital flows and an economy with medium-term growth potential. However, if the Government does not deliver fiscal consolidation and does not stabilize the deficit in the next two years, the agency could decide on a downgrade to the junk category, which would significantly increase Romania's financing costs.

• BNR - high interest rates, explosive inflation, external vulnerabilities

This state of affairs was also mentioned by the National Bank of Romania, which on September 12 warned that there would be a peak in inflation at 9.6-9.7% in September, followed by a slow correction. The central bank expects the return to the target range only at the end of 2026, with an average of over 8% in 2025 (up from the previous forecast of 4.7%). This new forecast was driven by persistent pressures from energy and food costs, as well as inflationary expectations of the population and companies. At the same time, the NBR also drew attention to external imbalances: the current account deficit increased in the first six months of 2025 by over 2 billion euros compared to last year, reaching almost 15 billion euros; total external debt exceeded 212 billion euros, of which 162 billion is long-term.

Governor Mugur Isărescu sent a firm message: "In the face of major supply shocks - energy, VAT, excise duties - the central bank cannot afford to relax. We have the obligation to anchor inflationary expectations and protect the credibility of monetary policy.”

• Memorandum on structural reform in the energy sector

During September, the Government approved a memorandum on the restructuring of the energy market, aimed at addressing chronic competitiveness problems and price volatility. The main directions are: expanding production capacities through investments in renewables and nuclear, with the involvement of state and private companies; creating energy storage mechanisms, both batteries and pumped hydro capacities, to balance variable production from renewable sources; introducing dynamic tariffs for consumers, reflecting the real price on the wholesale market and stimulating energy efficiency; clear separation between supply and distribution, to avoid conflicts of interest and market abuse; adapting regulations to the European model, especially regarding long-term contracts and hedging mechanisms.

Energy Minister Bogdan Ivan spoke of a two-stage calendar: immediate measures to stabilize the market and reduce pressure on consumers, followed by structural reforms to attract massive investments.

• Commercial markup remains capped on basic foods

Separate from the energy issue, the Government decided in September to extend the cap on the commercial markup on basic foods until March 2026. The measure was justified by the Executive by the need to protect the population from price increases, especially in a context in which food inflation exceeds 12%.

The list of products targeted includes bread, milk, chicken and pork, oil, sugar and other essential foods. The commercial markup is limited to levels between 5% and 20%, depending on the link in the chain (producer - distributor - retailer).

While consumers welcomed the measure, retail and processing employers harshly criticized it, arguing that it distorts competition, reduces margins and discourages investment. However, politically, the decision is perceived as an important social protection gesture for a population affected by price increases and austerity.

• Budget rectification draft deepens deficit by increasing public spending

The Ministry of Finance made the budget rectification draft for 2025, a document that reconfigures both state revenues and expenditures, in an attempt to calibrate public resources to the economic and social realities of the moment, public on September 29, transparent. The new projection provides for an increase of 3.23 billion lei in budget revenues, but increases expenditures by 27.8 billion lei, which means a deepening of the deficit by almost 24.6 billion lei. The redistribution of funds clearly shows the government's priorities: the Ministry of Finance receives over 20 billion lei for interest payments, replenishing the budget reserve and supporting PNRR projects, the Ministry of Labor benefits from an additional 5.5 billion lei for social assistance and pensions, and other ministries receive smaller allocations, such as Development, Agriculture, Energy, Environment, Economy and Education. The Permanent Electoral Authority in turn receives 169 million lei for the reimbursement of electoral expenses, while Intelligence Services and Justice is supported on a case-by-case basis. On the other hand, there are also credit reductions, especially at the Ministry of Investments and European Projects, Health and Transport, where the low level of execution of some European-funded programs or the PNRR has required a reallocation of resources.

The project's substantiation note shows that the rectification is being made in a complicated economic context, marked by tensions generated by the United States' tariff policy, the slowdown in external demand, inflationary pressures and high energy costs, factors that make the macroeconomic landscape fragile, but with specific areas of resilience. The gross domestic product increased by only 0.3% on the gross series and by 1.4% on the seasonally adjusted series in the first half of the year, compared to the same period in 2024, while the GDP deflator, at 7.6%, exceeded the expectations of the spring forecast. From the supply side, total gross value added fell slightly by 0.2%, while net taxes on products, increased by 5%, made a positive contribution of 0.5 percentage points to economic growth. Construction, with an advance of 5.6%, and the IT&C sector, with +1.1%, only partially compensated for the contractions in industry, where the 1.5% decrease confirmed chronic difficulties, but also in trade, transport and HoReCa, with a decline of 0.2%, or in professional and scientific activities, where the decline was 2.9%.

On the demand side, gross investments returned to growth, with an increase of 2% due to large infrastructure projects, but private consumption slowed down sharply, falling from 6% in 2024 to just 1.3% in 2025, amid the decline in purchasing power and the prudence of the population. Government consumption fell by 2.3% under the impact of fiscal consolidation, and the imbalance between imports, which grew by 5.6%, and exports, with a more modest advance of 2.8%, led to a negative contribution of net exports of 1.4 percentage points. Retail trade grew by 3.1% in the first seven months, well below the 8.6% pace of 2024, and services for the population stagnated, with an average of +0.2%, oscillating from spectacular advances in beauty salons, of over 18%, to severe collapses in tourism, where agencies recorded decreases of 13.2%. However, industry continued to contract, by minus 1.3%, especially in light industries and metallurgy, where energy costs eroded competitiveness, but there were also dynamic sectors, with double-digit increases, such as pharmaceuticals, furniture or coking. Foreign trade deepened the balance of payments deficit: exports, at 56.6 billion euros, rose by 3.7%, but imports accelerated by 4.5%, to 75.9 billion euros, which led to a trade deficit of 19.3 billion euros and a current account deficit of 17.2 billion euros, over 17% higher than the previous year.