The sign of an underfinanced economy: Romanian corporate debt, nine times below the European record

We are in last place in the European Union in the corporate debt ranking, with a level of only 28% of GDP at the end of 2025, two and a half times lower than the European average of 70.1% and almost nine times below the record of 251.1% recorded by Luxembourg, according to Eurostat data, cited in an article published yesterday by Euronews. At first glance, the position could be presented as evidence of a prudent economy, in which companies avoid over-indebtedness and financial risk. In reality, Romania's last place has a much more uncomfortable significance: Romanian companies use credit and the bond market to an extremely low extent to finance their investments, expansion and modernization, in an economy in which domestic capital remains insufficient, access to financing is difficult and expensive, and the capital market fails to offer a strong alternative to bank loans.

Eurostat data shows that the debt of non-financial corporations in Romania represented 28% of GDP at the end of last year, the lowest level among all member states. The indicator includes bank loans and debt securities issued by companies, such as corporate bonds, but excludes banks, insurance companies and other financial institutions. To avoid double counting, loans between companies located in the same country are also eliminated. It is therefore an indicator of the financing attracted by enterprises that produce goods and services, that is, precisely the segment of the economy that should transform credit into factories, machinery, technologies, jobs and exports. The level of 28% places Romania below Poland, which is immediately above it, and at a huge distance from Western economies. The debt of Romanian companies is 42.1 percentage points below the European Union average and 43.6 points below the Eurozone average, where the indicator reaches 71.6% of GDP. In other words, relative to the size of the economy, the Romanian corporate sector uses less than 40% of the relative volume of debt financing used on average by European companies. The difference is not marginal, but describes two fundamentally different economic models: in Western and Northern Europe, large companies develop including with money attracted from international markets, while in Romania a significant part of the business environment remains dependent on equity, reinvested profits, loans granted by shareholders or the limited resources of entrepreneurs.

A low corporate debt can protect the economy from a sudden increase in interest rates and can limit the number of insolvencies caused by the impossibility of refinancing. But an underfinanced economy is not automatically a healthy economy. If companies do not borrow because they cannot find profitable projects, because they do not meet the banks' conditions, because interest rates are too high or because the corporate bond market is too underdeveloped, the low level of debt becomes an expression of weakness. Without long-term financing, companies invest less, grow more slowly, postpone re-engineering and remain trapped in low-value-added activities. Financial prudence can thus become a structural brake on the economy.

Romania's position is all the more relevant as, at European level, corporate debt is close to its lowest level in the last two decades. The EU average of 70.1% of GDP and the 71.6% in the euro area have fallen not necessarily because companies have massively reduced their borrowing, but because nominal economic growth in recent years has been faster than the accumulation of new debt. Even in a Europe that has reduced its relative level of indebtedness, our country continues to be at the bottom of the ranking, which accentuates the image of an economy in which private financing does not keep pace with development needs.

At the opposite end of the scale is Luxembourg, where corporate debt reaches 251.1% of GDP, more than two and a half times the annual value of the entire economy, according to Eurostat. The difference with Romania is huge, but the crude comparison can be misleading. Luxembourg is home to thousands of holding companies and financing companies controlled by international groups, and their debts are largely offset by financial assets. The record level does not indicate that ordinary Luxembourg companies are on the verge of bankruptcy, but rather reflects the country's role as a global hub for financing multinational corporations. Eurostat shows that Denmark ranks second, with a corporate debt of 115.4% of GDP, followed by Sweden, with 108.6%, Cyprus, with 107.3%, the Netherlands, with 106.3%, France, with 91.6%, and Belgium, with 90.6%. These are the seven states that exceed the indicative threshold of 85% of GDP used by the European Commission in the framework of the procedure on macroeconomic imbalances. Exceeding the threshold does not automatically attract sanctions, nor does it mean that the companies in the countries in question are insolvent. It prompts the Commission to verify whether the indebtedness hides real economic vulnerabilities or whether it is amplified by the way in which multinationals organize their financing.

Italy and Greece present the opposite situation. Although they had public debts of 137% and 146% of GDP, respectively, at the end of 2025, corporate debt was only 55.1% in Italy and 58.6% in Greece, below the European average. In these countries, the debt burden is concentrated mainly in the public sector. However, Romania takes this separation even further: the state borrows at an accelerated rate and at high costs, while non-financial companies remain the least indebted in the Union.

Here lies the real problem indicated by the last place. The financial system's resources are not sufficiently geared towards the productive sector, and the link between the state and banks remains strong. The OECD shows that government loans and sovereign bonds represented 27% of the Romanian banking sector's assets at the end of the first quarter of 2025, a high exposure by international standards. When the state absorbs a substantial part of the available liquidity and offers banks attractive yields through bonds considered low-risk, lending to companies can become less attractive. The entrepreneur must be evaluated, must provide guarantees and may enter insolvency; the state issues bonds, pays interest and continues to borrow.

Romania's last place describes an economy in which the state borrows but companies invest insufficiently with the money raised, an economy in which corporate bond financing remains marginal and access to credit is uneven, an economy in which many companies are too small, too thinly capitalized or too transparent to obtain the resources necessary for expansion.