Romania Regains Political Stability with Appointment of Ilie Bolojan as Prime Minister
Romania ended a prolonged period of political deadlock in June with the appointment of Ilie Bolojan as prime minister, a move widely seen as restoring operational clarity to one of Emerging Europe’s most politically volatile economies. The impasse had persisted since early 2025, when the previous coalition collapsed amid internal disputes and failed negotiations between mainstream parties.
President Nicusor Dan nominated Bolojan on June 20, and just three days later, parliament confirmed him with broad support. Bolojan brings a reputation for competence and technocratic efficiency, having previously served as mayor of Oradea and head of the Bihor County Council, where he earned national recognition for fiscal discipline and infrastructure execution.
Re-engaging with the European Union
Bolojan’s appointment is expected to stabilize policymaking in the short term, paving the way for the delayed 2025 budget to be finalized as well as for Romania to regain momentum in absorbing EU structural and recovery funds. Investors had grown increasingly concerned in recent months over the country’s ability to meet fiscal targets and implement necessary reforms.
A pressing issue for Bolojan’s early tenure will be the government’s response to the EU’s excessive deficit procedure and the country’s soaring budget shortfall. As of May, the consolidated budget gap amounted to around 3.39 % of GDP (ca €12.7bn) in the first five months, virtually unchanged from the same period in 2024. The European Commission and ratings agencies have been clear – unless Bucharest delivers a credible fiscal plan soon, access to some EU funds could be frozen and sovereign credit ratings risk being downgraded.
Proposed Fiscal Reforms
In response, the government proposed a multi‑pronged package comprising a mix of spending cuts and tax hikes. On the expenditure side a 20% cut in civil‑service headcount (ca 167,000 people) is planned. On the revenue side VAT normalisation, higher excise duties and property taxes, a hike in dividend tax from 10% to 16%, a temporary windfall levy on bank profits, and new levies on gains from crypto currencies and social media platforms are in the agenda. Also, taxing pensions higher than RON 4000 (€800) monthly and listing minority stakes in state companies on the bourse are among the proposed measures.
For now, the existing 19% VAT rate shall be maintained but two lower 5% and 9% rates will be consolidated in a single 9% one, applicable to food, medicines, firewood, while for other reduced items the rate would increase to 19%. The proposed new banking tax would come in addition to the “special tax on banks,” introduced in 2024, which imposes a 2% levy on the turnover of credit institutions.
With broad pro‑EU parliamentary backing, this fiscal tightening aims to reduce the deficit from a punishing 9.3 % of GDP in 2024 to the EU’s 3% threshold over a multi‑year horizon. While the measures are socially unpopular and risk stoking public backlash – union protests have already begun – they are largely seen as necessary to preserve Romania’s investment‑grade status, ensure continued EU funding, and restore investor confidence.
Outlook for Investors
With a clearer political mandate and relatively low ideological baggage, Bolojan’s government is expected to focus on administrative efficiency, infrastructure delivery, and a more predictable fiscal trajectory — all positive signals for both domestic and foreign stakeholders. While coalition management will remain a challenge, the return of political clarity offers Romania a chance to regain credibility in the eyes of markets and EU institutions.
