DispatchesMihai Coca-Constantinescu, who holds an International and European Law LLB from the University of Groningen and an International Trade and Investment Law LLM from the University of Amsterdam, is a PhD candidate in Transboundary Legal Studies at the University of Groningen, based in the Netherlands, where he covers legal developments in Romania as a JURIST correspondent.
Romania’s Parliament removed Prime Minister Ilie Bolojan’s government on May 5, in a decisive 281-4 vote of no confidence—the highest support for such a motion in post-communist Romania’s history.
The motion, initiated primarily by the right-wing Alliance for the Unity of Romanians and joined by the Social Democratic Party along with smaller parliamentary groups, carried the dramatic title: “Stop Bolojan’s Plan to Destroy the Economy, Impoverish the Population, and Fraudulently Sell State Assets.” Core accusations centered on alleged privatization and “sale” of strategic state-owned enterprises (especially in the energy sector), framed as a rushed liquidation to mask fiscal shortfalls under the country’s EU obligations. Critics complained of tax hikes, benefit cuts, wage and pension freezes, and what they called “insufficient genuine structural reform.”
The Social Democratic Party, the largest parliamentary party, had withdrawn from the ruling coalition on April 21, after an internal vote, with ministers resigning shortly afterward and rendering the government a minority administration. The cooperation between the Social Democratic Party and the Alliance for the Unity of Romanians was widely viewed as tactical: the Social Democratic Party sought to distance itself from unpopular policies as its support eroded in favor of right-leaning rivals, while the Alliance for the Unity of Romanians amplified and reinforced its position within the opposition.
Prime Minister Bolojan denounced the motion as “cynical, artificial, and false,” noting that the Social Democratic Party had co-decided many measures taken by his administration. He emphasized inheriting a 9.3% budgetary deficit, partial successes which have been visible in the stabilization of debt, and the necessity of addressing an oversized public sector. Detractors from the pro-reform camp interpreted the vote as protection of vested interests and local patronage networks.
Shortly after the vote, the national currency of Romania, the leu, weakened against the euro at a 20-year record rate, and Romania’s interest rates on international loans increased, with rating agencies warning that they may further downgrade Romania’s credit rating.
Four days after the vote, Romania operates under what is now an interim Bolojan government, with limited powers. President Nicușor Dan has initiated consultations, ruling out early elections due to risks of further instability and potential political gains of conservative movements; the right-wing Alliance for the Unity of Romanians is currently polling strongly at around 37% in some surveys. Analysts anticipate protracted negotiations lasting weeks, driven by deep distrust, a popular backlash against austerity, and complex parliamentary arithmetic.
The Bolojan coalition government, in power from June 23, 2025, to May 5, 2026, was a broad “pro-EU” bloc of the National Liberal Party, Social Democratic Party, Save Romania Union, and Democratic Union of Hungarians in Romania. Formed amid one of the country’s most severe post-communist fiscal and economic crises, the administration inherited a dire economic situation. The country registered the EU’s highest budget deficit (over 9% of GDP in both 2024 and early 2025), alongside rising debt-servicing costs, persistent inflation, a technical recession, looming threats of credit rating downgrades, and the potential suspension of vital EU funds. Against this backdrop, the coalition’s primary mission was fiscal consolidation: narrowing the deficit toward 7% in 2025 and below 6.4% in 2026, restoring market confidence, unlocking approximately €10 billion in EU Recovery and Resilience Facility (RRF) funds, and advancing structural reforms. While the government recorded partial successes—such as the beginning of a deficit reduction, borrowing costs somewhat easing, and immediate receding downgrade risks—widespread backlash against its austerity measures ultimately led to its downfall.
The Bolojan cabinet implemented its agenda through successive reform packages (“Package 1” and “Package 2”), which combined revenue-enhancing measures with spending restraint and state efficiency efforts. Many initiatives explicitly targeted the budgetary deficit through higher collections and lower expenditures.
Revenue-side measures included a reorganization of Value-Added Tax (VAT)—a consumption tax added to the price of goods and services—from 19% to 21%, effective August 1, 2025. The reduced VAT rate was consolidated to 11% for essential goods and services such as food, medicines, books, firewood, thermal energy, water/sewage, and temporary Hotel, Restaurant, and Cafe/Catering (HoReCa) accommodations. Excise duties rose by 10% on alcohol, fuels, and tobacco. Seniors receiving a pension of over 3,000 lei monthly began paying 10% health contribution on the excess amount, with broader efforts to expand the contributor base from roughly 6 million to 8 million. Dividend tax remained at 10% in 2025 before increasing to 16% in 2026. Banks faced higher taxation on excess profits, while gambling winnings saw supra-taxation aimed at generating 30% more state revenue. Package 2 introduced sharp increases in local property taxes (up to +80% on housing) and vehicle taxes scaled by pollution and emissions levels. Capital gains taxation tightened, stock market gains rose (typically 3-6%), and crypto taxation moved from 10% to 16%. Additional steps included raising minimum capital requirements for limited liability companies, imposing a 30% flat tax on certain independent incomes (e.g., Airbnb/Booking platforms), stiffer fines for undeclared work (up to 1 million lei), and new fixed taxes on low-value parcels from outside the EU, alongside improved tax collection and insolvency procedures.
On the expenditure side, a 2026 public-sector wage freeze capped base salaries, bonuses, and allowances at December 2025 levels. Overtime work was largely compensated with time off rather than pay. Pensions—public, military, and special regimes—were not indexed to inflation, and magistrates’ special pensions were reformed with caps and greater reliance on contributions. Hiring was heavily restricted with many vacancies frozen (with limited exceptions) targeting overall reductions of tens of thousands of public positions across central and local administration. European project bonuses were cut from 50% to 35%, other allowances limited, and various perks curtailed—such as meal vouchers, vacation vouchers, transport reimbursements. Education saw higher teaching norms (+2 hours) and merit-based scholarship reforms. Broader structural reforms merged overlapping agencies, reduced staff, introduced unified salary grids, advanced digitalization, and improved governance at state-owned enterprises through remuneration caps, performance criteria, and smaller boards. Regulatory bodies—the Romanian Energy Regulatory Authority (ANRE), the Romanian Financial Supervisory Authority (ASF), and the National Authority for Management and Regulation in Communications of Romania (ANCOM)—faced 30% salary cuts and downsizing. Health system efficiency improved through performance-based hospital leadership. Meanwhile, tax collection efforts were fortified to detect evasion more efficiently, publicly shame major debtors, and enforce stricter local measures—such as denying construction permits to tax debtors.
While these measures delivered measurable economic progress, deficits narrowed, and borrowing costs fell—saving roughly €1 billion in interest in some estimates—and EU fund disbursements advanced, the implementation encountered court challenges, street protests, and internal coalition friction, particularly from the Social Democratic Party, which clashed over impacts on its voter base and local networks.
The package proved deeply unpopular: VAT-driven price hikes and wage/pension stagnation hit the middle class and public employees hardest, while rural and lower-income groups felt indirect tax effects more acutely than high earners. Critics argued the approach relied too heavily on tax increases rather than aggressive collection of existing debts or deeper cuts in government spending. Supporters countered that the measures represented necessary “tough love” inherited from years of prior fiscal mismanagement of former governments.
The most discussed scenario remains a reformed four-party pro-EU coalition (Social Democratic Party-National Liberal Party-Save Romania Union-Democratic Union of Hungarians in Romania plus minorities), potentially under new leadership more acceptable to the Social Democratic Party. Challenges include lingering mistrust and flashpoints over austerity and privatization, though national minorities and markets would likely welcome continuity. Alternative paths include a narrower minority government (National Liberal Party-Save Romania Union-Democratic Union of Hungarians in Romania core with ad-hoc Social Democratic Party toleration) or, less probably, a technocratic interim administration. Broader majorities involving the Alliance for the Unity of Romanians remain off the table due to ideological and presidential opposition.
From a broader, holistic perspective, criticism can also be directed at the overall structural process of government formation itself. Although the Alliance for the Unity of Romanians is Romania’s second-largest party, President Dan has repeatedly stated that he will not approve any government that includes this right-wing formation, regardless of whether the Alliance for the Unity of Romanians could secure a parliamentary majority on its own or through alliances. While this position is technically permissible under Romania’s democratic constitutional framework, many Romanians perceive it as evidence of a deeper institutional bias against conservative movements in the country. This situation highlights a key point of discontent in democracy: what is legal is not always synonymous with fair play. The systematic sidelining of the Alliance for the Unity of Romanians serves as a prominent example of that tension, which can prove imminent to the current political establishment, and only serve towards the majoring of conservative movements.
This political episode underscores Romania’s chronic coalition fragility amid acute fiscal pressures and rising conservative movements. While short-term turbulence is probable, institutional and presidential insistence strongly favors an eventual status quo outcome without major shifts. Developments remain fluid, with potential clarity expected after the upcoming B9 Summit and further formal talks. The coming weeks will test whether political actors can prioritize national fiscal sustainability over short-term electoral calculus.
