Last week cost Romania nearly €1bn

Parliamentary elections are crucial to keep the economy afloat. Romania has already to pay one billion euro the vote of the first round of presidential elections and the putsch given by CCR – that is sum the interests paid by the state have increased.   The parliamentary majority resulted from the elections will have one of the most difficult tasks of the last decade: to apply the reforms necessary for the avoidance of an economic crisis and re-establish Romania’s credibility in relation with institutional partners and financial markets. The Ciolacu-Ciuca governing left the economy in a critical point, with a budgetary deficit reaching almost 9% and unsustainable expenses of the state. But it could be worse.   The first big risk is the financing of the budget deficit.   The financial markets, which lend money to the government, are already showing signs of nervousness because of the result of the first round of the presidential election and the uncertainty caused by the ongoing electoral putsch by the CCR, which decided to recount the votes and postponed the validation of the presidential elections. The major fear is that Romania could have an anti-European, populist executive that rejects the reforms needed to put public finances on a sounder footing. The PSD-PNL government led by Marcel Ciolacu's government borrowed 213bn lei (€42.8bn) in the first 10 months of this year, after 13.8bn lei in October.   In fact, Romania has ended up spending as much on interest on loans as on subsidies, bill compensation, scholarships for students and support for religious cults all together: almost 22 billion lei in just seven months, according to another Economedia analysis.   A possible anti-reform and anti-European parliamentary majority or the Bulgarian scenario (extreme splits that would make it extremely difficult to create a government majority) are the two scenarios that would make financial markets quickly increase the interest rates at which Romania borrows to cover its budget deficit.   The second risk, connected to the first, is the probability that the rating agencies drop Romania’s rating. If Romania has a multi-split parliament or an anti-reform parliamentary majority it is most likely that a drop of the rating happens, which will automatically lead to the increase of interests for Romania’s loans.   The third risk is connected to the reforms essential for the decrease of the budgetary deficit. Romania has brought it on itself after the electoral debauchery of the last two years, when the governments led by Marcel Ciolacu and Nicolae Ciuca unsustainably increased state spending with salary increases for public employees, pension increases, bloating the budgetary apparatus, money given indiscriminately to local barons for votes.   The future government needs to make the fiscal and administrative reforms to drop this deficit. If the reforms are not applied, there is the real risk that the European cohesion funds be partially suspended. Moreover, PNRR is already blocked due to the lack of reforms.   The fourth risk is connected to investments. No investor – Romanian or foreigner – risks his money in a country led by a president and/or by a government hostile to the west. Nobody wants to risk his money in a country with a president who promises a 2% universal tax on company turnover and wants out of NATO.   The best evidence is the evolution of the Bucharest Stock Exchange. Market capitalization fell by 10 billion RON in one week.