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After a set of controversial elections, a new-old ruling coalition took the reins

On December 23, the newly elected parliament voted to give another term to the incumbent government, led by the Social Democrats (PSD) and National Liberals (PNL) under PSD Prime Minister Marcel Ciolacu. The two parties suffered losses in the December elections and failed to advance their candidates to the cancelled second round of presidential polls but they will govern alongside the Democratic Alliance of Hungarians in Romania (UDMR).

What next

The socially conservative Ciolacu government will prioritise stability over action, continuing entrenched patterns of underperformance wrapped in the veneer of predictability. The government will tread carefully with limited fiscal reform, hoping not to cause a backlash before the re-run of presidential election, which is expected to take place in the spring, when establishment parties and the far right are likely to face off.

Subsidiary Impacts

Analysis

The new ruling coalition was established with 240 votes in favour, a majority of just seven seats in the 465-member two-chamber legislature.

The continuation of the PSD-PNL coalition, with support of the UDMR (a familiar junior partner) and minority representatives, signals stability but not strategic direction. Having governed together since 2021, the PSD and the PNL have prioritised short-term goals over policymaking, ensuring minimal internal conflicts but little meaningful reform.

Both parties are socially conservative and have a tainted track record of dealing with corruption, preferring opaque governing practices. They also favour, to varying extents, relatively conservative economic policies that fail to address poverty, which affects nearly one-third of the population, the highest proportion in Europe. That mostly rural demographic will continue to tilt to the far right.

Fiscal policy

Efficient economic growth is hindered by underdeveloped infrastructure, a weak technological foundation and persistent political corruption, further undermining the business environment.

Meanwhile, large fiscal and current account deficits continue to erode investor confidence. Estimated at 8.5% of GDP in 2024, the government will struggle to reduce the budget deficit below the EU-stipulated 3%, risking elevated public debt, rising bond yields and higher borrowing costs (see ROMANIA: Government will struggle to reduce deficits – October 18, 2024).

The large fiscal deficit will present one of the main challenges for the government

A government ordinance issued at the end of last year aims at halting state spending growth, reducing budget waste by 1% of GDP, or RON9bn (USD4bn), and increasing revenues through the reforms required by the EU Recovery and Resilience Plan.

Key measures include freezing dignitaries’ salaries, cutting party funding by 25% and halting public servant salary increases and bonuses. Salaries will be tied to performance evaluations, state employment will be frozen in 2025 and public institutions considered redundant will be abolished or merged.

Romania’s access to some EUR28.5bn (USD30.8bn) in EU Recovery and Resilience funds offers some optimism. Romania has also become a full member of the Schengen free-movement area starting January 1, 2025, eliminating barriers to trade (see BULGARIA/ROMANIA: Schengen membership brings benefits – December 31, 2024). However, failure to comply with EU fiscal rules could delay EU funds, jeopardising the investments propping up the country’s fragile economic growth.

Opposition dominated by the far right

The government will be opposed by an alliance of far-right parties, holding some 35% of the seats in parliament. They will oppose the government’s pro-NATO and pro-EU policies, though there is some alignment on social policy.

The socially progressive, pro-EU and neoliberal Save Romania Union (USR) will be isolated in the new parliament but will side with the governing coalition on issues related to Romania’s role in the EU and NATO. The USR was part of coalition talks but broke off because of disagreements over what the party sees as the coalition’s loose approach to fiscal policy (see ROMANIA: An even grander ruling coalition looks likely – December 13, 2024).

Joint presidential candidate

The PSD-PNL-UDMR coalition agreed to field a joint candidate in the repeat presidential elections later this year. Their choice is Crin Antonescu, a former leader of the PNL and briefly the acting president in 2012 under a PSD-PNL coalition government. Antonescu was also the PNL’s presidential candidate in 2009, when he failed to reach the run-offs.

Antonescu last week announced he was suspending his presidential campaign in protest at the time it was taking the coalition to formalise his candidacy. He has indicated he would return to the race once he is confirmed as the government candidate and a date for the presidential elections set.

If he chooses to run, Antonescu, now an unemployed history professor who has spent the past ten years out of public life, faces significant challenges in appealing beyond the coalition’s loyal voter base. Securing a spot in the run-off will be an uphill battle, as he will probably compete against a USR-supported candidate for the second place behind the far right’s nominee.

The latest polls show Antonescu with 15-20% of popular support, similar to Bucharest Mayor Nicusor Dan, who is running as an independent but is negotiating for the USR’s support.

The far right’s presidential candidate is likely to be Calin Georgescu, an anti-establishment and pro-Russian candidate that emerged as the front-runner in the cancelled presidential elections (see ROMANIA: Ruling parties are headed for a reckoning – November 29, 2024). He is polling at close to 40% currently. If Georgescu, who is facing allegations of campaign fraud, is not allowed to run, leader of the far-right Alliance for the Union of Romanians (AUR) George Simion will likely stand in his place. That would probably improve the coalition candidate’s chances in a race where a majority of votes, rather than a plurality, is required for victory.

The presidential re-run will likely again pit the establishment against the far right

The outcome of the presidential elections is unlikely to significantly affect government stability. Under the Constitution, while the president can influence government formation, he or she cannot dissolve the government without parliamentary support.

If Romanians elect a far-right, anti-EU and anti-NATO president, tensions will manifest most visibly in foreign policy. Conversely, if the USR manages to clinch a victory, cooperation on foreign policy will be smoother but tensions may arise over government spending and budget allocation, where the president holds veto power. Antonescu’s victory would likely eliminate both threats.

Foreign policy and Russian interference

Under the new government, Romania’s foreign policy is unlikely to make waves. The appointment of Emil Hurezeanu as foreign minister reflects a preference for party loyalty over expertise.

While the government will maintain support for Ukraine, public opinion, which is strongly opposed to increased aid, is unlikely to shift. A 2024 opinion poll conducted by the European University Institute and YouGov revealed that Romanians are among those in Europe most opposed to aiding Ukraine, alongside Bulgarians and Hungarians.

Anti-system sentiment

The controversial decision to cancel presidential elections has further fuelled anti-system sentiment (see ROMANIA: Annulled election casts doubt on institutions – December 9, 2024). The perceived absence of transparent and well-communicated evidence of Russian interference in the presidential campaign has only deepened public distrust toward Romania’s political elite. Romania’s NATO allies have largely supported the decision as a means to shield the country from Russian influence and have not voiced concern over the cancelled elections.

Anti-establishment sentiment is on the rise
Georgescu has appealed the decision to annul the elections to the European Court of Human Rights. If the court finds the decision illegal, that may throw Romania into turmoil again.
Prime Minister Marcel Ciolacu, 23 December 2024 (Daniel Mihailescu/AFP/Getty Images)

Authored by:

Mak Kasapovic

Mak Kasapovic

Eastern Europe Analyst

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