Austerity in Romania: what do we need to know?

Daniela Dimitrova

On 6 August 2025, BNT 1 broadcast a report by Ruse-based journalist Daniela Dimitrova on price increases in Romania as of 1 August 2025. Daniela Dimitrova visited the market in Giurgiu and talked to food vendors about the effect of tax and excise duty increases on the prices of their goods. The report also included excerpts from an interview with Vladimir Mitev, in which he provided details on various economic aspects of the Bolojan government’s austerity measures, price increases, accession to the eurozone, and wages in Romania. Below is the full transcript of the interview.

Reasons for the fiscal crisis in Romania

Tell us why this economic crisis has come about in neighbouring Romania and which products have become more expensive?

Romania’s problems are linked to the large budget deficit that has existed for several years. Although this was previously considered a positive thing – the funds were used for investment in the economy or for social spending – a crisis has now been reached.

Political instability linked to the presidential elections in December has further created mistrust in the credit markets. As a result, Romania is financing its debts with new loans at high interest rates.

After the election of the president and the partial resolution of the political crisis, the financial (fiscal) crisis must now be tackled. Measures are being taken that mainly affect people in the public sector and employees, and to a lesser extent people with capital.

This is leading to social unrest and protests, for example by teachers and civil servants. The crisis is likely to continue for some time, with some experts predicting a difficult period at least until the end of next year. Household incomes are expected to fall and spending to rise.

The extent of price increases

And which products have become more expensive in practice?

All basic everyday products are becoming more expensive.

• From 1 July 2025, the price of electricity has increased. Until then, it was subsidized by the state, but after the liberalization of the market, its price has risen significantly.
• Excise taxes are increasing, making fuel, alcohol, and tobacco more expensive.
• VAT is also increasing. The general rate of 19% is becoming 21%, and the reduced rate for food products (from 5% or 9%) is becoming 11%.

This is expected to lead to an overall price increase of at least 10-12% by the end of September. The Romanian press reports that some retailers are taking advantage of the situation to raise prices even further.

Adoption of the euro in Romania

Is this dissatisfaction among Romanian citizens a factor that is increasingly distancing them from the adoption of the euro?

At this stage, Romania does not intend to join the euro area. Given the large budget deficits, this is not realistic in the coming years. According to some estimates, this could happen in about 10 years if the country so desires.

A well-known Romanian economist, Cornel Ban, argues that countries such as Romania and Poland have no serious interest in joining the eurozone. He points out that, unlike Bulgaria, Romania does not rely solely on exports, but also on consumption. In his opinion, joining the eurozone would put a brake on consumption. The current spending cuts will affect consumption in particular.

The estimated inflation of at least 9% by the end of the year is also likely to reduce consumption. It is interesting that some retail chains are not rushing to raise prices to save consumption and sell more. They say they will absorb part of the VAT increase so as not to raise prices so quickly.

Average salary in Romania

What is the average salary in Romania and to what extent can people cope with such financial pressure?

The average gross salary for May 2025 is almost 10,000 lei (2,000 euro). It is important to note that in Romania, employees pay their own social security contributions, without sharing the costs with their employers (as is the case in Bulgaria). As a result, the average net salary is around 5,500 lei (1100 euro).

There are big differences between sectors. For example, in the IT sector, average salaries reach 4000 euro, while in restaurants and hotels they are significantly lower. In these sectors, there is even a large influx of workers from Sri Lanka and Nepal, as Romanians are unwilling to work for such low wages. So, there is a big difference in income, but the average net salary is around 1100 euro.

Photo: Vladimir Mitev (source: YouTube)

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