Vladimir Mitev: Romania has managed to create a stronger middle class and develop a robust industry. These are advantages in the current crisis

Iordan Barzakov, Nova News, September 15, 2025

Intro

On September 15, 2025, Nova News interviewed Vladimir Mitev about the Romanian socio-economic model. 

We discussed how Romania’s economic growth is based on exports and consumption, with consumption being stimulated over the last ten years by special VAT rates for food and wage increases. We mentioned that Romania has a stronger urban middle class than Bulgaria, which is reflected in the fight against corruption ten years ago. However, the Romanian state stopped this fight during Liviu Dragnea’s term in office, and we saw that not only Laura Koveși but also Călin Georgescu are a Romanian phenomenon. The discussion also focused on state aid for foreign investors in Romania, the importance of Poland for Romania, the abundance of energy resources in the country, and its advantages in the context of the current crisis and austerity policy.

Yordan Barzakov: We now have Vladimir Mitev in our studio, albeit via remote connection. He is a journalist who is well acquainted with the current situation in Romania. Mr. Mitev, hello and thank you for accepting our invitation.

Vladimir Mitev: Hello.

The financial problems of Romania

Mr. Mitev, let’s start here. If we take a superficial look at media reports about what is happening in Romania, we are left with the impression that the country is on the verge of bankruptcy. Is this true or, as usual, are we exaggerating a little?

Romania does indeed have budgetary problems. These are not new. Since 2020, the country has been in an excessive deficit procedure. However, what happened last year was a significant deviation from the program to reduce this deficit.

Last year, Romania recorded a budget deficit of over 9% of GDP. This year, it is expected to remain high, perhaps above 8%, which is far from acceptable.

The situation is such that, combined with the political crisis at the end of last year, which we are all aware of, with the cancellation of the elections, the levels at which Romania finances its debt, i.e., the interest it pays when it takes out new loans to finance old ones, have risen considerably, and its credit rating has been threatened with downgrading to junk bond status, which would have created major problems. You yourself said that the state might no longer be able to finance itself and find itself in a state of bankruptcy. And this now requires the serious measures that the government is trying to implement, because, of course, no one wants to lose the rights and privileges they have enjoyed.

Romania has a growth model, based on consumption

Mr. Mitev, let’s try to go chronologically. For a long time, the prevailing idea in Bucharest was that government spending stimulates consumer behavior. It is interesting to note that consumer behavior drove the growth of Romania’s gross domestic product and economy for many years, from 2015 to 2025, overtaking Bulgaria. Was this really the case, and how did we get into this situation?

Yes, you are right. In fact, this is a topic for serious international economists, such as Cornel Ban, a Romanian economist based in Denmark, who says that Romania does not rely solely on the export sector of the economy, i.e. the automotive industry, which I believe sometimes accounted for a third of exports, but also on consumption. In this regard, a number of measures have been introduced.

Ten years ago, Victor Ponta’s government introduced special VAT rates for food, i.e., it reduced the VAT level, which naturally allowed people with lower incomes to consume more. This was followed, over time, by Liviu Dragnea, the next leader of the Social Democratic Party, with a policy called wage-based growth, i.e., growth based on the fact that wages are rising and people have more money to spend.

And finally, what we have been seeing for a long time, perhaps more than 10 years, at least here in our part of Bulgaria, which is further north, are Romanian tourists. Whenever there is a holiday, a longer holiday, that is, when there are more days off, Romanians really like to travel, and I suppose that at least one of the explanations is that they have the means, or had the means, to consume more.

Romania is an industrially developed country

Mr. Mitev, I am asking you this question because the following situation has arisen: in Bulgaria, industrial production is declining for the third consecutive year. We do not have significant growth in the service sector, but we are still seeing economic growth. This means one thing—that Bulgaria is growing because of consumer behavior, but not because of government policy, but because of exogenous shocks—external shocks and the way the Bulgarian economy works.

However, things are different in Romania. At the very least, Romania is a much larger country with many more people who can spend money. Tell us a little more about Romania’s current population and the size of Bucharest. I’m trying to make a comparison to show our viewers that things are different.

Before I answer, let me tell you another specific feature of Romania – it has an important industrial sector, meaning it attracts a lot of foreign investment. It does not rely solely on consumption, although this is important, but also has an industrial sector. For example, the automotive industry, about which I have conducted several interviews and about which you probably have an idea. Romanians are proud of their automotive industry, including the technologies that are being developed. In Romania, there are development centers, not just production facilities.

According to some information, 4-5 million Romanians have left the country since the beginning of the transition, meaning that Romania has a large diaspora abroad, especially in Western Europe. And yet, as far as I know, the population is around 18-19 million. Bucharest – there are different figures on this, because Bucharest itself is not just the administrative area proper, but also an urban agglomeration.

At least 3 million people, if not more, are residents of Bucharest. In addition, there are statistics on gross domestic product per capita that are higher than in Warsaw or Madrid, as far as I know, meaning that there is a concentration of wealth there. At least there are people who have wealth.

The fiscal measures of the Bolojan government

First of all, I said that consumer behavior and consumer spending have clearly helped the Romanian economy in recent years. But now it is in the opposite situation, where consumption revenues, especially from VAT, are clearly insufficient to feed the Romanian treasury. What measures has the government taken to address this year’s and next year’s budget deficit? Let’s go back to Bucharest. How do Romanians perceive what is happening at the moment?

The government is introducing measures that, on the one hand, increase taxes for everyone to some extent. For example, the second series of measures, presented in the early days, increases property taxes. The property tax rate has been increased several times. There are attempts to tax transactions between different companies that are in a kind of hierarchy, i.e., to prevent some companies from being above others. There is a tax on the turnover of companies with a turnover of more than €50 million, which is not common.

On the other hand, there are measures in the field of education that take away various opportunities, privileges, and rights from employees. For example, the working hours for employees in the field of education have been increased, which means that fewer people have to do more work. There has been an attempt, the outcome of which remains to be seen, to attack the privileges of people in the judicial system. And because these people retired early, they also benefited from large pensions, special pensions.

You ask me how Romanians are reacting. People who are losing their rights are protesting. There have been protests by teachers throughout the summer, and these are continuing in September. And at the moment, the judicial system is somewhat blocked. Of course, there are tensions in society, because someone has to lose their rights.

The turning point in Romanian macroeconomic situation

At what point did things go wrong? This policy of consumption encouragement is relatively pragmatic. At what point did success turn into failure?

Last year, Romanians had all the elections possible in a single year. In such a year, Marcel Ciolacu’s government (Ciolacu does not have the image of a particularly intelligent leader), had no reason to cut spending. This government made some symbolic expenditures for the people, as if it wanted to ensure good results in the elections. This coincided with the wave of sovereignty in Romania. This discontent was directed, on the one hand, against the major parties – the Social Democrats and National Liberals, which in recent years had been something like state parties.

On the other hand, Trump came to power in the US, and this gave free rein to the sovereignists. So there was enough tension in Romanian society, and this may explain to some extent why the government did not want to introduce unpopular measures, for fear of losing the elections. And in the end, both the Social Democratic Party and the National Liberal Party did not achieve good results. Another candidate became president. And perhaps this is one of the factors that led to what you are saying.

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Romania and the convergence with the EU economies

Mr. Mitev, we are entering the second part of our conversation. Ten to fifteen years ago, we were confident that we were the more developed country, with a slightly stronger economy. Today, Bucharest is at 72% of the so-called convergence, that is, in relation to the average standard of living in the EU. What is your explanation? When did they overtake us? Why did they overtake us?

Yes, if I may, if we look at purchasing power parity, when measuring gross domestic product per capita, Romania is actually at a higher level. The latest information I have seen indicates that the country has reached 90% of the European average.

It should be noted that there is great inequality in Romanian society, so we should not think that all Romanians are so wealthy. There are simply many wealthy people there. This is specific to Romania, as are many other things.

Romania’s specificity is that it has attracted a lot of foreign investment. It has also created a stronger middle class in a way. We can discuss this further in the second part of the conversation, if you like. Foreign investment, even during the coronavirus crisis, was €5-6 billion per year. I remember that by 2022 – this is already old data, but I think it was €110 billion in total.

In other words, Romania has, in a way, positioned itself well to develop, as I said, an automotive industry and other industries linked to Western Europe. There are claims that foreign corporations actually dominate the Romanian economy, while national capital is weaker.

In Bulgaria, there is always talk of a kind of mafia, of a kind of local interests in the economy. Meanwhile, in Romania, many people are convinced that the foreign sector of the economy is more strongly developed. This, of course, has both positive and negative aspects.

Romania and the anti-corruption

How can foreign industries be attracted in the Balkan context? Is there a connection here with the radical judicial reform that has been carried out in Romania, the arrests of politicians, has Romania created a justified or unjustified image of a country that is in the Balkans but has left the Balkan system? We all know that in order to attract foreign industries, it is important to guarantee that their assets and property will be protected.

There are a few things I need to say. First of all, if we look at industry, it is largely developing through state aid. In Bulgaria, it is often said that state aid is not acceptable; in our country, there is talk that it is not acceptable to grant state aid to foreign industries. If this happens, it is perhaps less pronounced than in Romania. 

In Romania, for years, when foreign companies expand their production, hire new people, introduce new technologies, they receive support from the state, based on a specific agreement. For example, a certain number of jobs are created, and the state agrees to provide one-third of the investment. From my discussions with representatives of the automotive industry, it appears that this activity is carried out with the agreement of the European Commission, so that Europeans do not say that certain rules are being violated. That is one aspect.

As for the fight against corruption, I see it more as a consequence of the fact that Romania has a stronger middle class, meaning that in the internal struggle in Romania between different social groups and economic interests, those who were, let’s say, more oriented towards Western Europe had a dominant position 10 years ago. And that’s when Laura Kövesi was in action. But it can be seen that this anti-corruption fight was stopped by the Romanian state during Liviu Dragnea’s term.

So Romania is not only pro-Western Europe, it is not only made up of urban middle-class elites. Romania also has another tendency, as we saw in the case of Călin Georgescu. The country contains different realities. People living in big cities can benefit from foreign investment and have a better education. But there are also people who live in a different reality, in what is called “deep Romania.”

Romanian-Polish relations

When we talk about sovereignist movements, about the pro-Western and anti-Western wings in Romanian politics, let’s clarify something. The new star on the European scene is Poland. As far as I know, Poland has a significant minority of Poles living in northwestern Romania. How do they influence the situation in the country? Does Poland help? Are there any Polish foreign investments? I need to understand whether the neighbors in the region can be a powerful engine to push the country up the economic ladder. For example, can Romania push Bulgaria?

I haven’t noticed any talk of a particularly significant Polish minority in Romania. But you are right that Polish-Romanian relations have developed recently. This very close relationship is based on sovereignism.

Of course, Nicușor Dan, immediately after being elected president, spoke at a rally of Polish liberals, which was also attended by their presidential candidate. This was a gesture by Nicușor Dan towards them. On the other hand, George Simion, leader of the sovereignist AUR party, regularly participates in economic and other forums in Poland, in agreement with Polish sovereignists. In Romania, there is a consensus among sovereignists that the Polish president is a very solid and authentic statesman, unlike the Romanian president, whom they view with some derision.

In economic terms, as you asked, in Romania, for example, Żabka stores, a Polish chain, have opened. On the other hand, Romania has a chain of fast-food restaurants. These are similar to pretzels, but more sophisticated than regular pretzels. This is the so-called “Luca.” “Luca” has also opened stores and sells products in Poland.

In other words, there has been a revival of Polish-Romanian relations since Mateusz Morawiecki, the former prime minister of Poland, visited Romania in 2023. This coincided with the deterioration of relations between Poland and Hungary. Thus, Romania has somehow come to the fore, as Hungary has a different position from Poland regarding Ukraine. Poland strongly supported Ukraine at the time. Hungary gave the impression that it had some reservations about European policy towards Ukraine. This brought Romania to the fore for Poland.

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Romania’s energy resources

We are nearing the end of our conversation. There is something we cannot fail to mention. Part of Romania’s success is linked to the abundance of energy resources located on Romanian territory and in its territorial waters. Romania is the largest producer of natural gas in the EU. Norway is not part of the EU. How did this situation come about and to what extent does it help Romania pursue its own interests?

As far as I know, Romania scores high on an indicator called energy sovereignty. In other words, it has a lot of natural resources. Even now, it produces oil, for example. Of course, the companies operating in the energy sector are mostly foreign. The country has ambitions. It has resources. However, from the interviews I have conducted with the former Romanian energy minister, Burduja, and with some experts, it is clear that the Romanian elites are quite dissatisfied because they have many ambitions, but the various projects and policies that Romania wants to implement are still progressing slowly. Obviously, it takes time. But you are right that Romania is ambitious in the energy sector.

Prognosis about what follows

Will Romania manage to return to normal despite the current crisis, despite its history of budget deficits, despite the wage freeze?

I believe that Romania retains many of its strengths. For example, industrial production in Romania remains in the country, despite the fact that there are also some problems in this sector. Romania has developed considerably, it has experts, so I cannot accept that this is the end of the world for Romania. It has its strengths. Of course, we have to see how the international situation will develop.

Thank you very much. Vladimir Mitev is a journalist with exceptional knowledge of Romania. We have tried to present a portrait of our northern neighbor as it is today and as we have allowed it to surpass us over the last 15 years. Romania is far ahead of us, even if it is currently facing difficulties.

Photo: The Arc of Triumph in Bucharest (source: Pixabay, CC0)

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