The Romanian coalition survives something. Managing a government is rarely easy in any nation. Leaders frequently deal with stressful situations, difficult decisions, and votes that could make or break their power overnight, behind formal speeches and well-prepared press conferences. Making controversial choices and persuading enough to support one another when it counts most are often necessary to maintain political power. The leaders of Romania found themselves in a similar situation recently. The ruling coalition faced a significant challenge that might have led to their overthrow.
The government in Romania wins the Vote and pushes tax increases to prevent crisis
Romanian Prime Minister Ilie Bolojan’s three-week-old coalition government survived a no-confidence vote, allowing it to push through unpopular tax hikes needed to lower the European Union’s largest budget deficit. The government has fast-tracked through parliament an increase in value-added tax, excise duties and other levies from August to prevent a ratings downgrade to below investment level and to unblock access to EU funds.
The broad coalition of four pro-European parties took power at the end of June, ending months of political deadlock after a presidential election was cancelled in December and was re-run in May. The parties have been reluctant to agree on the hikes that have been criticised by employers and unionists, while thousands of public sector workers have staged protests.
The hard-right opposition filed Monday’s no-confidence motion and said it will file more. Bolojan told lawmakers,
“I understand the opposition does not agree with the measures proposed by the government.”
A vital vote keeps the government’s position
The government of Prime Minister Marcel Ciolacu contended that in order to maintain budgetary stability and prevent more difficult issues in the future, the nation needed to make immediate adjustments to its tax structure. Romania has been dealing with high inflation, growing expenses, and pressure from the EU to stabilise its budget for months.
While all four parties in the government approved the increases, the Social Democrats, the coalition’s largest party, without which a ruling majority cannot hold, criticised them. The Social Democrats had supported replacing a flat rate of tax on income with progressive taxation instead of raising VAT, but the other parties did not support that, and the tax authority has said it is not equipped to enforce it.
These are the rapid changes happening in the government right now
Romanian Prime Minister Ilie Bolojan said earlier this month the coalition government would do everything possible to lower the deficit to around 8% of economic output by year-end from last year’s 9.3%—above an initial 7% target – and closer to 6% in 2026. Under Romanian law, the tax measures could be challenged in the constitutional court, and the opposition last week said they would seek to do so.
What is changing exactly, then? To lower the deficit, the government’s plan combines spending cuts and tax increases. This implies that some companies and, occasionally, regular employees will generate more revenue. Taxes on large corporations and high earners are increasing. At the same time, some expenditures in the public sector will be reduced.
Any discussion about increased taxes can be hurtful to many citizens of Romania, who already pay more for utilities, groceries, and petrol. The ruling coalition in Romania has so far passed one of its most significant tests. The new tax proposals are proceeding after the no-confidence vote was unsuccessful. However, the discussion surrounding them is still ongoing. Whether this plan can truly stabilize the nation’s finances or merely cause additional annoyance for residents who feel they are paying more but receiving less will become clear in the upcoming months. Making the difficult decisions work.