Romania Struggles with Rising Debt, Eurozone Entry in Jeopardy

Romania's public debt is nearing the critical threshold of 60% of GDP, as outlined by the Maastricht criteria, further distancing the country from its goal of adopting the euro. According to the "Ziare" information site, cited by BTA, Romania's public debt stood at 52.6% of GDP by the end of May, marking a 3.8% increase from December 2023. The total debt reached 172.6 billion euros, up by 1.9 billion euros from April's figures.

At this pace, Romania's debt could rise to 58% of GDP by the end of the year, dangerously close to the Maastricht limit for joining the Eurozone. To replace the leu with the euro, Romania must meet several economic criteria, including keeping the budget deficit below 3% of GDP, maintaining public debt under 60% of GDP, and achieving inflation no more than 1.5% above the average of the best-performing euro area countries. Additionally, the country needs a stable exchange rate within the ERM II for at least two years without significant deviation from the central rate, and its long-term interest rates should not exceed by more than 2 percentage points the rates of the three best eurozone economies in terms of price stability.

In June, the European Commission highlighted Romania's failure to meet the euro adoption criteria in its Convergence Report. The report by the European Central Bank indicated that Romania does not satisfy four essential criteria—price stability, public finances, exchange rate stability, and convergence of long-term interest rates. Moreover, Romania has been under an excessive budget deficit procedure since 2020.

Romania ended 2020 with a budget deficit of 9.2% of GDP, and even before the pandemic, in 2019, the deficit was 4%, already above the 3% threshold. Local media recall that the government...