The Romanian economy would suffer greatly if Romania were to leave the European Union, and without access to European funds, it would no longer be able to provide the current level of well-being, argue the economists of the CFA Romania Association, in an opinion piece.
“A must-read, the famous novel “Ora 25” by the Romanian author Constantin Virgil Gheorghiu, although written in 1949, shows us what can happen in a dehumanized, divided society, which fails to find common objectives and values, in a period of great turmoil and transformation – as was the period immediately following the Second World War. Although history repeats itself at large intervals of time, we are not the same. We are better! We suffered a dark period, with fears and deprivations, until 1990, only to then go through another period of exceptional prosperity, from 1990 until today. The figures from the last 35 years show it. Since Romania’s accession to the European Union, benefiting from over 100 billion euros in European funds, the Romanian economy, if we look at the real convergence towards the European Union average, with the exception of the 2008-2009 financial crisis, has been one of the most dynamic economies within the Union”, states the opinion article entitled “The 25th Hour” signed by the president of CFA Romania, Adrian Codirlasu, and the vice president of the association, Alexandra Smedoiu.
According to the authors, measuring real convergence as the level of GDP per capita adjusted for purchasing power, it is clearly noticeable that the evolution of this indicator in the case of Romania has been spectacular. Thus, in the early 2000s, when Romania began the process of preparing for accession to the European Union, GDP/capita adjusted for purchasing power represented only 27% of the European Union average. At that time, Romania was in last place among the member states or candidates for accession to the EU. Next was Bulgaria, with 29%. Poland, Hungary and the Czech Republic were far ahead of Romania. In 2007, at the time of accession, Romania recorded a value of 44%, and this indicator increased constantly, with a break between 2013-2015, reaching the level of 79% in 2024. Thus, Romania reached above Bulgaria, Slovakia, Greece, Croatia, Latvia and Hungary and at the same level as Poland.
The authors mention that the same rapid convergence was also transferred to wages. Expressed in euros, in 2024, according to Eurostat, the average monthly net salary reached 1,055 euros, which represents an increase of more than 3 times the net salary expressed in euros since Romania joined the European Union. It is worth noting that in large cities, salaries increased at an even faster pace, and the standard of living exceeded the European Union average and even the living conditions in some large European cities.
“In other words, in the last 30 years it has been possible to get rich in a single generation, an extremely rare thing in history,” the document states.
Thus, thanks to Romania’s membership in the European Union and the European funds we have invested in the economy, we are very close to the average standard of living of the European Union. Many of those who travel and do business around the world constantly tell us that, in Romania, life is better than in many other developed countries.
“But it has been a winding road, on which mistakes have been made, and we have not been able to build prosperity for everyone, and above all, the ruling class has not been able to gain trust. We, economists, like to work with mathematical averages. But averages do not tell the whole truth: they do not tell the story of those who did not have opportunities, of those who were left out of the education system, of those who were caught on the wrong foot by technological advances, or of those who struggled in vain and were gradually excluded from their communities. Likewise, the averages calculated by us, economists, do not tell the story of the lucky ones, who “caught the train” of this extraordinary development, who worked hard to get where they are or, perhaps, received but gave nothing back to society,” the authors state.
According to the cited source, averages are determined from these two types of data, but they do not tell the whole story. A system that thinks more too little on inclusive development and does not invest enough in social infrastructure, especially in access to quality education and health services, risks exacerbating social inequalities, with dire consequences.
“We have now reached a crossroads. The good things that brought us here – membership of the European Union, prosperity, political and macroeconomic stability, foreign investment, a business-friendly tax regime, trade partnerships with other democratic countries – may not be enough to take us further. They have weakened us from within, one after the other: marginalization and lack of access to education, more or less obvious corruption, harmful and unfair public policies that have weakened the budget structure, Covid and, finally, demography. All of this will have long-term and very long-term consequences, especially the latter – demography. With millions of Romanian emigrants, an increasingly low birth rate and a sharp aging in the coming decades, it is necessary to turn to ourselves and ask ourselves what kind of country we want. We want to be that country where even foreigners recognize that it is better to live than in many countries developed? Due to the budget excesses of recent years, Romania’s major problem in the coming many years will be the budget deficit, a deficit that has become unsustainable and is increasingly difficult to finance, with ever-increasing costs,” CFA Romania specialists reported.
They specify that, in recent years, Romania has recorded budget deficits significantly higher than the European Union average, consistently ranking among the countries with the highest fiscal imbalances. According to Eurostat data, in 2024, Romania’s budget deficit reached 9.3% of GDP, the highest level in the EU, compared to the European average of 3.2% and the euro area average of 3.1%. These budget deficits have had as consequences the generation of inflation (Romania having one of the highest inflation rates in the European Union), high financing costs (Romania borrows at the highest interest rates in the European Union), current account deficit.
Moreover, this unsustainable budget deficit greatly endangers Romania’s “recommended” rating for investments. A downgrade of Romania to the “non-investment” rating category would lead to capital outflows, depreciation of the leu, as well as even higher interest rates, which would hit both the population and companies (for example, in the previous “junk” rating episode, Romania recorded interest rates expressed in double digits).
“In order to be able to manage this situation, a fiscal adjustment will be needed, which will be spread over several years and will probably mean significant tax increases. However, in addition to the adjustment, we also need credibility in front of institutional creditors, attractiveness for foreign investors, encouragement of the business environment through responsible measures that would create a healthy competitive environment, based on property rights and free choice, European funds, large infrastructure projects and much more”, argue the economists.
According to them, it is necessary to be part of something bigger, of a union whose values are economic freedom, competitiveness, well-being, innovation.
“We must also be aware of the fact that the Romanian economy would suffer greatly if Romania were to leave the European Union. Practically, given the imbalances that the Romanian economy is experiencing, without access to European funds, it would not be able to provide anywhere near the current level of well-being. We can very easily compare, having enough examples in Europe, the standard of living of Romania compared to that recorded in those countries. Paradoxically, the democratization of information and freedom of communication have divided us more than ever. Some things, however, are extremely clear: belonging to a strong community block, fiscal responsibility, inclusive social policies, emphasis on investments. These are timeless values and it is time to become united again in defending these values. This 25th hour can make the difference between the past and the future,” the authors write.