Romanian PM's Reform Plan Sparks Coalition Tensions

Comments made by Romanian Prime Minister Ilie Bolojan regarding a 10% reduction in the overall staff budget for all ministers and comparable...

Comments made by Romanian Prime Minister Ilie Bolojan regarding a 10% reduction in the overall staff budget for all ministers and comparable contractual entities, rather than just the central administration of these organizations, led to a strong response from the Social Democratic Party (PSD) and public sector trade unions on November 19. Nevertheless, no finalized version of the document was shared or became public.

If given the go-ahead, the 10% reduction in payroll would add to another policy affecting the earnings of employees within the country's public sector: their salaries (along with public pensions) have been held at the November 2024 level until the end of 2026, as part of the initial set of budgetary reforms passed in July. In real terms, this freeze has already resulted in approximately a 10% drop in their income by 2025, as inflation remains near double digits by year-end. Although inflation is expected to be slightly lower in 2026, it will still remain high.

Social conflicts and a collapse within the governing coalition could arise if an additional 10% reduction is implemented for all staff. Other options for staff cuts might be available.

It is still uncertain if this step, vaguely mentioned by PM Bolojan, which is expected to have a budgetary impact of approximately 0.5% of GDP, is truly necessary for reaching the 6%-6.5% of GDP deficit target next year. Rating agencies, the European Commission, IMF, and the Fiscal Council all agree that the measures in the first package will be sufficient for a smooth fiscal consolidation aimed at the desired target in 2026 – although additional steps will be needed for further advancement.

"In the public administration reform package, this recommendation was included, suggesting that all ministries should consider, for next year, a reduction in expenses compared to this year, up to 10% of the salary budget. This implies that some may need to make staff reductions, [...] while others may cut bonuses or other expenditures to maintain salary costs at a reasonable level," Bolojan stated in an interview with ProTV, as reported byNews.ro.

Ilie Bolojan stated that no exceptions will be allowed, but emphasized that the 10% reduction in payroll can be accomplished through different methods besides lowering wages: stopping new hires, eliminating bonuses, and "reorganizing" operations (presumably with a smaller workforce).

The prime minister previously mentioned that the draft law on public administration would be finalized this week and passed in Parliament next week.

Under the framework announced by PM Bolojan and verified by UDMR president Kelemen Hunor — whose party is overseeing the Development Ministry responsible for drafting the bill through minister Cseke Attila — this measure would consequently cut personnel costs for all public employees, excluding those in local administration (which is governed by a separate law that also includes a similar 10% reduction in salaries). Initially, it was thought that only the staff in the central offices of ministries and related contracting organizations would be affected by the 10% salary cut.

There will be no exceptions, except for the local Ministry of Education, where the first set of budget measures passed in July already included a 6% cut in payroll, meaning a 4% reduction would be enough this time, explained Kelemen Hunor.

The president of PSD, Sorin Grindeanu, strongly opposed any decrease in public sector earnings.

"Until PSD is in power, wages will rise, not fall. We won't be part of any administration that cuts salaries. If someone plans to do this, PSD will exit the government, and we will not back such an action," Grindeanu stated, according toNews.ro.

"The state could save approximately RON 10 billion (EUR 2 billion) by implementing a 10% reduction in spending, which could also be achieved through alternative methods, and there's no necessity to reduce the wages of teachers, doctors, police officers, or military personnel," Grindeanu added.

iulian@romania-insider.com

(Photo source: Gov.ro)