Romanian parties fail to agree on wage reform, costing country €770m in EU funds

Romania’s governing parties have failed to agree on wage reform. The Liberals promoted a more fiscally-restrained proposal, while the Social Democrats demanded billions more for teachers, healthcare workers and civil servants. Now Romania is set to lose €770m from Brussels, even though it had known the rules for years and could have secured the money by adopting a reform to which it had already committed itself. The European Commission did not withhold the funds because of an unexpected decision. The reason is that, even after repeated negotiations, Romania’s political parties failed to agree on a new pay system for more than one million public-sector employees. When it became clear at the end of August that the Bucharest parliament would no longer be able to pass the law by the final deadline, representatives of the four former coalition parties accepted the loss of the money. They want to approve the reform by the end of the year, but Romania will no longer receive the hundreds of millions from the EU’s Recovery and Resilience Facility. There is no single culprit behind this seemingly illogical decision, nor is it a simple dispute between advocates and opponents of reform. The negotiations were affected by the fall of the government, concerns about a further rise in the budget deficit, and pressure from professions whose incomes depend on bonuses. Moreover, the political parties could not agree on the fundamental question: how much money the state should allocate for the new pay system and who should receive an increase. Deadline - but no government “The failure cannot be attributed solely to one party; the entire political class bears responsibility,” Romanian journalist Marian Chiriac of the BIRN investigative network told Denník N. In his view, negotiations on the law should have begun as early as 2022, but governments repeatedly postponed them. They were later complicated by events not envisaged in the original plan, notably the annulment of the 2024 presidential election result. The decisive blow came on 5 May 2026, when parliament passed a vote of no confidence in Ilie Bolojan’s pro-European government. The motion was tabled by the Social Democrats of PSD together with the far-right AUR, and was backed by a substantial majority of MPs. Romania was subsequently governed by a caretaker administration with limited powers, while attempts to form a new cabinet failed. “The deadline did not wait for a government that rejected the reform. It fell on a country that had no government at all,” political scientist Cristian Pîrvulescu said. He noted that, under the constitution, a caretaker cabinet could take only measures necessary for the routine administration of the state, rather than carry out a far-reaching overhaul of public-sector pay. President Nicușor Dan tried to rescue the negotiations in May, beginning to mediate an agreement between PSD, Bolojan’s National Liberal Party (PNL), the reformist USR and UDMR, the party representing the Hungarian minority. Yet even after several rounds of talks, they failed to find a compromise with sufficient support in parliament. “In the end, both the political will and the majority required to pass the law were lacking,” Chiriac said. In his view, the main conflict was between Bolojan’s caretaker government, backed by smaller centrist parties, and PSD, which left the coalition in May and rejected the proposal put forward by the Liberals. The core of the dispute was not whether the pay system needed to change, but how much the reform would cost and who would benefit. The Liberals promoted a more fiscally-restrained proposal, while the Social Democrats demanded more substantial pay rises, particularly for teachers, healthcare workers and civil servants. The gap was enormous. According to caretaker labour minister Dragoș Pîslaru, trade-union demands exceeded €5bn, while the government’s proposal envisaged roughly €2bn. Bucharest also had to explain to the European Commission where it would find the money and how it planned to reduce its high budget deficit at the same time. “The size of the pay package itself became a political battleground,” Chiriac said. The parties also failed to agree on supplements and bonuses, which make up a significant share of many public-sector employees’ income. The proposal sought to cap them at 20 percent of basic pay within individual institutions, which the Social Democrats rejected.