Romania is set to forfeit at least €770 million in European Union recovery funds after its main political parties failed to reach an agreement on a public-sector salary reform, a key condition for receiving post-pandemic financing. The missed deadline has deepened political uncertainty in Bucharest and sparked a bitter blame game among the country's pro-European forces.
The reform was part of Romania's National Recovery and Resilience Plan (NRRP), which earmarks €21.41 billion in grants and loans. The 31 August deadline for completing the salary overhaul passed without consensus, triggering an automatic reduction in the funds still owed to the country. According to EU sources, the financial penalty will be applied to the €8.44 billion in remaining disbursements, which represent about 40% of the total plan.
The European Commission will make a final calculation of the loss when it assesses Romania's last payment request, which must be submitted by the end of September. While the exact figure could still be adjusted, the initial estimate of €770 million represents a significant blow to a country that has struggled to absorb EU funds efficiently.
Political deadlock and the blame game
President Nicușor Dan acknowledged last week that the legislation was technically almost finalised and could still be adopted by the end of the year. He described the reform as a “complicated topic with major social and economic implications” that had been debated “under enormous time pressure.” However, the failure to pass the law before the deadline has left the country exposed to financial penalties.
The dispute has also triggered protests by trade unions, which have strongly opposed the proposed legislation. Several federations demonstrated outside the Labour Ministry on 25 August, demanding higher minimum wages and the resumption of collective bargaining. Unions argue that the reform could reduce salaries for some categories of public employees and that the proposed inflation-linked adjustments would be insufficient.
The deadlock has exacerbated tensions within the former governing coalition, which was led by centre-right Prime Minister Ilie Bolojan. Acting Labour Minister Dragoș Pîslaru blamed the Social Democratic Party (PSD) for blocking the reform and for making promises to trade unions that could not be met within Romania's financial constraints. Pîslaru also accused the PSD of failing to prepare the legislation during the years it controlled the Labour Ministry.
The PSD has rejected these accusations and, in turn, blamed the National Liberal Party (PNL), Bolojan, and Pîslaru for the failure. The party claims the draft law was kept from public scrutiny and that the government failed to reach an agreement with trade unions. This exchange of accusations has further poisoned the political atmosphere in Bucharest.
Political instability and the future of Romania's pro-European camp
Bolojan's government collapsed in May after a no-confidence motion backed by the PSD and the far-right Alliance for the Union of Romanians (AUR). The vote marked the breakdown of the pro-European coalition and has left the country in a state of political flux. There is now speculation that the PSD and AUR could form a new coalition, potentially with the far-right SOS Romania party. Such an alliance would represent a major departure from Romania's previous pro-European governing formula and would further fracture the pro-European political camp, which appears increasingly difficult to reunite.
The political crisis has also spilled over into other EU-related matters. Last week, the Romanian Senate passed an integrity law aimed at preventing conflicts of interest among public officials, but it included a controversial amendment that would remove liberal party leader Dominic Fritz from his position as mayor of Timișoara. The European Parliament's European People's Party and Renew Europe groups both criticised the bill, calling on Commission President Ursula von der Leyen to pressure Romania's Parliament to amend it. Liberals and conservatives argued that the law's retroactive application was designed to target Fritz, warning that it could contribute to the “undermining of Romanian democracy.”
The loss of EU funds is a stark reminder of the consequences of political instability. Romania, like other member states, has benefited significantly from the EU's recovery package, but its ability to use those funds effectively depends on a functioning government and a willingness to implement necessary reforms. The current deadlock not only costs money but also undermines confidence in the country's commitment to European integration.
As the Commission prepares to assess Romania's final payment request, the country's political leaders face a choice: either find a way to cooperate and salvage what remains of the recovery plan, or continue down a path of confrontation that could have long-term economic and political consequences. The coming weeks will be crucial in determining whether Romania can regain its footing or whether it will slide further into a crisis that threatens its European future.
