By Luiza Ilie BUCHAREST, March 20 (Reuters) - Romanian lawmakers approved on Friday a long-delayed budget for 2026, keeping the deficit reduction target while incorporating higher welfare spending - a
Romanian Lawmakers Approve 2026 Budget Despite Ruling Coalition Strains
Romania's 2026 Budget Approval and Political Implications
By Luiza Ilie
Budget Approval and Key Provisions
BUCHAREST, March 20 (Reuters) - Romanian lawmakers approved on Friday a long-delayed budget for 2026, keeping the deficit reduction target while incorporating higher welfare spending - a condition set by the main ruling leftist party for keeping the coalition government in power.
The nine-month-old coalition of four pro-European Union parties reached a compromise on Thursday to incorporate one-off aid to pensioners and other welfare support while delaying other payouts to reduce the deficit to 6.2% of economic output from last year's 7.7%.
Coalition Dynamics and Political Tensions
Despite the agreement, the leftist Social Democrats, parliament's largest party that is key to the pro-European ruling majority, said they would still evaluate whether to remain in government as they criticised Prime Minister Ilie Bolojan's austerity policies.
Bolojan's administration, which includes Social Democrats, raised taxes and cut some state spending last year, and has agreed with Brussels to bring the gap below 3% by 2030.
Economic Growth Assumptions and Risks
The budget, based on an economic growth assumption of 1% - mainly underpinned by EU investment - could come under strain if the war in Iran continues pressuring energy prices and debt costs.
Bolojan, the head of the Liberal Party, defended the budget's fiscal prudence, saying during the debate: "If we don't press the (spending) brakes now, in a few years the country will be crushed by the weight of interest rates."
Romania's Fiscal Situation and Debt Servicing
Servicing costs on Romania's public debt have doubled over the past four years to 60 billion lei ($13.63 billion).
Before it started reducing the budget gap, the country ran the EU's largest deficit in 2024, at over 9% of GDP, and faced an imminent risk of losing investment-grade credit ratings.
Political Stability and Future Outlook
Speaking in Brussels after an EU summit, Romania's centrist president Nicusor Dan warned Bolojan could see his parliamentary support wane, potentially threatening political stability.
"I want for this parliamentary majority to carry on for a long time, but we will see."
($1 = 4.4017 lei)
(Reporting by Luiza Ilie, edititng by Andrei Khalip)
