Romania on the brink of a bailout: debt at 7% and government fallen
Romania is suffering double-digit inflation and debt at 7% after its government fell in a no-confidence vote. Will it repeat Spain's 2011 crisis?
English · Original discussion in Spanish · Published
Romania on the brink of a bailout: double-digit inflation and debt at 7% after the Government falls
Just a year ago, Romania was the economic miracle luring its skilled emigrants back home. Today, after a no-confidence vote toppled the executive, the country faces a crisis unseen in Europe: double-digit inflation and its public debt trading at 7%, the same threshold that pushed Spain to the brink of a bailout in 2011.
The mirror of Spain 2011
The comparison with the Spanish risk premium of a decade ago is inevitable. Back then, the ECB's intervention with Draghi's 'whatever it takes' stopped the bleeding. Now, Romania has no community safety net. The political crisis compounds the economic one: elections were annulled after the victory of a pro-Russian candidate, and the new caretaker government cannot place its debt. The market is punishing it mercilessly.
Farewell to the 'Romanian miracle'?
The currency is devaluing, wages are losing purchasing power and the Dacia effect – the low-cost car that symbolised integration – has turned against it: the same cars cost twice as much in Spain because of the exchange rate. Migration, which had begun to reverse, could turn around again. Some analysts point to a double standard at the EU, which allows fiscal deviations in other countries while suffocating Bucharest.
The Romanian crisis is not just a local problem. It is a warning that Europe's periphery remains vulnerable, and that the 'miracle' can evaporate when politics goes wrong. The ECB no longer has room for another 'whatever it takes'.
Related debates in the forum
Just a year ago, Romania was the economic miracle luring its skilled emigrants back home. Today, after a no-confidence vote toppled the executive, the country faces a crisis unseen in Europe: double-digit inflation and its public debt trading at 7%, the same threshold that pushed Spain to the brink of a bailout in 2011.
The mirror of Spain 2011
The comparison with the Spanish risk premium of a decade ago is inevitable. Back then, the ECB's intervention with Draghi's 'whatever it takes' stopped the bleeding. Now, Romania has no community safety net. The political crisis compounds the economic one: elections were annulled after the victory of a pro-Russian candidate, and the new caretaker government cannot place its debt. The market is punishing it mercilessly.
Farewell to the 'Romanian miracle'?
The currency is devaluing, wages are losing purchasing power and the Dacia effect – the low-cost car that symbolised integration – has turned against it: the same cars cost twice as much in Spain because of the exchange rate. Migration, which had begun to reverse, could turn around again. Some analysts point to a double standard at the EU, which allows fiscal deviations in other countries while suffocating Bucharest.
The Romanian crisis is not just a local problem. It is a warning that Europe's periphery remains vulnerable, and that the 'miracle' can evaporate when politics goes wrong. The ECB no longer has room for another 'whatever it takes'.
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (35 replies).
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