Ten years of presidency ended with a resignation

Ten years of presidency ended with a resignation, with Klaus Iohannis thus ending his two terms not in glory, but in disgrace. On February 10, the former president announced his resignation in order to avoid a political crisis generated by the initiation of the suspension procedure. This unexpected decision opened a new stage, and on February 12, Ilie Bolojan was appointed interim president. In his first speech, Bolojan pleaded for stability, professionalism and the organization of fair and transparent presidential elections.

The government approved, at the beginning of the month, a series of major legislative projects for 2025, including the State Budget Law and the Social Insurance Budget Law. These were built on a forecast of economic growth of 2.5% and a GDP estimated at 1,912.6 billion lei, with a budget deficit targeted at 7%. The emphasis was placed on public investments, which reached a record level of 150.5 billion lei, representing 7.9% of GDP. The average monthly net salary is expected to increase by 6.1%, and annual inflation to decrease to 3.8%. There is also a decrease in the share of personnel expenses in GDP, signaling a trend towards more efficient budgetary apparatus. The budget was adopted by Parliament on February 5, after two intense days of debates.

Also last month, the Executive adopted regulations on the mechanism for establishing the gross minimum wage in the country and directed substantial funds for investments in infrastructure, health and education, which increased the value of budgetary expenditures, to which was added during the same month the allocation of over 1.1 billion lei for the organization of the presidential elections in May 2025.

Budget expenditures will continue to increase, if we take into account the fact that the members of the Ciolacu Cabinet adopted several relevant social measures in February, the most important of which is the one approved by GEO 6/2025 - the extension of the capping and compensation scheme for electricity prices (until July 1, 2025) and natural gas (until March 31, 2026 inclusive), as a protection measure for the population and the economy.

Despite these populist measures, the Ciolacu government had to pass the confidence test of Parliament after 155 deputies and senators of the political opposition - AUR, POT, SOS Romania and USR - signed and submitted a motion of censure. On February 27, the motion did not meet the majority of 233 votes for the fall of the Government, nor even the number of those who initiated and signed it, being voted for by only 147 deputies and senators out of the 155 signatories. Consequently, Marcel Ciolacu and his government team remain in the Victoria Palace and will continue to deal with the management of the national economy and public finances.

On the judicial front, the end of the month was rocked by a large-scale DNA investigation into the Port of Constanta. Several directors and officials of the Maritime Ports Administration, along with businessmen, were accused of taking and giving bribes. The investigation revealed a complex network of influence and corruption in the awarding of contracts and in the development of projects in the port, with damages estimated at millions of euros.

Another high-profile case was that of former presidential candidate Călin Georgescu. He was placed under judicial control, being accused of six serious crimes, including instigation of actions against the constitutional order. In parallel, investigators discovered a real arsenal and impressive sums of money among Georgescu's associates, especially Horaţiu Potra, raising suspicions of a possible paramilitary structure with destabilizing plans.

At the end of this prologue, before presenting the main events of last month, we also mention that, against the background of the situation described above, the Board of Directors of the National Bank of Romania decided in the meeting of February 14 to maintain the monetary policy interest rate at 6.5% per year, to maintain the interest rate for the lending facility (Lombard) at 7.5% per year and the interest rate related to the deposit facility at 5.5% per year.

• Macroeconomic bases of the 2025 budget

On the first day of February, the Government approved the draft budget for 2025, a normative act based on an economic growth of 2.5%, a GDP estimated at 1,912.6 billion lei and an average annual inflation of 4.4%. These indicators reveal a moderately optimistic macroeconomic scenario, in the context of a global economic slowdown. The reduction of the budget deficit from 8.6% (at the end of 2024) to 7% (estimated for December 31, 2025) suggests a clear intention of fiscal consolidation, but at the same time, it may imply constraints on public investments or extensive social policies. A careful analysis of the average net salary, projected with an increase of 6.1%, reveals a correlation with the inflation rate, but not high enough to provide a significant real increase in purchasing power.

Total budget revenues are estimated at 667.5 billion lei and while expenditures will amount to 802.2 billion lei, which highlights a large but controlled budget deficit. The high share of personnel expenses (169.5 billion lei, i.e. 8.9% of GDP) and social assistance expenses (242.3 billion lei) indicate a constant budgetary pressure on public resources. The announced public investments of 150.5 billion lei represent a historical peak, which signals the government's commitment to development, but the degree of budget execution and absorption of funds remains to be seen, especially since the number of rigid expenses affects the capacity to react quickly in case of crisis.

In the current year's budget, allocations for local authorities cover a wide range of responsibilities: allowances for people with disabilities, child protection, pre-university and denominational education, as well as local road infrastructure. These amounts contribute to territorial balancing and the effective decentralization of public services. However, the criteria for distributing funds, the uneven administrative capacity of UATs and the audit mechanisms remain significant vulnerabilities.

The package of fiscal measures adopted by the Government in February 2025 included updating the minimum wage according to inflation and productivity, liberalizing cross-border credit services, as well as allocating funds for the green transition. These decisions align both with commitments to the European Union and with domestic economic sustainability requirements. The measures have the potential to stimulate domestic consumption, but at the same time may generate pressure on employers. Regarding investments, the prioritization of projects carried out through the Anghel Saligny Program and the National Investment Company provides a framework for their implementation, but transparent and depoliticized application remains an old and still unresolved challenge.

The state budget and the state social security budget passed the plenary session of the Parliament on February 5. There were 254 votes in favor and 192 votes against. Regarding the form of the Government, approximately 60 amendments were made to the draft state budget in the Budget, Finance and Banking Committees, which were approved by the assembled plenary. These concern changes in form, rectifications, but also some allocations of additional amounts, the most numerous - 34 amendments - to the State Secretariat for Religious Affairs for clerical personnel and renovations, repairs or construction of churches.

• The energy market does not return to liberalization on April 1

Although on April 1, 2025, the energy market should have been reliberalized and we should witness the establishment of the price of electricity and natural gas, on a competitive basis marked by supply and demand, the Government decided on February 27 to extend the measure of capping-compensation of energy prices until July 1, 2025 - for electricity - and until March 31, 2026 inclusive - for natural gas.

According to the Executive, the current scheme of capping energy and natural gas prices will continue, in order to mitigate the impact of price increases in this sector on household and non-household consumers and to continue to support vulnerable consumers. In order to ensure the continuity and security of supply to final customers, the new regulatory act provides for the obligation of natural gas suppliers/thermal energy producers, as direct customers of natural gas producers, to constitute in underground gas storage depots a minimum stock representing 90% of the storage capacity of underground storage depots at national level, according to the regulations of the National Energy Regulatory Authority. Regarding the final price invoiced capped by electricity and natural gas suppliers, the regulatory act provides for differentiated billing depending on the level of consumption and categories of consumers, so that the Government protects vulnerable consumers. The amounts related to the compensation granted will be provided through the budget of the Ministry of Labor, Family, Youth and Social Solidarity and the budget of the Ministry of Energy, from the Energy Transition Fund, as well as from the state budget.

• Loans through the Ministry of Finance

To support budgetary expenditures, but also to extend the energy capping-compensation scheme, the Ministry of Finance is forced to borrow again throughout 2025, and February brought new amounts attracted from the market to the state accounts. The first TEZAUR edition of 2025, held between January 13 and February 7, marked a historical record, with 5 billion lei invested by citizens in government securities. The second edition for the current year of this program started on February 10 and ended on March 6. The first FIDELIS edition of 2025, held between February 7-14, 2025, resulted in 4.3 billion lei attracted to the state budget and 44,000 subscription orders.

The increase in public spending and the contracting of new loans by the state during the past month seem not to have taken into account the execution of the general consolidated budget for the first month of the current year, the execution published by the Ministry of Finance on February 27 and which shows a budget deficit as of January 31, 2025 of 11.01 billion lei, respectively 0.58% of GDP compared to the deficit of 7.89 billion lei, respectively 0.45% of GDP for January 2024. Total revenues amounted to 46.75 billion lei, down by 1.4% (year/year), amid the reduction of European funds and some categories of current revenues. The expenditures of the general consolidated budget in the amount of 57.76 billion lei increased in nominal terms by 4.5% compared to the same period of the previous year. Expressed as a percentage of Gross Domestic Product, expenditures in January 2025 decreased by 0.1 percentage points compared to the same period in 2024, from 3.1% of GDP to 3% of GDP.

• BNR maintains monetary policy rate

In this macro-economic context, on February 14, the members of the Board of Directors of the National Bank of Romania decided to maintain the monetary policy interest rate at 6.5% per annum, to maintain the interest rate for the lending facility (Lombard) at 7.5% per annum and the interest rate for the deposit facility at 5.5% per annum. In making this decision, the NBR management took into account the fact that the annual adjusted CORE2 inflation rate decreased relatively more sharply in 2024 - by 2.8 percentage points, compared to 6.3 percentage points in 2023 - and the recent data on the evolution of the consumer price index, according to which the annual inflation rate decreased in January 2025 to 4.95 percent, primarily under the impact of consistent base effects manifested in the adjusted CORE2 inflation level, the annual rate of which decreased to 5.1 percent. In the discussions on financial conditions, the Council members highlighted the small increases recorded by the main interbank money market quotations in the second decade of January 2025 and their subsequent stabilization at the new levels. At the same time, the wide fluctuation of long-term government bond yields was noted, which extended their steep rise in the first part of January, only to record a sharp downward correction towards the end of the month, amid the improvement in global risk appetite, but also in the context of the easing of financial investors' concerns regarding the prospect of budgetary consolidation following the announcement by the authorities of the state budget for 2025.

As for future macroeconomic developments, the Council members indicated that inflation would be reduced to 3.8 percent in the last month of the current year and to 3.1 percent in December 2026, the end of the forecast horizon, compared to the values of 3.5 percent and 3.3 percent, respectively, indicated by the previous projection for the same reference points, the Council members pointed out.

• Klaus Iohannis leaves Cotroceni Palace permanently

Faced with a request for suspension from office submitted to Parliament by the political opposition, a request that had a chance of being voted on by the deputies and senators of the PSD-PNL-UDMR governing coalition, President Klaus Iohannis announced on February 10 that he would resign, on February 12, from the position he had held for more than 10 years. His second constitutional presidential term expired on December 21, 2024, but Klaus Iohannis continued to exercise the office of president based on the decision of the Constitutional Court of Romania on December 6, 2024, which annulled the presidential elections held last year. With his gesture, Iohannis avoided a deep political crisis and facilitated the institutional transition. On February 11, the CCR took note of President Iohannis' resignation, and Ilie Bolojan, as President of the Senate, became, in accordance with the Constitution, interim president of the country and promised democratic continuity, stability and the preparation of the presidential elections in good conditions.

• Călin Georgescu, indicted for the crime of inciting actions against the constitutional order

The Prosecutor's Office attached to the High Court of Cassation and Justice (General Prosecutor's Office) launched a large-scale action on February 26 that shook the Romanian political scene. Călin Georgescu, a former candidate for the presidency of Romania, was detained in traffic and placed under judicial control, being accused of six serious crimes, including attempted actions against the constitutional order, promotion of fascist ideologies and anti-Semitism. In total, 21 people are indicted in this case, and prosecutors have requested preventive arrest for several defendants, including mercenary Horaţiu Potra and his son, who have left the country. The judges of rights and freedoms approved the preventive measures requested by the prosecutors, and Horaţiu Potra and his son were put on international wanted list. Following the searches carried out in this case, prosecutors discovered a real military arsenal in Horaţiu Potra's house, hidden in a secret room: 21 pistols, 7 machine guns, grenades, launchers, lethal ammunition and explosives. A safe with over $3.3 million, 25 kilograms of gold, as well as other amounts in lei, euros, dirhams and Serbian dinars was also discovered in the same building.

According to prosecutors, Călin Georgescu would have empowered Horaţiu Potra since 2022 to ask Potra for financing of $20-35 million from the controversial businessman Frank Timiş, promising in return to reopen the gold mines in Romania.

Following the investigations, prosecutors decided to prosecute Călin Georgescu for instigating actions against the constitutional order, communicating false information, making false statements in a continuous form, initiating and supporting organizations with a fascist, racist, xenophobic or anti-Semitic nature, promoting the cult of war criminals and genocide. Prosecutors ordered the measure of judicial control for 60 days for Călin Georgescu, a measure definitively confirmed by the court, during which he is prohibited from leaving the country and from publishing materials of a legionary, fascist, racist or xenophobic nature. The investigation also targets a magistrate who allegedly supported the illegal activities and several of Georgescu's close associates, including former combatants in paramilitary structures such as the Foreign Legion.

• Corruption in the Port of Constanta

The National Anticorruption Directorate (DNA) announced, on February 25, a large-scale action to combat corruption within the National Company Maritime Ports Administration S.A. Constanta, targeting 17 people, including directors and civil servants, as well as influential businessmen. The investigation revealed acts of corruption carried out in the period 2024-2025, in connection with economic activities and contracts awarded in the Port of Constanta. The amounts circulated in the alleged bribery acts reach approximately 6 million euros, and the value of the bribes already received by the officials is estimated at 350,000 euros. According to prosecutors, the bribes were offered in exchange for the preferential award of port infrastructure contracts, the facilitation of real estate transfers and approvals, obtaining exclusive access to berths, the approval of business expansion projects, the rental or concession of land under advantageous conditions, but also the employment of certain people within the Maritime Ports Administration. Among the contracts targeted are major projects such as "Extension of Berths 10 and 12 in the Midia area" or "East-West Link Road, Root of Piers IV-V".

This investigation highlights systemic corruption in the country's strategic infrastructure and the urgent need for reforms in the public procurement system. The economic and image impact is significant, especially in the context in which the Port of Constanta is a major regional logistics hub.