Key Challenges

Anti-corruption achievements at risk. Country joins democratic backsliding trend
Until recently, Romania drew considerable acclaim for its judicial reform and fight against corruption. The country’s efforts were widely regarded as a model for other countries, for example, the neighboring Bulgaria or Ukraine. Efforts by the PSD/ALDE coalition to rollback judicial reform and anti-corruption efforts – blocked only temporarily by mass protests, parts of the opposition and President Klaus Iohannis – puts these achievements at risk. These developments will likely be accompanied by democratic erosion in other areas. The legislation introduced by two members of parliament from the governing coalition in June 2017 and passed by the Senate in November 2017 that places restrictions on NGOs and is clearly inspired by the “foreign-agent” legislation observed in Russia and Hungary, is a good case in point. The campaigns waged against protesters and the intimidation of critical journalists are further examples. The developments in Romania must thus be seen as part of a broader democratic backsliding in Central and Eastern European (CEE) countries and elsewhere.
Negative effects on economy likely
Backtracking on both judicial reform and the fight against corruption is likely to have negative effects on the development of the Romanian economy, too. While there are many factors influencing economic performance, progress with judicial reform and anti-corruption mechanisms would certainly help improve the country’s reputation and thereby foster economic growth. The combination of more corruption and less legal certainty will negatively impact investor confidence and favor a diversion of effort and resources from productive to rent-seeking activities. It will distort the allocation of public R&D spending and EU funds, and it will aggravate the growing shortage of qualified labor by fueling the emigration of talent. While fiscal expansion might stimulate economic activity in the short-term, its fiscal limits have already become visible and it won’t raise medium- and long-term growth prospects.
Mass protests continue, effect questionable. EU must take clear position
Romanian citizens’ resistance against the PSD/ALDE governments’ attempts at decriminalizing corruption and restricting the independence of the judiciary has been impressive. The big question is whether or not this resistance can be sustained. Romania’s recent past suggests we should view this with cautious optimism. After all, the country had seen mass protests against corruption in 2015 and the PSD still won the December 2016 parliamentary elections with a landslide. Sustaining the mobilization against the governing coalition until the presidential elections in 2019 and the parliamentary elections in 2020 will be complicated by the biased media landscape and the government’s attempts to weaken NGOs. Moreover, the opposition continues to suffer from fragmentation. These problems make it even more important that the EU take a clear position and make use of the leverage it has for containing democratic backsliding in Romania.
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