Key challenges are corruption, judicial integrity
Romania faces a number of challenges that extend to nearly every corner of society. The most important challenge relates to the intertwined issues of corruption and judicial integrity. Until 2017, Romania drew considerable acclaim for its judicial reforms and fight against corruption. The country’s efforts were widely regarded as a model for other countries, for example, neighboring Bulgaria or Ukraine. The efforts by the current PSD/ALDE coalition to rollback judicial reform and anti-corruption efforts have squandered these achievements. The backtracking on both judicial reform and the fight against corruption is likely to have negative effects on the development of the Romanian economy.
Negative impact on investment likely
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 driving talent out of the country. Finally, it will damage Romania’s international standing and make it more difficult to shape debates within the EU.
Public trust in state
Related, yet somewhat distinct is the issue of trust. As the mass unrest in 2017 and 2018 shows, public trust in state actors and institutions has suffered from the government’s backtracking on judicial reform and the fight against corruption. Restoring and rebuilding this trust will take more than putting a stop to attempts to increase government influence in the judiciary and facilitate a more lenient approach to corruption.
There is also a strong need to make decision-making more transparent and to expand public consultation. The creation of a ministry of public dialogue and social consultation by the Cioloș government back in 2015 was an important step in this direction. The re-establishment of the ministry should be combined with a more sincere and systematic approach to public consultation, a stronger inclusion of both academic experts and interest associations in the policymaking process and a bolstered commitment to making relevant policy information accessible online in a timely manner. Trust in government would also benefit from a reduced reliance on government emergency ordinances as a means of policymaking.
Development strategy must look to long term
Improved public consultation might also help address a third challenge, the need to develop a more long-term development strategy. The near halving of GDP growth, strong inflation, the rising fiscal deficit and growing external imbalances in 2018 have revealed the limits of a model of economic growth based primarily on strong wage increases and higher consumer spending. Likewise, the recent increases in the minimum wage, wages in general and pensions have done little to reduce poverty and expand social inclusion. What is needed here are structural reforms addressing long-standing issues such as a shortage of qualified labor, outdated school curricula, high levels of avoidable hospital admissions, weak R&I activities by enterprises or strong regional disparities in access to education and health care. Such measures cannot be developed, let alone implemented, without the proper inclusion of all relevant stakeholders
Government, opposition strongly divided
Since 1989, the Romanian party system has undergone many changes. Existing parties have split or merged, new parties have emerged, and quite different coalitions have been formed. Since the parliamentary elections in December 2016, the polarization between the governing coalition, consisting of the Social Democratic Party (PSD) and the Party of the Alliance of Liberals and Democrats (ALDE), and the center-right opposition led by the National Liberal Party (PNL) has been strong.
Cross-party agreements are rare
The opposition, backed by President Klaus Iohannis, a former chairman of the PNL, has taken to the streets and used all available parliamentary means to derail the governing coalition’s attempts to strengthen its ability to influence the judiciary and undermine the fight against corruption. In turn, pro-government supporters have criticized Iohannis and the opposition for not accepting the results of the parliamentary elections and for instrumentalizing the judiciary and the National Anti-Corruption Directorate (DNA) as an illegitimate “parallel state” as a means of climbing back to power. The resulting polarization has undermined the ability to find cross-party agreements in policymaking. (Score: 4)