Romania’s Political Crisis May Undermine Foreign Financing: S&P

“The government’s access to the Eurobond market has weakened, leading to pressure on the exchange rate and the domestic bond market,” it said. “Additionally, inefficient policy-making could make EU funds—particularly those under the Recovery and Resilience Facility—less accessible.”

Romania’s economy grew by just 0.8% last year, the slowest pace since the COVID-19 pandemic, with growth decelerating each year since 2021. On Thursday, a major employers’ group said the political crisis increases the risk of pushing the country into recession.

The leu, which on Tuesday broke out of the tight trading range it had maintained for most of the past three years, pared its weekly losses to under 3% on Thursday but was still trading above the key threshold of 5 per euro.

The yield on 10-year government bonds has risen by about 100 basis points since the beginning of the week, reaching the highest level since November 2022.

Polls show that Simion, the far-right candidate, is likely to win the second round on May 18. However, regardless of the outcome, policymaking in Romania is expected to become more fragmented, less stable, and less effective in the coming months, S&P Global said.

“This could result in weaker growth, fiscal, and external outcomes than our already pessimistic assumptions,” it said.

S&P Global said its post-election scenarios include an unstable minority government that may attempt to move forward with fiscal consolidation measures.

A decision to call early parliamentary elections would further delay budget cuts and put pressure on refinancing efforts, while a third scenario envisions forming a unity government with sufficient support for fiscal stabilization.