Reuters: Political crisis puts pressure on Romania’s rating ahead of S&P’s review

Romania’s political crisis deepened after designated Prime Minister Siegfried Mureșan lost the confidence vote in Parliament, increasing pressure on public finances and the sovereign rating, according to a Reuters analysis. S&P Global is due to review Romania’s rating on Friday; it is currently at the lowest level of the investment-grade category, with a negative outlook.

Over the past two weeks, the leu has hit record lows, while yields on Romanian ten-year bonds have risen by approximately 60-80 basis points to their highest levels in the past year. Credit default swap (CDS) contracts indicate the risk of a two-notch downgrade, to the BB category.

Analysts warn that political instability could undermine deficit-reduction measures, especially in the event of a possible AUR-PSD alliance. S&P and the other rating agencies are calling for the adoption of the 2027 budget and the continuation of fiscal consolidation.

Romania is aiming to reduce the deficit to 6.2% of GDP this year, from more than 9% in 2024, and return it below the European threshold of 3% by 2030. The interim Finance Minister maintains that the adjustment cannot be interrupted, while the National Bank warns that debt is growing at a worrying pace and that interest costs have reached approximately 3% of GDP.