Romania: The Crossroads of Political Change and Economic Impact

Grand Union Day in Romania is set to mark the commencement of a new chapter in the nation’s presidential and parliamentary administration. The Romanian elections of 2024 are expected to conclude in the latter part of the year. Marcel Ciolacu, the incumbent Prime Minister, has declared that parliamentary elections will be conducted on 1 December 2024, with the presidential elections occurring concurrently (the first round on 24 November, followed by a second round on 8 December). This will be the first instance of an electoral synchronisation in Romania since the 2004 general election.

The trajectory of Romanian governance in the 21st century has been notably intricate. The administration of former Prime Minister Florin Cîtu came into power in December 2020, succeeding the legislative elections held that year. This cabinet was upheld by a centre-right coalition encompassing three parliamentary political parties: the conservative-liberal National Liberal Party (PNL), the progressive liberal/neoliberal USR PLUS (which reverted to its original USR designation in late 2021), and the Hungarian minority-focused Democratic Alliance of Hungarians in Romania (UDMR). A major political upheaval began in September 2021, known as the 2021 Romanian political crisis, which stemmed from a significant rift within the coalition. The dismissal of Stelian Ion, then Minister of Justice, by Prime Minister Cîtu—who enjoyed the backing of President Klaus Iohannis—precipitated this crisis. By 7 September 2021, all USR ministers resigned from the government, resulting in a minority administration. In November 2021, the Cîtu Cabinet was unseated through an unprecedented motion of no confidence, which garnered the highest number of votes against a government in post-1989 Romanian history. This crisis was ultimately resolved through the formation of a grand coalition, leading to the establishment of the Nicolae Ciucă Cabinet, which remained in power until June 2023. Pursuant to a rotation government agreement, the Social Democratic-led Ciolacu Cabinet succeeded the National Liberals on 15 June 2023, with Ciolacu continuing as Prime Minister to date.

Romania’s legislative structure is composed of 330 members of the Chamber of Deputies and 136 members of the Senate. These representatives are elected across 43 multi-member constituencies, which are delineated based on the country's 41 counties, the Municipality of Bucharest, and the Romanian diaspora. The electoral system employs party-list proportional representation. According to Law No. 208/2015, each constituency is allocated one deputy for every 73,000 inhabitants and one senator for every 168,000 inhabitants, based on population data reported by the National Institute of Statistics (INS) as of 1 January of the preceding year. Each constituency must have a minimum of four deputies and two senators. To gain representation, political parties must secure at least 20% of the vote in four constituencies or achieve a 5% threshold of the national vote. The Chamber of Deputies also includes additional seats—currently 18—reserved for ethnic minority groups that meet a lower threshold of 5% of the vote required to obtain a seat.

While the established political parties are anticipated to dominate the forthcoming elections, several newly formed alliances offer alternative options to voters. The Romanian Village Party (RoSAT), led by nationalist Marian Vișu-Iliescu, was established in July 2021 and positions itself as the defender of the peasantry’s interests, which it claims have been neglected by mainstream political parties. Similarly, the Alliance for the Homeland (Alianța pentru Patrie, ApP), founded by former PSD president Liviu Dragnea and his ally Codrin Țuțefănescu on 19 September 2021, presents itself as an alternative to the PSD, advocating a nationalist agenda.

Current public opinion suggests that the Social Democratic Party (PSD) is poised to retain power, providing Marcel Ciolacu with an opportunity to extend his premiership. The PSD is characterised by conservative positions on social and ethical matters, while maintaining centre-left rhetoric and policies, particularly in the economic sphere. The 2024 elections in Romania will have significant implications for both domestic and international business operations. If the PSD maintains its leadership, it is likely that Romania will continue its emphasis on income redistribution, social welfare policies, and labour rights. These policies, emblematic of the PSD’s centre-left ideology, may include an expanded state role in key sectors such as infrastructure and healthcare and initiatives aimed at mitigating income inequality.

For domestic businesses, this continued focus on social welfare and regulatory oversight could provide a more stable and predictable operating environment, albeit one that might entail higher costs due to labour protections and tax policies. Enhanced government intervention in infrastructure development could offer increased opportunities for construction and service-oriented businesses. However, potential regulatory tightening in areas related to taxation and labour could necessitate adjustments in operational strategies.

International businesses active in Romania may benefit from the country's ongoing stability and deepening integration within the European Union’s economic framework. Nonetheless, such entities might face increased regulatory scrutiny, particularly in labour law compliance and tax obligations. For multinational corporations, this may translate into the need for enhanced legal and operational strategies to align with Romania’s policy shifts. Additionally, the continuation of PSD’s policies may prompt a focus on social investments and corporate social responsibility to align with the government’s social equity objectives.

Overall, the political landscape post-2024 will likely maintain a balance between social equity-driven policies and the broader objectives of economic integration and international collaboration. Businesses, both domestic and foreign, should remain vigilant and adaptive to potential regulatory changes while leveraging opportunities arising from government-backed development initiatives.