The rating agency also believes it is becoming increasingly unlikely that sufficient political support can be secured to adopt the 2027 budget before the end of this year.
On September 30, Romania’s political deadlock deepened as Parliament failed to approve a new government for the third time since May, when the pro-European coalition government was dismissed. Despite a new round of cabinet talks scheduled to begin on October 5 and the president’s strong preference to avoid early elections, the latest impasse indicates that the likelihood of snap polls is significant, Moody’s said.
The latest failure to form a government leads Moody’s to question the sustainability of Romania’s fiscal consolidation beyond 2026. While the fiscal adjustment has significantly exceeded expectations so far this year, further measures are needed to continue reducing Romania’s deficit, which remains the largest among EU member states.
Moody’s questions the sustainability of the fiscal adjustment achieved so far.
Data for the first eight months of 2026 showed a further narrowing of the cash deficit, to 2.9% of GDP from 4.5% in the same period of 2025, Moody’s admitted. However, the rating agency noted that much of the improvement reflected temporary restrictions on public-sector wages and social transfers, which reduced total spending by 0.7 percentage points year-on-year, as well as stronger-than-expected tax revenues, with VAT receipts up 25.2%.
At the same time, Moody’s sees underlying spending pressures as remaining significant. Financing from the RRF has now ended, while pressure to increase spending on defence, public-sector wages and pensions continues to build. Moody’s therefore sees the political developments of the coming weeks as important in determining whether the fiscal adjustment achieved this year will prove sufficiently durable to support Romania’s sovereign credit profile.
Other takes from Moody’s ad hoc comment.
Rising interest costs are narrowing Romania’s fiscal space and complicating further consolidation.
Romania’s interest bill has risen rapidly amid higher risk premia on international borrowing, weaker domestic demand and exchange-rate pressures affecting external debt servicing. Interest expenses reached RON42bn, or around EUR8bn and 2.2% of GDP, in 2025 and increased by 26.7% year-on-year through August 2026. The increase continues a multi-year trend of rising debt-service costs.
Political uncertainty has already made domestic financing conditions less favourable.
The average bid-to-cover ratio at September Treasury auctions was only 1.3x, falling to 0.9x for short-term maturities of up to one year. Exchange-rate movements add further pressure to debt-servicing costs and the current-account deficit, given that more than half of general government debt is denominated in foreign currencies.
Romania’s gross financing needs of around EUR 55 billion this year also leave the sovereign dependent on continued market access at a time when political uncertainty remains elevated. Moody’s warning therefore came not so much from the deterioration of the 2026 fiscal numbers, which have been better than expected, as from the increasing difficulty of ensuring that this improvement can be maintained beyond the temporary measures underpinning it.
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