Reform or Eyewash? Monday Will Reveal Whether the PSD Came to Govern or Just to Promise

Sorin Grindeanu is convening the PSD leadership on Monday morning. According to Mediafax, the meeting comes just as the debate over pensions and wages is unfolding, and for the first time the party must answer, alone, without a coalition partner, how much money the country has and what it will spend it on. What's worth watching?

First of all, pensions, because just a week ago Grindeanu said that pensions were "required" to rise next year, and this is also included in the government program. The party's optimistic scenario envisions a seven percent increase, the more realistic one five percent, but according to political sources cited by Euronews, at most four percent is feasible if they don't want to exceed the deficit target. Attention must also be paid to the minimum wage, on which Grindeanu has so far declined to comment, saying the budget needs to be seen first. The third topic is the budget itself: a supplementary budget will come first (the party leader says there might even be two), and only afterward the 2027 budget, for which Grindeanu is asking Niculescu to take responsibility in parliament. These three issues will reveal whether the Social Democrats have moved from criticizing austerity to taking on the responsibility of governing, or whether they are simply continuing where they left off as an opposition party.

The PSD's recent months have been about nothing but criticizing the austerity measures introduced by the Bolojan government for stabilization purposes, and the PSD's criticisms have not infrequently drawn on the world of populist promises. What am I saying, not infrequently: often. Well, now they have come to power, and they are governing as the sole party within the Niculescu government, which is made up of technocrat and PSD ministers, with the Social Democrats holding the most seats of power. And if they are governing, they must do something about the situation Romania has been in for years, but which, in the shadow of the economic downturn sweeping across Europe and the war launched by the Russians, the country can no longer avoid. That issue is carrying out major structural reforms.

One such reform is raising the minimum wage. The gross minimum wage has been 4,325 lei since July, and the National Trade Union Bloc (BNS) is demanding a gross five thousand lei from January 1, 2027, which would mean another fifteen percent increase. Let's make something clear for our readers: raising the minimum wage is nothing more than a disguised tax. For a while, of course, it's reasonable, but what Romania has been doing in this area so far is not sustainable: it wasn't sustainable before, and from now on this path leads straight to bankruptcy.

Then there are the reforms of the large state institutions. One live example is the state authority overseeing Transylvania's and Romania's mineral waters, which has one job: issuing licenses to economic operators in exchange for good money. Based on these licenses, companies invest in extraction and bottling plants, risking their own capital, yet it is this state company that has now drifted to the brink of insolvency. Why? Perhaps because control of the company is divided among politicians from the PNL, the PSD and the USR. Romanian political jargon calls these sinecures (the term comes from the Latin sine cura, meaning "without care"). Such sinecures exist in central offices and in companies that appear to be economic in nature, and there are local and county-level ones too, all staffed with party people according to various mutual arrangements. Various supervisory and inspection bodies can also be counted among the sinecures, which have county, major-city and central divisions, and so on. Neither Niculescu nor the PSD, who came to lead the country after a five-month government crisis, can afford to let these money-draining systems and wasteful measures remain as they are today.

The pension issue is similar: for a pensioner to receive more money, someone has to produce that money. In Romania, a large share of tax and fee revenue comes from multinational corporations and small and medium-sized enterprises. If the minimum wage is raised, they pay much more per employee, and the state would then raise pensions from this extra money. It's a vicious circle, because due to more expensive labor, a company hires fewer people or employs them off the books, and in the end the state loses revenue exactly where it wanted to gain it. The only way out of this is through a strict but humane fiscal policy, which in turn requires structural reforms.

One such structural reform is the merging of settlements with fewer than 1,500 inhabitants. This is currently being called administrative reform, but it is only the first part of it. In the first stage, 429 settlements were put on the list, and town halls must indicate by March 1, 2027 whether they are willing to merge voluntarily; the new arrangement would take effect from the 2028 local elections, and if too few volunteer, the government would force the merger by assuming responsibility for it. The Romanian state has attempted this issue several times before, but each time it bounced off the resistance of the parties defending the sinecures. Yes, the UDMR [Hungarian minority party] is also among these parties. It is also true that previous attempts always wanted to start the reform from the top, by merging counties, which would have eliminated a significant number of cozy posts reserved for party loyalists; what is truly frightening about the current reform initiative is how cleverly it has been devised. Starting by merging settlements that cannot support themselves? What citizen would fail to see the rationale in that, who wouldn't see some fairness in it? Hardly any reasonable person would fail to recognize that this is necessary. Once this is done, settlements with fewer than 3,000 inhabitants will follow (Grindeanu's original idea was still about settlements under 3,500–4,000), and then the counties will follow. It is also frightening that the Hungarian elite has not said a word about this, even though a significant portion of the 429 settlements are villages in Szeklerland and Partium, where a town hall is often the village's largest employer, and, not incidentally, a pillar of the UDMR's local network.

So Monday's PSD meeting will be interesting for several reasons, but mostly because we will find out whether the reds finally have the courage to govern this country well. As I wrote after the government was formed, they may even have a chance to do so, mainly because if the reforms are postponed, someone else will carry them out afterward, and the party will be able to salvage much less of its own power. Right now they are governing alone, which comes not only with responsibility but also with great opportunities, even without a solid parliamentary majority behind them. The PSD now has no one else to point fingers at: Bolojan is no longer prime minister, the coalition partners aren't holding them back, and the budget figures won't bend to election posters. What will come of this, we can start to find out on Monday. A sinecure is a sinecure precisely because those who hold it have no worries about it, so if the PSD continues to want to keep its own people free of worry, the worry will remain the country's problem, and the bill will be paid by pensioners and minimum-wage earners.

Fallow Land

Hungarian-majority settlements could also disappear in the administrative reform – why is the UDMR silent?

Hunor will protect us, he just hasn't discussed it with anyone yet

Szeklerland will also be reshaped, the UDMR will protect us afterward

Grindeanu: territorial-administrative reform is coming!

The UDMR's prefects will keep their posts. What did Hunor give for that?

Too much for a campaign, too little for action. Árpád Antal went hiking in Rimetea