In the spring of 2021, I wrote: “The year a ghost wanders through the international public space. It’s called the “Great Reset,” a concept promoted by the Davos Economic Forum (WEF) in 2020. This concept later became a favorite subject of conspiracy theories. In this direction, the Bulgarian began to be pushed by political and media groups close to former President Trump, who tried to reduce the popularity of President Biden, a master of promoting fundamental changes at the global level. After deployment, the Bulgarian conspiracy theory was only expanded and adapted by ideological movements of both extremes.”

If you are interested in my perspective on the conspiracy theory surrounding the idea of ​​the Great Reset, I suggest you read the post titled “The Great Reboot or the Great Hysteria?”

But the perspective I want to offer you now is the second profound change of context that Romania will have to face in 3-4 years, unprecedented changes, and which I think can be called, without fear of exaggeration, a reboot of how Romania will work.

A reset of some important economic variables is sure to come upon us, and a lack of preparation could create serious economic imbalances and serious vulnerability for Romania.

The first major reset will be related to Romania’s status in the EU. Even before the accession and, later, as a full member, Romania benefited from large-scale financing programs from the EU, which were the basis of the accelerated development of the country. According to the Ministry of Investments and European Projects, by the spring of 2023, Romania received a net amount of 56 billion euros from the EU, starting from the moment of accession. This is an amount without which the economic development of Romania would not be possible, given that the insufficient budget either constantly neglected the need to finance development, favoring consumption, or, when it financed projects, it did so in a detrimental way due to the quality or possibility of investments.

Currently, the PNRR program once again offers a generous source of funding for economic development, recalling what National Bank of Romania Chief Economist Valentin Lazea said was “the best program for the country that we have, whether we like it or not (…)”. According to the Minister of Finance, Romania has currently received 9 billion euros from the PNRR and, subject to the implementation of the promised reforms, will receive another 19 billion by 2026.

Thus, we have reached the time of restarting the Romanian economy. Because from 2026, the tap of financing from the EU will be closed. The reason is simple and predictable: financing new candidates for EU membership and, above all, financing the restoration of Ukraine. The amount needed for the reconstruction, which is estimated at more than 500 billion dollars, will mainly be provided by the EU and the US. This will most likely force Romania, along with other member states, to become a net contributor to the EU budget. From this moment on, the development of Romania will be financed mainly from domestic resources.

This will be a complete paradigm shift, a reboot of the way Romania’s development has been financed in recent decades. And if you want to know what Romania would look like without this huge funding, just look at the development and standard of living of the non-EU countries in the region.

And it is not only about Romania taking over the financing of new infrastructure or energy projects. At the same time, it is about maintaining those that were created all this time with EU funds, but which will now have to be maintained at the expense of local funding. To better understand what I mean, look at the highways built with European money and on which the lanes, lighting installations or guardrails are not repaired for months or years. As the road network expands due to European funding, their maintenance will become more and more expensive.

The second economic reset will be associated with the fact that a wave of “decrees” will begin in 2026. This will be a defining moment for the inversion of the age pyramid of the Romanian population. Romania’s largest generation, which currently still pays pensions to the elderly, will stop paying and start receiving money from the social security budget starting in 2026, when they retire.

There is much debate these days about how well the state pension reform planned for the second half of this year can be financed from a budget that already has one of the biggest deficits in the EU. If such a reform is already difficult to sustain, the reset caused by the repeal of the “decrees” will put dire and unsustainable budgetary pressures on the current size and structure of the budget.

To understand how difficult it will be to manage the “Great Reboot” of Romania, I would like to point out that in terms of budget revenues, Romania has the highest percentage of public sector wage costs in the EU (33%) and one of the highest percentages with social insurance costs (29% ). Very high percentages calculated from the smallest consolidated budget in the EU relative to the size of the economy.

This means that the additional funding, designed to compensate for the lack of EU money and the contribution to the reconstruction of Ukraine, will not be able to survive in the current conditions. Limiting public pensions or salaries has never been liked or available to policy makers. When this was done, it was the result of pressure from financiers of the last court of Romania. There is only one conclusion.

After 2026, we will no longer be able to develop on other people’s money, and the number of pensioners will explode. Romania’s economic “Great Reboot” will require development mainly at the expense of public funds and stimulating accelerated development (not penalizing) the private sector. In order for this to become possible, apart from 2024, we have two more years to eliminate waste and increase budget revenues by at least 25%. And the answer to the following question will be important.

Who will pay?