Romania 2015

Total score

65.85 change: 2.16

Quick facts

  • 19.9 million
Unemployement rate:
  • 6.78 %
  • 199.95 billion $
GDP growth rate:
  • 2.9 %
GDP per capita:
  • 10030 $

Score and comments

Political Freedom
Free and Fair Elections

Beginning with the 1989 Revolution, the legal system in Romania has been gradually improved and the country managed to obtain full scores regarding the organization of free and fair elections. However, according to the Freedom House analysis, the last presidential elections that took place in November-December 2014 proved that there is still room for improvement regarding the electoral process in Romania. Due to procedural misunderstandings, a lack of executive strictness and an increasing number of new international factors such as the free movement of people, a large number of Romanian citizens living abroad have been denied the right to vote. There have been long lines and a shortage of official stamps to mark ballots. This situation created political turmoil and caused the resignation

of two Ministers of Foreign Affairs. Moreover, a legal investigation has been opened regarding the issue. In terms of political pluralism and participation, Romania’s multiparty system seems to work just fine, facing only minor challenges. Although minorities seem to have the right to be fairly represented in the Parliament, there is still a lack of representation of the Roma minority.

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Absence of Unconstitutional Veto Players

Ever since it joined the European Union in 2007, Romania has been blamed of corruption, a lack of political transparency and huge resistance from political leaders. This should be of no surprise considering that Romania was the only Warsaw Pact country that did not experience a process of lustration in any form or shape. Furthermore, Transparency International’s 2014 Corruption Perceptions Index ranks Romania 69 out of 175 while a European Commission report, released in 2014, argues that the country was the second largest source of attempts to defraud the EU in 2013. However, the National Anticorruption Directorate in Romania started to play an essential role in investigating acts of corruption among top political leaders. Consequently, during 2014, a large number of individuals were

arrested and many more investigated, including former and current Ministers, Members of Parliament, mayors, and political advisers. To conclude, it could be argued that the number of unconstitutional veto players is decreasing in Romania.

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Freedom of Press

Although it experienced ups and downs, press in Romania has been ranked by Freedom House as partially free for a long period of time. The reasons why such a situation occurs are quite clear. Firstly, there are legal ambiguities regarding defamation, there are fines for specific insults in public speeches and the appointments to the National Audiovisual Council are highly politicized, obstructing the well-functioning of the institution. Secondly, the political environment plays an important role in shaping the agenda of both public and private broadcasting companies. The leadership of the public broadcaster is changed after each of the general elections, while the private media sector shows strong business and political interests, usually maintaining close ties to players in the political

arena. Last, but not least, public advertising is also highly politicized and non-transparent, while journalists frequently suffer from abuses, low pay and job insecurity.

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Rule of Law
Independence of the Judiciary

Since Romania’s accession as a full member of the EU in 2007 there has been a progress in the independence of judiciary. But in this subcategory of the rule of law Romania is still quite low. Starting from political influences down to corruptive ones, problems are numerous. Judges of the Constitutional Court (CCR) are selected largely along political preferences of the two chambers of Parliament or of the President, who appoint them one each every three years, to have served nine years’ terms. Many of the CCR decisions reflect partisan interests or positions. Throughout the court system, corruption, nepotism and trading in interest are common. According to Transparency International’s Global Corruption Barometer 2013, 58% of citizens found the judiciary corrupt. 13% of citizens

reported giving bribes to judges during the preceding 12 months. During 2013 and 2014, a number of judges were convicted and retired because of corruption. Many among them afterwards received high special pensions. Legislation was carried in July 2014 to disallow that, at least for those with definitive sentences for corruption.  

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Prior to 2007, widespread corruption was often cited as an argument against Romania’s EU accession. Since then, plenty of domestic and EU’s effort was put into the anti-corruption struggle. The situation has improved, albeit relatively little. For instance, Freedom House reports between 2006-2015 showed a fall of the score in the field of corruption, from 4.25 to 3.75, on the scale between 7 (worst) and 1 (best). Transparency International, in its Corruption Perception Index 2014, marked Romania 43 points, which put her, together with Brazil, Bulgaria, Greece, Italy, Senegal and Swazi, on the place 69 of 175 countries of the world. No other EU country is below. Same organization’s Global Corruption Barometer 2013 showed that citizens perceived political parties (by 76%), legislature

(68%) and judiciary (58%) as corrupt or extremely corrupt. Roughly half of them considered civil servants, police or medical staff corrupt, which indicated at a trend of gradual decreasing of petty corruption.

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Protection of Human Rights

Romania is worse in the field of human rights than the neighbouring Bulgaria or Hungary. While ordinary street police forces are ever better trained in professional treatment of citizens, ill treatment in custody or jail is still present. The worst reformed among security forces are secret services, which occasionally break laws, infiltrate and misuse other state institutions and avoid full democratic civil control. They are sometimes misused by various branches of government to pressurize each other over political issues. Other, even bigger problems include gender inequality, poor protection of women and girls and widespread human trafficking. Minorities – racial, ethnic, religious, sexual or other - are insufficiently protected. Too little is done for the persons with disabilities.

Romania is a homophobic country, due to strong religious traditionalism but also due to remaining legacies of Ceausescu regime. The Romany people suffer maltreatment. Worse to it, as a recent study by the University of Uppsala has shown, Romanian or Bulgarian Romany who migrated to some other EU countries including even Sweden have sometimes faced discrimination over there too. On the bright side of Romania’s human rights record, freedom of assembly, association or expression is fairly well respected, in contrast with the memories of the brutal treatment of dissidents until 1989.

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Economic Freedom
Security of Property Rights

Property rights in Romania are relatively secure. However, problems arising from weak judiciary system are present. The judiciary is not independent from out-of-the-court influences, with powerful vested private interest groups. Courts can also be partial in their ruling, undermining the rule of law. Enforcing legal contracts is complicated, with many procedures resulting in a long duration process. However, the newly enacted civil procedure code is expected to streamline and speed up current court procedures. Foreign nationals face restrictions in the right of ownership of agricultural land. However, there has been improvement in this field due to lifting the ban on the EU citizens in January 2014 (Romania opted for a 7 year restriction, starting from its EU accession date in 2007).

Property rights can be ill-defined, as in the case of real estate property land ownership and land tenancy rights, which are divided, resulting in uncertain or unclear property rights.    

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Size of Government: Expenditures, Taxes, and Enterprises

Size of government in Romania is modest as compared to other European countries, with government expenditures reaching 34% in 2014. After the strong recession in 2009, Romanian economy has rebounded with robust growth in European terms since 2013. Harsh fiscal austerity measures introduced since 2010, by cutting public expenditures as well as by raising taxes, have substantially decreased the level of fiscal deficits (from 7.1% of GDP in 2009 to 1.9% in 2014), leading to a more sustainable public debt, which increased threefold since 2008, to 40.6% of GDP. State-owned enterprises remain one of the weak points of the Romanian economy: they are numerous and play a notable role in the economy. However, their performance is low, with low profitability, accumulated arrears and the reliance on

government transfers for needed investments. Further involvement of the private sector in this area is necessary in order to hurdle investments and increase performance, by majority or minority privatization or other public-private partnership arrangements. Personal income and corporate income taxes in Romania are flat, all set at 16%. However, VAT is high, with the standard rate of 24% and reduced rates, for certain products, of 9% or 5%. In June 2015, a plan for a substantial reduction of VAT rate was introduced, aiming at 20% standard VAT rate from January 2016 and its futher decrease to 19% in 2017. This move, although a moderation from the previous plan under the influence of the European Commission and the International Monetary Fund, and generally a step in a good direction, still poses a significant fiscal threat and therefore calls for more efforts in making the program sustainable, by improving the tax coverage. Labour tax wedge in Romania is high due to social contributions which remain high, approximately 47.5% when applied on an average wage. They are surpassing those of Belgium, a country which has the highest labour tax wedge in the OECD.

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Regulation of Credit, Labour, and Business

Business regulation in Romania is mostly favourable to business activities, but many aspects of legislation are complicated and burdensome to entrepreneurial activities. Starting a business is easy and inexpensive, but problems exist in the area of administrative requirements. Obtaining a construction permit and getting electricity are both lengthy processes with many procedures, and with high fees. Compliance with tax procedures is unnecessarily complicated, incurring costs due to the high number of annual payments. Corruption and open favouritism by public officials is present, due to the environment in which regulations can be circumvented via proper contacts. Labour market regulations are mostly flexible, especially in the section of working hours, where only the maximum working week

regulation, stipulating a 5-day workweek, is restrictive, albeit allowing for longer hours in case of an increased workload. Firing regulations can impose difficulties through retraining, reassignment or reemployment obligations of the employer towards the redundancy workers, but with low severence payments.    

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Freedom to Trade Internationally

Freedom to trade internationally is mostly upheld in Romania. As a member of the EU since 2007, Romania implements the common trade policy, with low tariff rates. However, regulatory trade barriers are enforced, mostly in the field of necessary product standardization for imports, which burdens trade by incurring costs. Poor state of the public transport infrastructure, most notably the railroads, is another hindrance to free trade, resulting in high transportation costs, which limit the trade volume. Further private involvement in the railroad freight system through the privatized Marfa Company is expected to boost freight performance. Bearing in mind fiscal risks due to the envisaged decrease in tax rates, more effort should be made to involve international project financing, where

steps could be made by increasing effectiveness in the EU funds’ absorption. Romania is mostly oriented to the EU common market and its main trade partners are Germany and Italy, followed by other EU countries, while Turkey is being the only EU outsider on the list of important trade partners.

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