Romania’s borrowing costs eased sharply after the Constitutional Court validated the reform of magistrates’ special pensions, a key milestone required by the European Union for the release of funds under the National Recovery and Resilience Plan (PNRR), Bloomberg reported. The improvement, however, reflects a broader easing of political tensions rather than the court ruling alone.

The yield on Romania’s 10-year government bonds fell by six basis points to around 6.4% per year, the lowest level in the past two years, according to data cited by Bloomberg and G4media.ro.

Markets were encouraged not only by the Constitutional Court’s decision but also by signs of political stabilisation within the ruling coalition. The pensions reform was ultimately upheld after one of the court’s judges nominated by the Social Democratic Party (PSD) changed his vote in favour of the law promoted by prime minister Ilie Bolojan’s government.

Investors have been closely watching PSD’s stance, as the party is expected to take over the prime ministership next April. Its perceived ambivalence toward structural reforms and fiscal consolidation has been regarded as a key risk factor by both markets and rating agencies.

Additional reassurance came earlier this week when a breakthrough was reported in the legislative process concerning the public administration reform. 

After initially resisting the bill, PSD signalled support for its adoption and for a swift drafting of the 2026 budget. The move suggests a more pragmatic approach by the senior coalition partner and a higher degree of functionality within the governing alliance.

The agreement was reportedly reached at the expense of diluting certain reform elements. While this may have longer-term implications for economic growth and perceptions of fairness, investors are primarily focused on near-term debt servicing capacity and political stability.

Over the longer term, the absence of deeper reforms could weaken Romania’s repayment capacity. For now, however, that structural vulnerability is already reflected in the country’s relatively high borrowing costs and fragile sovereign ratings.

The recent rally in bonds appears to signal a short-term reduction in political volatility rather than a fundamental shift in the country’s fiscal outlook.

iulian@romania-insider.com

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