Romania's political deadlock threatens credit rating downgrade ahead of S&P review
A five-month stalemate over forming a new government has heightened pressure on Romania's credit rating as S&P prepares its next assessment.
Romania's inability to install a new government after five months of political deadlock has intensified scrutiny of its sovereign credit rating ahead of S&P's scheduled review. The designated prime minister Siegfried Mureșan lost a confidence vote, leaving the leu at historic lows and pushing 10-year bond yields up by roughly 60-80 basis points. External debt pressures persist, with long-term bonds hitting their lowest prices since May 2025, while five-year CDS spreads suggest a market view of a potential downgrade to BB.
Analysts from Capital Economics and Generali Asset Management note that S&P may be more tolerant of political instability if fiscal consolidation stays on track, but warn that a snap election or deviation from deficit-reduction plans could prompt a downgrade. The ruling coalition's austerity measures have also boosted support for the eurosceptic AUR, raising concerns about future deficit-cutting efforts. Moody’s and Fitch are slated to review Romania's rating early next year, maintaining a negative outlook at the bottom of investment-grade. Finance Minister Alexandru Nazare emphasized that slowing fiscal consolidation is not an option despite the political turbulence.
Why it matters
A rating downgrade would raise borrowing costs for Romania, affecting its economy and taxpayers.
In this story
