Romania’s government approved on February 24 a long-debated decree reshaping the public administration system, alongside an “economic relaunch” package designed to cushion the impact of fiscal consolidation and stimulate investment, according to a government statement.

The public administration decree introduces staff cuts and tighter personnel expenditure controls at both the central and local levels, while also aiming to decentralise and simplify administrative procedures and to introduce unified evaluation standards for civil servants. The economic package, approved separately, includes state-backed guarantee schemes, hyper-accelerated amortisation, tax credits for research and development, incentives for reinvested profits and a more lenient regime for small firms.

The simultaneous endorsement of the two decrees sends a strong political signal about the ruling alliance’s ability to reach consensus after months of negotiations. The final form of the reform includes compromises — and, critics argue, potential loopholes for incumbent local administrations — but is a significant step forward in terms of budgetary impact and rationalisation of public resources.

Although criticised for avoiding a territorial reorganisation — Romania maintains more than 3,200 territorial administrative units (UATs) — the decree sets new human resource standards and expenditure rules intended to curb inefficiencies. Prime Minister Ilie Bolojan said the reform would improve the functioning of the public administration and reduce costs. The provisions are due to take effect by July 1.

Under the new rules, UATs that cannot cover their personnel expenditures from their own revenues — 2,584 out of 3,228 units, with only 644 currently self-sustainable — will have to apply centrally determined wage standards.

Local administrations must also adjust staffing levels in line with unified national benchmarks. The reform is expected to reduce personnel numbers by around 10%, equivalent to 12,794 employees. Overall, the number of positions, including vacant posts, will be cut by 30% across local administrations. Only 731 UATs already comply with the new staffing thresholds and will avoid layoffs. UATs may defer staff reductions until 2027, but only if they proportionally reduce personnel expenditures in the meantime.

Some provisions have sparked controversy, including the halving of bonuses granted to public employees holding PhDs and a measure allowing for the suspension of driving licences for individuals who fail to pay speeding or other traffic fines.

The economic relaunch package was introduced at the request of the Social Democratic Party (PSD), although its implementation will fall under the Finance and Economy ministries, both led by Liberal (PNL) ministers.

Finance Minister Alexandru Nazare said the package includes hyper-accelerated amortisation for investments, tax credits for R&D expenditure, incentives for reinvested profits, broader access to the VAT cash accounting regime — under which companies pay VAT only upon invoice collection — and a dedicated instrument for large-scale investments exceeding RON1bn (€200mn).

The declared objective of the package is to stimulate domestic production in high-value-added industries and in sectors where Romania runs persistent trade deficits. Analysts remain divided on the likely impact of the measures, some of which have been implemented in the past as well, while others are impacting only a limited number of companies.