The Romanian welfare state at times of crisis

Abstract

The chapter discusses the evolution of Romanian labour-market and welfare policies within the context of the global financial crisis, investigating the demographic, macroeconomic, and political dimensions that shaped this evolution. High labour migration from Romania amplified the sensitivity of domestic markets to developments in other European economies and augmented the problem of population ageing. Child poverty, severe deprivation and marginalization among ethnic Roma remained serious social problems, but they neither became policy priorities nor inspired adequate welfare measures. Romania reacted to the crisis by scaling-back the state and deregulating the labour market. Salaries in the state sector were uniformly cut by 25 % and the VAT was increased from 19 to 24 % in June 2010. The democrat-liberal government of 2008-2012 sought to diminish the political costs of austerity by fuelling already-existing contestations of state redistribution and public services (as being ineffective) and de-legitimizing claimants. New regulations denied social benefits to all those having debts of taxes or public fees, and controls over local welfare authorities intensified. Eligibility for the means-tested family allowance and the guaranteed minimum income tightened, and their values froze at 2009 levels. Middle-class pressures safeguarded the generosity of earnings-related childcare leave benefits, which nonetheless hardly reach out to the large segment of precarious workers and long-term unemployed. Overall, social spending fluctuated around 16-17 % of the GDP, the lowest in the EU. The political crisis of January 2012 imposed a change of discourse on social matters, and incremental adjustments were performed by the subsequent social-liberal cabinet. However, no paradigmatic shift could be observed in strengthening the welfare state towards greater decommodification.