Romanian Leu: Why is budget credibility crucial for stability? - Societe Generale

EUR/RON is trading below 5.35, while 10-year RONGB yields are under 7%, Societe Generale notes, following parliament’s approval of the Niculescu government that brought the political deadlock to an end. While highlighting the fragility of political stability, the bank points to a commitment to bring the deficit below 3% by 2030. According to Moody’s, retaining the Baa3 rating requires the budget to be passed before year-end.

Can fiscal discipline safeguard the credit rating?

"EUR/RON settled below 5.35 and the 10y RONGB yield stayed below 7% as the Romanian parliament approved the new government led by PM Niculescu, ending the political deadlock."

"Political stability remains fragile and conditional on the support of the Liberals and the ethnic Hungarians."

"In his governing program, Niculescu committed to stick to the plan agreed with Brussels to shrink the deficit to below 3% by 2030."

"Moody’s warned that political stability and credible budget are essential to maintain the country credit rating (Baa3). Avoiding a downgrade to junk means passing the budget before year-end."

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