World Library  
Flag as Inappropriate
Email this Article

1980s austerity policy in Romania


1980s austerity policy in Romania

The 1980s austerity policy in Romania was imposed by Romania's President Nicolae Ceaușescu in order to pay out the external debt incurred by the state in the 1970s. Began in 1981, the austerity led to economic stagnation throughout the 1980s, being a "sui generis shock therapy" which lowered the competitiveness of the Romanian economy and decreased the amount of exports.[1]

The harsh austerity measures negatively affected the living standards of the Romanians, increased shortages[1] and eventually led to the downfall of the Romanian Communist Party through the Romanian Revolution of 1989.


  • Background 1
  • International loans 2
  • Austerity policy 3
    • Inflation and lowering of real incomes 3.1
    • Government cuts 3.2
    • Food shortages 3.3
    • Energy usage 3.4
  • 1989 revolution 4
  • Notes 5
  • References 6


Between 1950 and 1975, Romania's economy grew at one of the fastest rates in the world[2] and in the 1960s and early 1970s, Ceaușescu was considered one of the "enlightened" Eastern European leaders.[3] Through his domestic policies, he tried in the late 1960s to get the support of the people, as he increased wages, reformed the pension system and encouraged consumption by decreasing the prices of consumer goods.[4]

However, as the economy continued to grow in the 1970s, much of the growth was achieved through investment in heavy industry (34.1% of the GDP in the 1971-1975 five-year plan) rather than consumption.[2] Some industries, such as petrochemicals and steel, had a production capacity higher than demand in the local and the available external markets, resulting in underused capacities.[2] Overall, the economy suffered from the combination of productive and inefficient units, as well as the reliance on material plans rather than profit, which led to falsification of statistics and large inventories of unsold production.[2]

The Romanian economy had a strong bias toward large enterprises: 87% of all industrial workers and 85% of industrial output were in enterprises having more than 1000 employees, leading to a lack of flexibility of the economy.[1]

The growth was, according to Daniel Dăianu, a case of immiserizing growth, as the industrialization and increased ties with market economies were rushed with a weak functional basis, by ignoring the market mechanisms.[5] This kind of growth limited the potential of increasing the exports and the hard currency for repaying the loans was obtained through cuts in the imports.[5]

International loans

Early in the 1970s, the Western countries were willing to fund Romania's acquisition of technology through loans given on political considerations.[2] The debts of Romania to Western creditors rose from just $1.2 billion in 1971 to a peak of $13 billion in 1982.[6] The 1970s energy crisis combined with the increase in interest rates made Romania incapable of repaying its debts.[2]

In 1981, in order to pay its due debts, Romania requested the International Monetary Fund a line of credit[2] and adopted a policy to pay back all its debt.[7]

As the IMF recommended, imports were reduced and exports were increased. The effect of the cuts in imports in Romania, a net importer of food from the West, was however not correctly estimated by the foreign analysts and it led to food shortages.[8]

By 1986, it paid half its debt[7] and it finished paying its whole debt early in 1989, ahead of schedule.

Nevertheless, the austerity policy continued even after all the debts had been paid.

Austerity policy

Ceaușescu started an austerity program without reforming its centralized and inflexible planning.[2] Domestic energy resources were channeled towards inefficient production intended to be exported.[2] Even basic necessities, such as food, heating, electricity and medical attention were rationed and the infrastructure has been left decaying.[9] Due to the austerity, by 1983, the standard of living fell by 19-40 percent, according to IMF figures.[10]

Inflation and lowering of real incomes

Starting with 1978, the government began increasing prices that had been stable until then: during the first wave of price increases were food, services, public transportation, clothing, wood and wood products. In 1979, a second wave of price increases began, for energy: prices for petrol, natural gas and electricity were increased.[10]

Throughout 1982, prices were increased again; initially, the plan was to have just one large increase in basic products, but eventually, the decision taken was to increase prices gradually, for all products. Just for the year 1982, the increase reached 35%.[11] Apart from the limitation of energy usage, its price was increased as well: electricity by 30% and natural gas by 150%.[11]

On October 7/8, 1982, the Central Committee approved a law on the participation of workers to the investment fund of state-owned companies. Through this act, the workers were given the "right" (in practice, it was mandatory) to participate with money and become, theoretically, co-owners of the company. Practically, it meant it was a reduction in wages with a part that was given to the investment fund of the company.[12]

In December 1982, a new reform of the salaries system: part of the wages were to be paid to the workers only if the company achieved its goals. This part was initially 24% and later increased to 27%. The goals were often not achieved, so de facto this meant a decrease of the wages.[13]

The real incomes began to shrink not only due to the inflation, but also due to the lack of availability of certain products, while the flourishing [14]

Government cuts

According to [14]

The healthcare cuts led to an increase in infant mortality rates (one of the highest in Europe) and high AIDS prevalence,[15] the disease being transmitted through the reuse of hypodermic needles in hospitals.

Food shortages

A queue for cooking oil, Bucharest, 1986

Romania's agriculture had been ignored as the government focused on industrialization: the highly inefficient agriculture employed more than 30% of the working force,[16] but received little and mismanaged investment. Despite of this, Romania's agriculture still lacked sufficient labour, the state solving the issue by taking each year millions of school children and university students (2.5 million in 1981, 2 million in 1982) to contribute to the [16]

Romania began having chronic food shortages and despite the attempts of the government to solve the problems, the problems persisted throughout the 1980s.[17] Beginning in 1983, the collective farms and individual peasants had to deliver produce to the state (something that had been previously abolished in 1956) and, when selling their products in [6]

In 1981, a [10]

Energy usage

The electricity and [18] Availability of hot water was also restricted to one day per week in most apartments.[8] Unannounced power cuts affected even hospitals' regular functioning: for instance, in the winter of 1983, dozens of babies in neonatal intensive care units died due to the power cuts to the incubators.[8] Street lighting was often turned off and generally reduced to a bare minimum.[11]

Petrol was rationed; private car owners were only allowed to buy 30 litres of petrol per month[8] and private driving bans were regularly imposed.[18] In order to save fuel, the media even appealed peasants to replace mechanical work with manual work, using carts and horses instead of trucks and tractors.[18]

In 1985, Ceaușescu shut down all regional radio stations and limited television to a single channel broadcasting only two to three hours a day, in both cases to conserve energy.

1989 revolution

The economic austerity, along with political repression, were the main reasons behind the protests and revolution of 1989.[19] His politics isolated him not only from the people, but also from the party (as seen by the Letter of the Six in March 1989) and the military.[19]


  1. ^ a b c Dăianu, p. 393
  2. ^ a b c d e f g h i Bacon, p. 374
  3. ^ Roper, p.45
  4. ^ Roper, p.47
  5. ^ a b Dăianu, p. 392
  6. ^ a b Georgescu, p. 270
  7. ^ a b Debt Halved, Romania Says, The New York Times November 28, 1986
  8. ^ a b c d e Deletant, p.248
  9. ^ Bacon, p. 374-375
  10. ^ a b c d Georgescu, p. 260
  11. ^ a b c Burakowski, p. 274
  12. ^ Burakowski, p. 275
  13. ^ Burakowski, p. 276
  14. ^ a b Georgescu, p. 271
  15. ^ Roper, p. 56
  16. ^ a b Georgescu, p. 261
  17. ^ Georgescu, p. 259
  18. ^ a b c Georgescu, p. 272
  19. ^ a b Roper, p.57


  • Henry F. Carey (ed.), Romania since 1989: Politics, Economics, and Society, Lexington Books, 2004, ISBN 9780739105924
    • Wally Bacon, "Economic Reform", p. 373-390
    • Daniel Dăianu, "Fiscal and Monetary Policies", p. 391-417
  • Vlad Georgescu, The Romanians: A History, Ohio State University Press, 1991, ISBN 0814205119
  • Stephen D. Roper, Romania: The Unfinished Revolution, Routledge, 2000, ISBN 978-90-5823-028-7
  • Dennis Deletant, Ceauşescu and the Securitate: Coercion and Dissent in Romania, 1965-1989, M.E. Sharpe, London, 1995, ISBN 1-56324-633-3.
  • Adam Burakovski (2011). Dictatura lui Nicolae Ceaușescu, 1965-1989 - Geniul Carpaților.  
This article was sourced from Creative Commons Attribution-ShareAlike License; additional terms may apply. World Heritage Encyclopedia content is assembled from numerous content providers, Open Access Publishing, and in compliance with The Fair Access to Science and Technology Research Act (FASTR), Wikimedia Foundation, Inc., Public Library of Science, The Encyclopedia of Life, Open Book Publishers (OBP), PubMed, U.S. National Library of Medicine, National Center for Biotechnology Information, U.S. National Library of Medicine, National Institutes of Health (NIH), U.S. Department of Health & Human Services, and, which sources content from all federal, state, local, tribal, and territorial government publication portals (.gov, .mil, .edu). Funding for and content contributors is made possible from the U.S. Congress, E-Government Act of 2002.
Crowd sourced content that is contributed to World Heritage Encyclopedia is peer reviewed and edited by our editorial staff to ensure quality scholarly research articles.
By using this site, you agree to the Terms of Use and Privacy Policy. World Heritage Encyclopedia™ is a registered trademark of the World Public Library Association, a non-profit organization.

Copyright © World Library Foundation. All rights reserved. eBooks from World eBook Library are sponsored by the World Library Foundation,
a 501c(4) Member's Support Non-Profit Organization, and is NOT affiliated with any governmental agency or department.