Romanian Leu Plunges 2% Post-Election: Political Turmoil and Market Anxiety Take Center Stage

The Romanian leu has plummeted more than 2% against the euro in the wake of the May 2025 presidential election, reaching a record low of 5.0495 leu per euro. This sharp decline reflects deepening political instability, investor flight from emerging markets, and fears of a far-right government’s potential rupture with Western alliances.

Political Crisis at the Heart of the Selloff

The election’s first round on May 4 saw George Simion, leader of the eurosceptic far-right Alliance for the Union of Romanians (AUR), secure 40% of the vote, far surpassing pro-EU candidates like Crin Antonescu (20%) and Nicusor Dan (21%). Simion’s strong showing triggered a government crisis, as Prime Minister Marcel Ciolacu (PSD) resigned, citing a loss of public confidence. The ruling pro-EU coalition’s collapse has left Romania without a stable leadership, raising fears of policy paralysis and a potential shift toward pro-Russian alignment.

Simion’s platform—opposing EU/NATO integration, criticizing aid to Ukraine, and demanding territorial revisions with Moldova and Ukraine—has unsettled investors. His victory in the second round, set for May 18, would likely strain Romania’s ties with Western institutions, deterring foreign capital and destabilizing markets.

Market Reactions: Leu Weakness and Bond Yields Surge

The leu’s decline has been exacerbated by investor flight from Romanian assets. shows the currency’s sharp drop, while government bond yields have surged to 8%, signaling heightened risk aversion. The National Bank of Romania (NBR) has spent over €10 billion in foreign exchange interventions since 2024 to prop up the leu, but political turmoil has eroded confidence in its ability to stabilize the currency.

The banking sector faces particular strain. reveals declines of 5-7%, reflecting fears of Simion’s anti-establishment policies and potential credit downgrades.

Economic Fundamentals: A Fragile Foundation

Romania’s economy is already under pressure. GDP growth has slowed to 2.1%, with one-third of the population living in poverty and inflation eroding purchasing power. Public debt remains manageable at 35.6% of GDP, but a far-right government could jeopardize compliance with EU fiscal rules, triggering credit rating downgrades (currently BBB+ with a stable outlook).

Key sectors are at risk:
- Energy: Companies like OMV Petrom may face geopolitical headwinds if Simion’s nationalist stance disrupts foreign partnerships.
- Tech and Real Estate: Bucharest’s booming sectors, reliant on EU-driven urban development, could suffer if Simion’s victory strains EU relations.

Geopolitical Risks: A Threat to EU Stability

A Simion presidency could destabilize the EU’s eastern flank. His party’s alignment with far-right movements in Poland and Hungary—already under EU scrutiny—risks further sanctions or reduced funding. Romania’s access to €10.7 billion in EU recovery funds hinges on adherence to democratic norms.

The Runoff and Investment Implications

The May 18 runoff between Simion and Nicusor Dan (pro-EU centrist) will determine the leu’s trajectory. A Dan victory could stabilize the currency and boost investor sentiment, particularly in sectors tied to EU funding. However, Simion’s strong rural base and anti-establishment appeal make the outcome uncertain.

Conclusion: A Crossroads for Romania and Investors

The leu’s selloff underscores the high stakes of the election. A Simion victory would likely trigger further capital flight, with bond yields spiking beyond 8%, the leu falling toward 5.10/euro, and sectors like banking and energy facing prolonged volatility. Conversely, a Dan win could stabilize the leu near 5.00/euro and attract foreign investment, particularly in tech and infrastructure.

Investors must weigh these scenarios carefully. The leu and bond yields will remain barometers of political risk, while sectors reliant on EU funding—such as renewable energy and urban development—will hinge on the election’s outcome. For now, the markets are braced for turbulence, with the Romanian economy at a critical crossroads between democratic resilience and populist upheaval.