Romania's Far-Right Turn: How Milei-Style Austerity Could Upend Eastern Europe

The rise of George Simion, the far-right leader of Romania’s Alliance for the Union of Romanians (AUR), marks a pivotal moment in Eastern Europe. A self-proclaimed acolyte of Donald Trump and Argentine libertarian Javier Milei, Simion has positioned himself as a disruptor of Romania’s political and economic order. His pledge to slash public spending—modeled after Milei’s austerity-driven policies—has sent shockwaves through markets and governments. But what does this mean for investors?

The Economic Gamble: Simion’s Milei-Style Reforms

Simion’s plan targets deep cuts to public sector wages, subsidies, and social spending, aiming to reduce Romania’s fiscal deficit. Modeled after Milei’s approach in Argentina—which prioritized shrinking government size and tax cuts—the policy could free up funds for infrastructure and private-sector growth. However, critics warn it risks destabilizing an economy already strained by 10% inflation and stagnant wages.

The proposal faces fierce opposition. Romania’s current coalition, led by the center-left Social Democrats (PSD) and center-right National Liberals (PNL), has resisted austerity, arguing it would deepen inequality. Unions have threatened strikes, and economists caution that abrupt cuts could trigger a recession.

Romania’s GDP has grown at an average of 3.5% annually since 2015, but public debt remains stubbornly high at 38% of GDP. Simion’s plan could lower debt, but at the cost of social upheaval.

The Political Tightrope: AUR’s Path to Power

Simion’s momentum is undeniable. He captured 40.96% of the vote in May’s presidential election first round, positioning him to win the runoff against reformist candidate Nicusor Dan. His base—a coalition of anti-establishment voters, rural communities, and disenchanted youth—views him as a bulwark against corruption and EU “interference.”

Yet his path to power is fraught. His ally, Calin Georgescu—a pro-Kremlin figure barred from the election—has been linked to incendiary rhetoric, including calls to reclaim Moldovan territory. This has raised red flags about democratic backsliding. Meanwhile, Simion’s own statements, such as advocating for opponents to be “flayed,” have drawn comparisons to Viktor Orbán’s authoritarian playbook in Hungary.

Geopolitical Risks: The Ukraine Factor

Simion’s policies extend beyond economics. He opposes sending military aid to Ukraine—a stance aligned with Russian interests—and has called for closer ties with Moscow. While he insists on maintaining NATO membership, his rhetoric risks straining relations with the U.S. and EU.

Romania currently spends 2.2% of GDP on defense, below the NATO target of 2%. Simion’s proposed cuts could shrink this further, undermining regional security.

Investment Implications: Navigating Uncertainty

For investors, Romania presents a high-risk, high-reward scenario. Key sectors to watch include:
1. Energy: Romania is Europe’s fourth-largest oil producer. Simion’s push for energy independence could boost local firms, but EU sanctions on Russia may complicate exports.
2. Banking: Austerity could strain household finances, increasing non-performing loans. The banking sector, already under pressure, faces a precarious outlook.
3. Real Estate: Simion’s infrastructure plans might boost construction, but public sector wage cuts could dampen demand in urban areas.

The BET index has underperformed the MSCI EM Index by 15% year-to-date, reflecting investor caution.

Conclusion: A Crossroads for Romania

Simion’s victory in the May 18 runoff would mark a seismic shift. His policies could deliver fiscal discipline but at the cost of social unrest and geopolitical isolation. Investors must weigh two scenarios:
- Best Case: AUR’s reforms spur growth, with privatizations and tax cuts attracting foreign capital.
- Worst Case: Austerity triggers protests, capital flight, and a downgrade in Romania’s credit rating.

The stakes are high. With 40% of voters backing Simion, the far right has already reshaped the political landscape. For markets, the next 12 months will determine whether Romania becomes a model of free-market revival—or a cautionary tale of populism gone wrong.

Data to Watch:
- May 18: Results of the presidential runoff.
- Q3 2025: Public sector wage data and inflation figures post-election.
- 2026: EU budget negotiations, where Romania’s stance on austerity may influence funding.

In a region where stability is currency, Romania’s gamble could redefine its future—and unsettle investors for years to come.