Romania’s external debt threats

The paper focuses on the sharp increase in the external debt level, both sovereign and private, threatening Romania’s financial stability, associated with weaknesses and risks arising from an unpredictable business environment and an unfavourable global and regional context. The study highlights inter-conditional ties between short-term and long-term debt, public and private debt, internal and external public debt. The increase in long-term external debt stock (more than two times during 2007-2013) has led to a significant rise in the related annual service (17.8% of GDP in 2013), deteriorating the financial framework of Romania and the growth perspectives. Excessive levels of the external indebtedness and critical debt-to-GDP ratio are recorded in the case of Romania as compared to international standards and national specific, exposing the debt position to higher default risk. Despite large external borrowings, due to the lack of their efficiency, the results, in terms of economic development and competitiveness gains, are much below expectations. The easiness of appeal to external borrowings by successive governments and the debt rollover year by year contradicts the principle of intergenerational ethics.