Romania’s newly elected president, Dan, has set ambitious targets for the country’s budget as it navigates economic challenges ahead. In his first remarks on the 2025 budget, Dan planted a huge flag. He has a goal of restoring the budget to a deficit no bigger than 7.5% of the country’s economic output. He emphasized that preliminary discussions concerning Romania’s budgets for 2025 and 2026 will not include any tax increases, aiming to stabilize the nation’s financial situation without imposing additional burdens on citizens.
Dan predicts that creating a new government will be time-consuming. As complicated as the entire political landscape has become, it will surely take weeks at the very least. He noted that the primary focus must be on addressing Romania’s pressing budget crisis, which he believes is essential to avoid a potential downgrade of the country’s credit rating. The president’s commitment to fiscal responsibility highlights the administration’s intent to foster economic stability amidst fluctuating market conditions.
Economic Indicators and Expectations
New European economic indicators paint a complicated picture, with production orders, trade flows and business expectations depicting contrasting images. Germany’s ifo Expectations index rose a little to 88.9 in May. At the same time, the general ifo Index rose as well, to 87.5. This points to a cautiously optimistic mood among firms in Germany about the prospects for improving economic activity.
The Manufacturing PMI in the United States jumped to 52.3 in May. This reading, combined with the Services PMI at 52.3, points to moderate expansion in both sectors. By comparison, Germany’s Manufacturing PMI has seen at least 10 months of consecutive growth with indications of a slow but positive shift in the direction of manufacturing activity. These indicators can give some idea about where closer economic cooperation might be possible, or where new patterns of trade might emerge in Europe.
Hungary’s central bank Governor Mihaly Varga underscored the importance of stabilizing households’ inflation expectations while ensuring financial stability. On unemployment, the rate in Hungary is still 4.4%, which is an indicator of a generally stable labor market even in a time of serious economic uncertainty. States in the area are forced to walk a fine line, too. They carefully juggle their own fiscal policy with an eye toward these deposit inflows.
Regional Employment and Wage Growth
Over in Slovenia, they’ve been pointing to past improvement in their labor market and just past deepening, with real wage growth now annualized at 5.9% y/y in March. This surge is being hailed as a major step forward for workers’ purchasing power. It would increase consumer spending and it would stimulate broader economic growth. Beyond that, Slovenia’s service sector sentiment — a forward-looking gauge — has plunged into contraction, foreshadowing tougher days to come.
The Composite PMI Index for Slovenia was set at 49.5, indicating that the macroeconomic activity is declining marginally. Meanwhile, the Manufacturing PMI increased to 48.8, reflecting some resilience in production despite broader economic uncertainties. Slovenia and other regional economies are sending conflicting signals. This underscores the need for big, targeted interventions to prop up growth and the stability it provides.