1980s austerity policy in Romania

In the 1980s, severe austerity measures were imposed in the Socialist Republic of Romania by President Nicolae Ceaușescu in order to pay off the external debt incurred by the state in the 1970s.

Beginning in 1981, the austerity led to economic stagnation that continued all throughout the 1980s, a "sui generis shock therapy" which lowered the competitiveness of the Romanian economy and decreased the amount of exports.

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.

[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.

[6] The 1970s energy crisis, combined with the increase in interest rates, and in the context of sluggish growth and the severe global recession of 1974, made Romania incapable of repaying its debts.

The country's industrial capacity was eroded as equipment grew obsolete, energy intensity increased, and the standard of living deteriorated significantly.

In 1988, real GDP contracted by 0.5%, mostly due to a decline in industrial output caused by significantly increased material costs.

[23] In December 1982, a new reform of the salaries system was introduced: part of the wages were to be paid to the workers only if the company achieved its goals.

Between 1980 and 1985, cuts were made by the state in its housing expenditure (37%), healthcare (17%) and education, culture and science (53%), according to data provided to the Comecon.

[25] The healthcare cuts led to an increase in infant mortality rates (one of the highest in Europe) and high AIDS prevalence,[26] the disease being transmitted through the reuse of hypodermic needles in hospitals.

[29] 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 farmers' markets, they had to adhere to strictly enforced price ceilings.

[30] 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.