Talks to form a broad pro-Western governing coalition in Romania have stalled amid deep divisions over fiscal policy, raising the likelihood of a minority cabinet excluding the Social Democratic Party (PSD). Negotiations among the four main parties — the PSD, the National Liberal Party (PNL), Union Save Romania (USR) and the Democratic Alliance of Hungarians in Romania (UDMR) — have failed to yield even limited consensus after two days of discussions in Bucharest.

President Nicușor Dan, currently attending a regional summit in Odesa, maintained an optimistic tone and confirmed that a fiscal consolidation package will be submitted to the European Commission by the June 30 deadline. “I am sure that we will do this,” Dan said. “There are no major issues about the consensus,” he said quoted by Hotnews. However, this assertion contrasts sharply with the reality in Bucharest, where talks remain deadlocked.

At the centre of the dispute is the PSD’s proposal for a so-called “solidarity tax” on gross monthly earnings above RON10,000-12,000 (€2,000-2,400), to be taxed at rates of 16% or 20%, compared to the current flat 10% income tax. The Social Democrats view this as a transitional measure toward full progressive taxation, but its fiscal impact — estimated at just 0.2% of GDP by employer association Concordia — is widely seen as insufficient to address Romania’s 2%-of-GDP budget gap.

The proposal has further widened the divide with USR, which continues to advocate for structural reforms based on market liberalism. The persistent resistance from the PSD to more extensive reforms and its apparent readiness to move into opposition have made a four-party agreement increasingly unlikely. Dan indirectly acknowledged the PSD's opposition to the nomination of Liberal politician Ilie Bolojan as prime minister, referring to a “three-letter obstacle”.

The impasse is also linked to unresolved political accountability. Several figures associated with past administrations — Adrian Câciu (PSD), Marcel Boloș (PNL) and Cristian Ghinea (USR) — are being considered for new government roles, despite public criticism of their previous performances.

Dan confirmed that technical teams had reviewed 60-80 potential measures over nearly 50 hours of discussions, with some measures requiring internal party votes. “The difficulty remains in cutting off some benefits that some social categories have,” Dan said, referencing resistance to reducing privileged entitlements.

With time running short before the European Commission issues its recommendations on June 20, the political deadlock is increasing the likelihood of a minority cabinet scenario — possibly led by the PNL and USR — with PSD stepping back into opposition.