Country Report Romania

Romania’s accession to the EU was one of the significant factors that boosted consumer confidence in the domestic economy. The general perception of accession as an opportunity for new jobs and higher income created a positive attitude towards taking credit. ¹ As such, by the end of 2008, two years after Romania’s accession to the EU, household debt reached a historical peak of almost half of the total private loans. The reasons for the contracted loans were similar to those that existed in the pre-accession period: rising income, optimistic expectations of future income, the significant interest of consumers in acquiring immovable property, and the banks’ household-credit oriented strategies. ² In the following years, the rate of consumers taking on credit started to decrease. This trend can be seen as one of the many effects of the financial crisis. The fluctuations in the level of household indebtedness did not affect consumers negatively on their own. Rather, it was the increased risk in foreign exchanges, the depreciation in value of the assets guaranteeing consumer loans, increased living costs, ³ and other specific characteristics of the Romanian consumer credit market ⁴ (see sections A and B) which led to increased levels of consumers’ over-indebtedness and evictions.