1980s austerity policy in Romania

The 1980s austerity policy in Romania was imposed by Romania's President Nicolae Ceaușescu in order to pay out the external debt incurred by the state in the 1970s. Beginning in 1981, the austerity led to economic stagnation throughout the 1980s, being a "sui generis shock therapy" which lowered the competitiveness of the Romanian economy and decreased the amount of exports.

The harsh austerity measures negatively affected the living standards of the Romanians, increased shortages and eventually led to the downfall of the Romanian Communist Party through the Romanian Revolution of 1989.

Between 1950 and 1975, Romania's economy grew at one of the fastest rates in the world and in the 1960s and early 1970s, Ceaușescu was considered one of the "enlightened" Eastern European leaders. 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.

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. Some industries, such as petrochemicals and steel, had a production capacity higher than demand in the local and the available external markets, resulting in underused capacities. Overall, the economy suffered from the combination of productive and inefficient units, as well as the reliance on material plans rather than profit, which led to falsification of statistics and large inventories of unsold production.

The Romanian economy had a strong bias toward large enterprises: 87% of all industrial workers and 85% of industrial output were in enterprises having more than 1000 employees, leading to a lack of flexibility of the economy.

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