According to the Eurostat data, in 2016 Romania ranked last but two among the EU states both in terms of share of GDP allocated to the health sector and percentage of GDP representing the public funds for education.
With 4% of GDP for health, we were far from the European average of 7.1% of GDP and left only Latvia (3.7% of GDP) and Cyprus (2.6% of GDP) behind. For reference, there are three countries that have reached the 8% threshold (Denmark 8.6%, France 8.1% and Austria 8%) and Germany has allocated 7.2% of GDP to this key sector.
With 3.7% of GDP for education, we were closer to the European average of 4.7% of GDP and slightly surpassed Bulgaria (3.4%) and Ireland (3.3%). Northern countries had the best results (Denmark 6.9% of GDP, Sweden 6.6% and Finland 6.1%), along with Belgium (6.4%) and Cyprus (6%).
Among the former socialist countries, Baltic countries (Estonia 5.9%, Latvia 5.5% and Lithuania 5.2%) excelled, as well as Slovenia (5.6%) and Poland (5%), which flanked France (5.4%) and the Netherlands (5.3%). This is the proof that, where there is will, a sustained policy can be pursued in this field.
That includes countries with relatively low shares of the public spending budget. We remind that Romania is the second to last in the EU in terms of public money allocated, with only 34% of GDP, because it cannot but receive only relatively low revenues, despite that it went down the path of the tax cut.
For example, Lithuanians that had expenditure worth 34.2% of GDP (nearly as much as us), can allocate 5.8% of GDP to health and 5.2% to education. That, although it allocates a similar share of GDP to social protection (11.2% of GDP and we have 11.6% of GDP). Social protection, where, to keep in mind, they allocate 5.9% of GDP and we allocate 8.4% of GDP to the elderly.
Not that 8.4% of GDP would be much, especially in the context of a European average of 10.2%, but it is a much larger share for social protection compared to the European practice. With 72% of the money for this sector allocated just for pensions, we are well above the EU average of 53% and significantly surpassed only by Greeks (77%) and Bulgarians (75%).
For reference, we note that Germany allocates only 48% of the money intended for social protection to pensions and France 55%, while countries in our region such as Hungary (50%) or Poland (54%) operate with similar percentages. Which means they chose to use some Western models of allocating the money rather than Balkan models, maintaining the proportions in the development process.
The strangeness of Romanian allocations to public spending
Data published by Eurostat reveals, moreover, some major strangeness in the allocation of funds spent by the state.
If you are referring to the share of 73% of the available money (which, we might say in passing, would involve an increase in the state revenues by about 30% – 40%, to bring the share of state expenditure in GDP to the European standards), any percentage below 73% means a disadvantageous allocation for that domain and vice versa (see table).
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- Government expenditure in Romania, compared to the EU average (2016)
- Government expenditure as a share of GDP
- Social protection
- Health
- Education
- Economic affairs
- Public order and national security
- Defence
- Leisure, culture, religion
- Environment protection
- Housing and urban improvement
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We knew that health was the „Cinderella” of the budget. Likewise, social protection, but positioning education above the budget average, even though we fall behind in Europe in this field, is surprising. This leads to the conclusion that the need for an immediate and consistent increase in budget revenues as a share of GDP, even though tax increases would be unpopular.
Contrary to the public perception, European statistics also tell us that we are allocating enough money (even though we do not quite have anywhere) to public order and national security, economic affairs (we seem to recall that we had not enough investment!) and housing and urban improvement (!!) and we are doing reasonably well in the field of culture and religion plus the environment protection. In addition, Eurostat says that in 2016 we effectively allocated only 0.9% of GDP to defence, which means that an effective, significant increase would be needed to reach 2% of GDP.
All in all, we do not even collect enough money to have enough for spending, even with a budget deficit on the edge, close to the allowed threshold of 3% of GDP (this is the Eurostat figure for 2016).
Moreover, the insufficient amounts overall are allocated in a quite bizarre way, if we relate to the European practice. Perhaps it would not hurt to examine all correlations between budget expenditure and perfect them here and there, where it is important, for the convergence with the EU.
