INTERNATIONAL POLICY ANALYSIS Which Way Goes Romanian Capitalism? Making a Case for Reforms, Inclusive Institutions and a Better Functioning European Union Daniel Daianu and Bogdan Murgescu June 2013 n This paper examines the Romanian economy and its version of capitalism from a long-term perspective and in a broad context. It focuses on economic prospects in the face of a legacy of backwardness and the endurance of domestic weaknesses, in the context of the Great Recession and the eurozone crisis. n Romania has a pressing need to mobilise its internal resources and absorb EU funds on a much greater scale so that it can enhance economic growth and mitigate exter­nal shocks. To this end, Romania needs to undertake thorough reforms in the public sector, combat rent-seeking and waste, foster domestic savings. The functioning of institutions and of taxation should convey a sense of fairness to citizens. n Romania needs to rethink its growth model. Romania must improve its education system by increasing the level of resources assigned to education and creating coher­ent policies to strengthen institutional capacities and to improve quality standards. n The Romanian economy would benefit significantly from EU policies that are more responsive to the economic and social fractures revealed by the current crisis. n Not least, financial markets have to be tamed in Europe and elsewhere if they are to serve economies.