The Romanian Government borrowed heavily from the West in the 1970s to build a substantial state-owned industrial base. Following the 1979 oil price shock and a debt rescheduling in 1981, Ceausescu decreed that Romania would no longer be subject to foreign creditors. By the end of 1989, Romania had paid off a foreign debt of about $10.5 billion through an unprecedented effort that wreaked havoc on the economy and living standards. Vital imports were slashed and food and fuel strictly rationed, while the government exported everything it could to earn hard currency. With investment slashed, Romania's infrastructure fell behind its historically poorer Balkan neighbors.
[[File:Nicolae Ceaucescu 1978.jpg|thumb|Nicolae Ceaucescu, 1978.]]
Since the fall of the Ceausescu regime in 1989, successive governments sought to build a Western-style market economy. The pace of restructuring was slow, but by 1994 the legal basis for a market economy was largely in place. After the 1996 elections, the coalition government attempted to eliminate consumer subsidies, float prices, liberalize exchange rates, and put in place a tight monetary policy. The Parliament enacted laws permitting foreign entities incorporated in Romania to purchase land. Foreign capital investment in Romania has been increasing rapidly, although it remains less in per capita terms than in some other countries of East and Central Europe.
Unemployment was officially 3.9%in August 2007, although these figures do not capture high levels of temporary emigration, gray-market employment, or under-employment.
In the early 1990s, inflation was one of Romania's most serious economic problems. Inflation rates have gradually declined, finally reaching single digits in 2004. Inflation in 2006 stood at a historical low of 4.9%. The Central Bank has set an ambitious annual target band of 4% plus/minus 1% for 2007, but outside analysts note that inflationary pressures are growing and predict that the rate for the year will slightly exceed the top of this band.
==History==