European Commission Determines Romania Has Failed to Implement Effective Measures to Address Excessive Deficit

Brussels – Romania’s net expenditures have significantly exceeded the limits established by its corrective trajectory, posing clear risks to its goal of correcting an excessive deficit by 2030. As a result, the European Commission advises the Council to declare that Romania has not effectively addressed its fiscal imbalance.

The analysis reveals that vulnerabilities have heightened due to worsening fiscal and current account deficits, alongside declining cost competitiveness in 2024. The public deficit has intensified this year due to increased wages and pensions in the public sector, which in turn has fueled private consumption and exacerbated the current account deficit.

Moreover, the report notes that last year saw a weakening of the external financing mix, once supported by substantial net foreign direct investments and EU funds, which helped control external debt growth.

Looking ahead, only slight reductions in government and current account deficits are anticipated for 2025 and 2026. Although the rise in unit labor costs and inflation is expected to decelerate, they will remain elevated. Progress on economic policies has been minimal in 2024, with increased risks to macroeconomic stability. Political uncertainty grew towards the end of last year, making Romania more susceptible to shifts in investor sentiment and higher borrowing costs.

In light of these challenges, the Commission suggests that executing a medium-term fiscal-structural plan and implementing tax reforms in 2025 could markedly alleviate fiscal vulnerabilities. Additionally, structural reforms, particularly those outlined in the Risk Reduction Plan, are essential for enhancing competitiveness, export capabilities, and attracting further EU funding.

Brussels advocates for strict fiscal policy measures to maintain net expenditures within the corrective trajectory limits under the Excessive Deficit Procedure and to bolster the external economic position. The Commission encourages a faster rollout of the Recovery and Resilience Plan along with cohesion policy programs.

Furthermore, the Commission has urged Bucharest authorities to enhance the quality and effectiveness of public administration and ensure predictability in decision-making processes. Romanian officials are advised to prevent legislative initiatives from compromising legal certainty through adequate stakeholder consultations, effective impact assessments, and streamlined administrative procedures. (4.6.2025)