The European Union’s executive branch has recommended that EU finance ministers start a disciplinary procedure against Romania over the country’s budget deficit that last year exceeded the EU limit of 3% of gross domestic product.
The European Commission wants the ministers to ask Romania to reduce the budget gap below 3% by 2022 and show it has taken action towards that goal by Sept. 15.
The recommendation sets out a path for the reduction of the headline deficit from 3.8% to 3.6% of GDP in 2020 which is in line with the Romanian government targets. After that, it wants 3.4% in 2021 and 2.8% in 2022.
The deadline is tight for the government in a year when Romania holds local and parliamentary elections. The acting government, which will face a parliament vote of no-confidence next week, is unlikely to be able to come up with a strategy to reduce spending ahead of general elections scheduled for the fall.
However, should Romania fail to comply with the deficit reduction goal without a good reason, the Commission can move to freeze EU structural funds for the country. That sanction has already been used against Hungary. .
Romania’s government also plans to enforce an already approved 40% hike in all state pensions from September. The Commission has warned the hike will take the country’s deficit to 6.1% in 2021.
A minority Liberal Government took office in November after overthrowing the Social Democrats.
Under the medium term fiscal strategy drafted in the 2020 budget planning, it estimated that the budget deficit would dip below 3%-of-GDP in 2023. Prime Minister designate Florin Citu has confirmed the strategy.
However, Citu said in a social media posting on Wednesday that the government’s plan to reduce the deficit had been “fully accepted by the European Commission, which means that the experts from the European Commission trust this government”.