Economy

Romania to face excessive budget procedure in March – former finmin

The European Union will likely launch its excessive budget procedure (EDP) against Romania in March, as the country’s deficit for 2019 under the European System of Accounts (ESA) has reached RON 48.3 billion (EUR 10.13 bln) or 4.6 percent of GDP, well above the EU’s limit of 3 percent, said the finance minister of the just-removed cabinet of Florin Cîţu on Monday.

“There are discussions with the European Commission […] and yes, Romania will be subjected to the excessive budget procedure. Yet another gift left by the PSD [Social-Democrats] government is the excessive budget procedure,” Cîţu said. “We cannot avoid this thing; the only thing we can do is to make sure we return to within ESA budget limits as soon as possible. We have already done this in our fiscal and budgetary planning.”

The demoted liberal government’s current financial strategy is still in force, and it calls for a 3.58 percent budget deficit this year that should be reduced to 2.77 percent (i.e., under the 3 percent required by the European Stability Pact).

Following massive wage and pension hikes by the PSD government, the country couldn’t really afford the jump in the budget deficit in 2019 to 4.8 percent of GDP from 2.8 percent in 2018.

Since Romania joined the European Union in 2007, it has been subjected to the European Commission’s excessive budget procedure from 2009 to 2013.

The country’s public debt rose by a massive EUR 7.3 billion last year, but thanks to still-robust economic growth of 4.9 percent, it remains under 50 percent of GDP.

Cîţu said that Romania was providing the European Commission with all the fiscal data required and the decision of when to launch the EDP was in their hands.

“At the earliest, this could happen in March, but it could also be in May, depending on the European Commission,” Cîţu said.

The EDP requires that Romania be subjected to the procedure in order to provide a plan of corrective actions and policies it will follow, as well as deadlines for when they will be achieved. Euro-zone countries that do not follow up on the recommendations may be fined.

 

Title image: Former finance minister Florin Cîţu.

Author: Dénes Albert