The European Commission finds that Romania has not taken effective measures to correct its excessive deficit

Brussels – The increase in Romania’s net expenditures is well above the ceiling set by its corrective trajectory, presenting clear risks for correcting its excessive deficit by 2030, and consequently, the European Commission recommends that the Council adopt a decision stating that Romania has not taken effective measures to correct the imbalance.

“Vulnerabilities have increased as Romania’s fiscal and current account deficits have worsened, and cost competitiveness has deteriorated in 2024. The high public deficit has increased in 2024. The continued rise in the public deficit, particularly due to increases in public sector wages and pensions, has boosted private consumption and the already high current account deficit,” the analysis from the community executive, published on Wednesday, states.

The document points out that last year, the solidity of the external financing mix, based on considerable net foreign direct investments and EU funds, weakened, which kept the growth of external debt under control.

“Only marginal reductions are expected for government and current account deficits in 2025 and 2026. The growth of unit labor costs and inflation are expected to slow down but remain high. Progress on policies has been minimal in 2024, and risks to macroeconomic stability have deepened. Political uncertainty increased towards the end of last year, leaving the country vulnerable to changes in investor perception and rising borrowing costs,” the European Commission added.

In these conditions, the Commission believes that implementing the medium-term fiscal-structural plan and a tax reform in 2025 could significantly reduce fiscal vulnerabilities. Additionally, structural reforms, especially those included in the Risk Reduction Plan, are necessary to strengthen competitiveness, export performance, and attract additional funding from the EU.

The community executive has recommended that Romania take measures this year and next year to strengthen expenditures and overall defense preparedness, in accordance with the conclusions of the European Council from March 6, 2025.

Brussels thus supports a considerable tightening of fiscal policy to keep net expenditures within the limits of the corrective trajectory under the Excessive Deficit Procedure and to strengthen the external position. The Commission recommends accelerating the implementation of the Recovery and Resilience Plan and cohesion policy programs.

Furthermore, the Commission has recommended that the authorities in Bucharest improve the quality and effectiveness of public administration and the predictability of the decision-making process. In this context, the European forum indicates that Romanian officials must ensure that legislative initiatives do not undermine legal certainty through adequate consultations with stakeholders, effective impact assessments, and simplified administrative procedures. (4.6.2025)