Romania has taken important steps in certain areas and the country’s macroeconomic situation has strengthened, but general progress in implementing the jointly agreed policy measures has not been sufficient, particularly as regards the fiscal policy, to allow the sides to reach an agreement, reads the statement released following the visit to Romania, between June 16 and 26 this year, of an EC mission tasked with reviewing the stage of the precautionary EU balance of payments financial assistance programme (2013-15).
“Important steps have been taken in some areas and the macroeconomic situation is strong. However, the overall progress in implementing the jointly agreed policy measures has not been sufficient, predominantly in relation to fiscal policy, to allow for a staff-level agreement with the Romanian authorities,” reads the document posted on the EC site.
According to the EC representatives, programme achievements should be preserved, as they form the basis for continued strong and balanced growth and job creation. Sound fiscal policies and the completion of the structural reforms started under the programme will be particularly important in this regard, the EC statement also reads.
Supported by three consecutive balance of payments assistance programmes, Romania has corrected its external and internal imbalances and has regained market access. Growth has been robust in recent years, unemployment is decreasing, inflation is at historical lows, and the financial sector has shown strong resilience, the document continues.
The current EU balance of payments financial assistance programme, formally agreed in October 2013, runs in parallel with an IMF stand-by arrangement. The programme was of a precautionary nature and no actual disbursements were envisaged. The programme provided support to Romania aiming at consolidating macroeconomic, fiscal and financial stability, increasing the resilience and the growth potential of the economy. Moreover, strong emphasis was put on enhancing administrative capacity, reforming the tax administration, improving public financial management and governance and restructuring state-owned enterprises, is the background information in the document.
Minister of Public Finance Eugen Teodorovici announced on Thursday that the Romanian authorities had failed to come to terms with the European Commission representatives on the country’s Tax Code, but that the matter will be taken to the EU Economic and Financial Affairs Council (Ecofin) due to meet on July 14; therefore, the IMF also canceled its review visit next month, Teodorovici also said.
The EC is particularly concerned about the budgetary impact of the Tax Code, cautioning that the budget deficit might shoot not only past the initially targeted figure, but also beyond the 3 percent of GDP where the excessive deficit procedure would be triggered. Finance Minister Teodorovici however assured that despite a temporary surpassing of the budget deficit to 2.9 percent of GDP in 2016, it would then fall back to 2.5 percent of GDP.