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March 23, 2023

Does the European Commission consent to new Fiscal Code?

Romania’s arrangement with the International Monetary Fund (IMF) and the European Commission continues, Romania’s Finance Minister Eugen Teodorovici said Tuesday, while Vice President of the European Commission Valdis Dombrovskis argued that the review of Romania’s Balance of Payments programme could not, once again, be concluded, but the European Commission (EC) stands ready to assist the Romanian authorities.

Unofficial sources inform us that Finance Minister Eugen Teodorovici has persuaded European officials during the Economic and Financial Affairs Council (Ecofin) meeting in Brussels that the state budget will have the resources needed to cover the Fiscal Code measures, based on better tax collection and supplementary revenues estimated at RON 1 bln.

“Today I took part in the Economic and Financial Affairs Council (Ecofin) meeting in Brussels. The main conclusion of the meetings today: Romania’s agreement with the IMF and EC continues,” Eugen Teodorovici wrote on his Facebook page.

EU finance ministers have also analyzed the stage of the reforms Romania committed itself to implementing through the agreement signed with the IMF and EC in 2013, an agreement that will expire in September, Adevarul informs.

European Commission officials rejected Romania’s new Fiscal Code at the end of June, after failing to reach an agreement with Romanian Government officials over the changes brought to the Code.

On the other hand , European Commission Vice President Valdis Dombrovskis stated at the press conference that followed the ECOFIN meeting that the EC’s financial assistance programme for Romania is not suspended but is “derailed” because the fiscal changes are generating concern.He specified that the European Commission is worried about the balance of payments programme of Romania, urging the Romanian authorities to use the time until September to pass necessary reforms.

He added that as far as the fiscal developments in Romania are concerned, there is a clear deviation related to the plans of the Romanian Government for instance to cut the Value Added Tax (VAT) by five percentage points to 19 per cent. He said the European Commission is expecting Romania’s Government deficit to reach almost 3 per cent of the Gross Domestic Product (GDP), which is no sign to assuage the markets.

The latest developments in Romania’s macroeconomic adjustment programme related to a precautionary arrangement signed by Romania with financial institutions in 2013 was discussed Tuesday at the ECOFIN meeting in Brussels, where also attending was Finance Minister Teodorovici.

European Commission staff came on a mission to Romania, June 16-26, at the end of which they told a news conference that Romania took important steps in certain areas and its macroeconomic state is consolidated, but overall progress with the implementation of jointly agreed measures was not enough, especially as far as the tax policy is concerned.

“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,” the European Commission wrote in a statement following its staff mission to Romania.

Looking forward, the statement reads, 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.

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 statement reads.

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.

On June 25, Teodorovici announced that the European Commission staff failed to reach agreement with the Romanian authorities on Romania’s Tax Code, but they were to decide at a July 14 meeting of ECOFIN the latest developments in the arrangement with Romania.

Romania’s ongoing arrangement with the IMF and the European Commission runs out this September, Agerpres informs.



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