The Recommendation on the Excessive Deficit Procedure in the case of Romania was adopted on Friday at the Meeting of the Economic and Financial Affairs Council (ECOFIN), in Luxembourg, and our country’s commitment is to return to a budget deficit up to 3% of GDP by 2024, according to a press release from the Ministry of Finance.
“Minister of Finance Alexandru Nazare participated in the meeting of the Economic and Financial Affairs Council (ECOFIN), held on June 17-18, in Luxembourg. The agenda of the ECOFIN meeting also included items related to the European Semester and the implementation of the Stability and Growth Pact, in this sense being adopted the Recommendation on the Excessive Deficit Procedure in the case of Romania, which confirms the commitment of our country to return to a budget deficit of maximum 3% of GDP, by 2024”, reads the Ministry of Finance’s release for AGERPRES.
According to the quoted source, in the presentation, the European officials underlined that the excessive deficit procedure was triggered as a result of the expansionary policies and the balance registered in 2019, and the recommendation presents the updated calendar of correction of the excessive budget deficit, also ensuring the necessary fiscal space. supporting investments and achieving economic growth objectives, being in line with the national targets set in the Convergence Program presented by Romania.
In 2021, the Romanian Government has taken the necessary measures to achieve the set targets. Economic growth for 2021 is substantial, and in the medium term it will be supported by the Structural Funds and those in the Recovery and Resilience Facility, the European Commissioner for Economy, Paolo Gentiloni said at the meeting.
In his turn, the Romanian Minister of Finance specified in his intervention that the recommendation formulated by the Commission and adopted on Friday by the Council foresees a calendar of gradual reduction of the budget deficit until 2024, in the conditions where a too fast correction. “For 2021, both the economic growth forecast and the forecast deficit are similar, which indicates the European Commission’s confidence in the measures adopted by the Romanian Government,” Alexandru Nazare said.
Romania presents to the European Commission half-yearly reports on the effective actions implemented, starting with 2017, when the procedure of significant deviation for our country was initiated.
The significant adjustment of the European Commission’s fiscal forecasts for 2021, from 11.3% of GDP (ESA deficit) in the autumn forecast, to 8% of GDP (ESA deficit) in the Recommendation, is mainly due to the measures adopted by the Government in the first months of 2021, in order to reverse the expansionary fiscal policies of 2016-2019.
European Council recommends Romania to put an end to excessive deficit by 2024
The European Council on Friday adopted a recommendation under the excessive deficit procedure for Romania that Romania should put an end to the excessive deficit situation by 2024 at the latest.
“The Council found that an extension to the current deadline for Romania to correct its public deficit would be important in order not to compromise the economic recovery after the COVID-19 pandemic. The new deadline for correcting the excessive deficit allows for a more gradual effort and a balance between fiscal consolidation and the economic recovery,” reads a press statement released by the European Council.
The recommendation indicates that, in order to meet this new deadline, Romania would need to achieve a general government deficit target of 8.0% of GDP in 2021, 6.2% of GDP in 2022, 4.4% of GDP in 2023, and 2.9% of GDP in 2024, which is in line with the Romanian government’s objectives.
The European Council says that it has taken into account the changes in the Romanian fiscal situation, budgetary developments in 2020 and the new budgetary strategy put in place and calls for reforms, including in the management of public finances. In this context, the Recovery and Resilience Facility can provide an opportunity for Romania to improve its fiscal situation while still supporting growth and job creation.
The recommendation adopted on Friday takes into consideration the recent developments and sets the new deadline for the correction of Romania’s excessive deficit as 2024. Romania is expected to report to the Council by October 15, 2021 on the consolidation strategy to achieve the targets set in the recommendation.
Photo: Facebook/Alexandru Nazare