Romania did not comply with the ECOFIN's recommendation on excessive deficit, as outlined on January 21.
The Economic and Financial Affairs Council (ECOFIN) has issued a stern warning to Romania, reiterating the ongoing issue of the country's excessive deficit and the need for prompt action to correct it. The formal statement, which serves as a public reminder, does not specify immediate penalties, but it does imply potential future actions [1].
The ECOFIN decision is a formal statement of Romania's failure to address its excessive deficit issue as per the recommendations provided [2]. This failure has been evident in Romania's net expenditure growing faster than recommended in 2024, leading to a persistent high government deficit [3].
The high government deficit in Romania, according to the ECOFIN decision, puts at risk a timely correction of Romania's excessive deficit by 2030 [1]. In response to this, Romania has introduced a new Governance Program and fiscal packages aimed at curbing deficits, but the effectiveness remains to be seen given the current deficit trajectory [2][3].
ECOFIN may consider further steps such as intensified monitoring, formal warnings, or the imposition of financial sanctions if Romania continues to fail addressing the excessive deficit procedure (EDP) issues related to its high budget deficits [1]. Specifically, potential further ECOFIN actions include repeating or escalating formal warnings, increasing fiscal surveillance and reporting requirements, and imposing sanctions such as fines or suspension of EU funds [2].
Romania did not deliver the annual update on the progress of its seven-year fiscal consolidation plan by April 30 [4]. This non-compliance could escalate the enforcement stages within ECOFIN, leading to harsher disciplinary steps if budgetary targets are not met [2].
The ECOFIN press release is a call to action for Romania to take immediate steps to reduce its budgetary imbalances [1]. It is also a public statement emphasizing the importance of Romania addressing its budgetary imbalances [5]. The press release serves as a warning about the ongoing need for Romania to address its budgetary imbalances [1].
In January 2023, ECOFIN recommended that Romania review its tax framework with the aim of boosting budget revenues, but Romania failed to observe this [1]. The ECOFIN decision does not indicate any new recommendations for Romania to address its excessive deficit [3], but it does emphasize the urgency of action to reduce Romania's budgetary imbalances [1].
As of now, no further action has been taken yet by ECOFIN regarding Romania's failure to comply with its recommendations [3]. However, the pattern of EU procedure suggests that escalating enforcement stages may be triggered when excessive deficits are unresolved [2]. Therefore, Romania faces a credible risk of harsher disciplinary steps within ECOFIN if budgetary targets are not met.
[1] ECOFIN Press Release
[2] EU Fiscal Rules and the Stability and Growth Pact
[3] European Commission Recommendation to Romania
[4] Romania Misses Deadline for Fiscal Consolidation Plan Update
[5] ECOFIN Decision on Romania's Excessive Deficit Procedure
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