The European Commission is expected to grant Romania additional time to present and implement a fiscal corrective package before considering punitive measures such as suspending disbursements under the EU’s Resilience Facility and cohesion policy funds, Bloomberg reported on June 2, citing sources familiar with the matter.
Romania is under pressure to reduce its fiscal deficit, which reached 9.3% of GDP in 2024 on an ESA basis – making it the largest budget gap among EU member states.
The country is required to compress the deficit by around 2% of GDP as part of its commitment under a seven-year fiscal consolidation plan agreed with the Commission in October 2023. The annual targets may also need to be revised as the starting point (2024 budget deficit) turned out to be wider than projected last October.
The Commission is set to release progress reports for all member states under the Excessive Deficit Procedure (EDP) on June 4. However, Romania failed to submit its updated fiscal plan by the end-March deadline amid prolonged political instability.
The expected reprieve follows Romania’s emergence from a political crisis that culminated on May 18 with the election of pro-European candidate Nicușor Dan as president.
An expert group appointed by president Dan is currently drafting a fiscal package that would combine spending cuts with potential tax increases to raise revenues. While drafting the budgetary plan remains a top priority, forming the ruling coalition remains an equally challenging task, as the Social Democratic Party (PSD, the largest parliamentary party) appears undecided and still confused following its loss in the presidential elections.
“I hope we’ll have a correct approach from the commission and receive a waiver of a few weeks to present the measures that we’re currently working on,” interim finance minister Barna Tanczos told reporters in Bucharest on June 2.
The fiscal plan is also a milestone under the Recovery and Resilience Facility (RRF), meaning that its timely submission is critical for unlocking future EU funding. A revision of the agreed annual deficit targets may also be necessary, given that Romania’s 2024 fiscal gap was wider than projected at the time of the original agreement.
President Dan has identified fiscal stabilisation as a top priority. Addressing Romania’s budget is his “number one priority as head of state,” he stated after the election.
iulian@romania-insider.com
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