Romania expects fiscal package to avert EU sanctions and credit rating downgrade

Romanian authorities believe the recently approved fiscal corrective package, with an estimated impact of 0.56% of GDP, will be sufficient to reassure the European Commission and international credit rating agencies of the country’s commitment to fiscal discipline, B1TV.ro reported.

The package, adopted by the government on July 4, is designed to begin correcting Romania’s public deficit, which reached 9.3% of GDP in 2024. Officials hope the measures will help avoid further steps under the European Union’s Excessive Deficit Procedure, including the possible suspension of EU funding.

“The fact that we are adopting this fiscal-budgetary adjustment package now and [the fact that] the package is consistent will probably convince the European Commission that we are on the right track,” said Ionut Dumitru, economic advisor to the prime minister and chief economist at Raiffeisen Bank. “That we have taken the necessary measures and that procedure for suspending European funds is no longer justified.”

Romania failed to submit its annual progress report under the Excessive Deficit Procedure by the April deadline, prompting the European Commission to issue updated recommendations in June. The government now aims to demonstrate progress through a series of fiscal packages, with the July measures forming the first stage.

Dumitru added that the package is also likely to influence the assessment of credit rating agencies. “Probably for the rating agencies, this fiscal-budgetary adjustment package will be convincing, and they will not reduce the country’s rating,” he said.

He noted that the announcement of the package had already improved investor sentiment, citing increased demand for Romanian government bonds and a slight decrease in yields in recent days.

The July 4 package includes a VAT hike, increases in excise duties and dividend tax, as well as spending caps in the public sector. Further fiscal consolidation measures are expected later in the year, with the government aiming to reduce the deficit to below 7% of GDP in 2025.

iulian@romania-insider.com

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