European Council closes excessive deficit procedures for Romania

“This decision is official recognition of the fact that Romania’s general government deficit was kept below the 3-per-cent target in 2012 and also of the credibility of the budgetary policy for 2013 and 2014, as the European Commission confirmed the Romanian Government’s forecast of fiscal consolidation,” reads a press release issued by the ministry.

Romania’s Minister-delegate for Budget Liviu Voinea attended on Friday the ECOFIN meeting in Luxembourg.

The Council confirmed that Romania, along with Italy, Latvia, Lithuania and Hungary have reduced their deficits below 3 per cent of Gross Domestic Product (GDP), the EU’s reference value for government deficits.

It adopted decision abrogating previous Council decisions on the existence of excessive deficits in these five countries, the European Council reports in a press release.

As a consequence, 16 of the EU’s 27 member states remain subject to the excessive deficit procedure, down from 24 during a 12 month period in 2010-11. Many procedures were opened subsequent to the global financial crisis and recession of 2008 and 2009, and the EU’s stability and growth pact is being used to support a return to sound fiscal positions.

According to the European Council’s release, the excessive deficit procedure for Romania was opened in July 2009, when the Council issued a recommendation on corrective measures to be taken. Romania’s general government deficit reached 5.4 per cent of GDP in 2008 and it had requested assistance from international lenders in March 2009, obtaining a 5-billion-euro loan from the EU as part of a 20-billion-euro package of assistance.

In July 2009, the Council called on Romania to correct its deficit by 2011. In February 2010, it extended the deadline to 2012, in the light of a stronger-than-expected contraction in GDP in 2009. Romania’s general government deficit had reached 9.0 per cent of GDP in 2009, despite efforts to reduce expenditure. To meet the 2012 target, the Council called for an annual fiscal effort of 1.75 per cent of GDP over the 2010-2012 period.

Romania’s general government deficit was reduced to 6.8 per cent of GDP in 2010, 5.6 per cent of GDP in 2011 and 2.9 per cent of GDP in 2012.

Based on a no-policy-change assumption, the Commission’s 2013 spring forecast projects deficits of 2.6 per cent in 2013 and 2.4 per cent in 2014, thus remaining below the 3 per cent of GDP reference value. AGERPRES