EC proposes to extend Romania's deficit cut deadline by one year

The European Commission (EC) proposed to the European Union Council to extend by one year (namely 2012) the deadline for Romania’s endeavour to cut the budget deficit under 3% of the GDP, having in mind the unexpected effects of the recession, a communiqué of the European institution shows. At he same time, the EC appreciates that Romania has taken effective measures to correct the budget’s unbalance.

„Romania has made serious efforts to limit the deterioration of the budget deficit and to maintain the macro-economic stability. The deterioration of the economic situation occurred since the initial recommendations have been made justify the deadline extension by one year. But the consolidation effort needs to continue – according to the conditions attached to the multi-lateral financing programme – to secure the deficit’s correction by 2012”, commissioner for economic and monetary affairs Joaquin Almunia declared.

In July 2009, the EU Council approved the Commission’s demand to begin the excessive deficit procedure in Romania’s case, when the budget deficit was above 3% of the GDP in 2008, and recommended that the budget deficit be reduced below 3% until 2011 at the latest. The council’s decision saw that the deadline for taking effective measures was January 7, 2010.

The EC also indicates that Romania reduced salary spending in the public sector and diminished public spending on goods and services in 2009, according to the recommendation.

„The 2010 also includes a package of measures addressing cutting spending by approximately 2% of the GDP and increasing incomes by 0.5% of the GDP. Plus, a fiscal responsibility law introducing a compulsory fiscal framework on medium-term was sent to the Parliament to be authorised. Having in mind these measures, it can be considered that Romania has taken effective measures, as it was requested in the recommendation”, the communiqué goes on.

Romania suffered a 7% economic contraction in 2009, much above the EC estimates in the spring of 2009, which saw a 4% drop in the Romanian GDP, as a consequence of the less exports and lower inner demand, caused by the economic and financial global crisis. The EC forecasts a 7.8% budget deficit in 2009, indicating that the budget for 2010 aims for a 5.9% deficit target.