EC: Romania must reduce its budget deficit below 3% of the GDP until 2011

The European Commission (EC) recommended Romania to reduce the country’s budget deficit below 3% of the GDP until 2011, according to an EC report on Wednesday. EC told Romanian authorities to apply the fiscal measures implied by the current year’s budget, particularly in regards to the private sector staff and the pensions’ reform.

EC recommends a GDP deficit drop of at least 1.5% in 2010. Additionally, the EC invites the authorities to identify the budget consolidation measures for the period after 2009, which should focus on the reduction of current expenses, especially incomes expenditure. The Government must look for measure to shrink the budget deficit until 2011.

EC appreciated that Romania, Lithuania, Malta and Poland have excessive budget deficit and they should reduce below 3%, according to the Maastricht treaty. The Deadline for Romania, Hungary and Lithuania is 2011, for Malta – 2010, and Poland has time until 2012. ECOFIN will discuss the recommendations at the next reunion in July. The countries will have six months to report back with the measures they will adopt to head toward the target deficit.

2008 saw Romania’s budget deficit to amount to 5.4% of the GDP. EC recons it was increased by the spending for the state salaries and social benefits, by the much-too-optimist forecasts on the budget’s income and, to a lesser extent, to a sudden drop in incomes in the third semester. The lack of efforts for fiscal consolidation when the economic climate was favourable also helped the budget deficit to scale up.