EcoFin: Romania needs to decrease its budgetary deficit by 2011

EU’s finance ministers council, EcoFin, urged Romania to decrease their budgetary deficit below the 3% threshold of GDP by 2011, Romanian news agency NewsIn informs, quoted by Reuters. Moreover, Hungary and Lithuania should reduce their deficits below the maximum threshold agreed at the EU level by 2011 while Poland and Latvia by 2012.

EU monetary policy and economy commissioner Joaquin Almunia declared that EcoFin recommended Bucharest authorities to fulfill their political commitments assumed by the financial agreement with the EC and the IMF.

He added that private banks will offer financial support, as they promised, only if the objectives and assumed deadlines will be respected by Romanian authorities. The decision was taken within the excessive deficit procedure, which can also impose fines upon euro zone states that fail to control their deficit.

The European Commission recommended Romanian authorities to apply fiscal measures included in this year’s budget especially those regarding salaries in the public sector and the reformation of the pensions system. Moreover, the government needs to control its deficit, to reduce it and adopt the necessary measures to decrease the deficit by 2011.

In 2008, Romania’s budgetary deficit was 5.4% of GDP. According to the Commission, this was due to high public expenses, increase in public sector salaries, social benefits and over – optimistic estimations on budgetary revenues.

For 2009, Romania’s budgetary policy foresees the correction of internal and external disequilibrium as a response to the financial assistance Romania receives from the EU and IMF. According to the program, Romania will limit its deficit to 5.1%. If policies will not be corrected, EC estimates a deficit of 5.6% of GDP in 2010.