site.btaRomania May Need Seven Years to Bring Its Budget Deficit Down to Target Set by EU Rules, Finance Minister Says

Romania may need seven years to bring its budget deficit down to a target set by European rules, Romania’s Finance Minister Marcel Bolos told Bloomberg on Tuesday. Bolos noted that the government contends with public resistance to fiscal restraint in an election year.

Romania likely needs seven years to narrow the gap to 3% of GDP from 5% forecast for this year, Bolos said, as quoted by Digi24 and Agerpres.

He noted that this seven-year budget horizon depends on whether credit-rating agencies regard electoral spending as sustainable and withhold potential downgrades.

Bolos said that even though the EU has introduced some flexibility due to the need to increase defence spending, refugee assistance, farmer assistance, and grain export routes tied to Russia’s invasion, rating agencies may not show such leniency when it comes to fiscal rules. Romania, which has been under the EU’s excessive deficit procedure since before the pandemic, has the lowest investment grade with a stable outlook at all three major rating companies. Fitch Ratings is scheduled to review Romania as early as next week, the Finance Minister noted.

Prime Minister Marcel Ciolacu’s Government approved two pension increases this year as well as higher wages for teachers, and may face pressure from state health-care workers and police, adding to spending, Bloomberg said. The news provider recalled that Romania failed to keep the deficit in check last year, with a shortfall reaching 5.7% of GDP after an initial target of 4.4%, despite the government’s approval of several spending-cut packages.

The budget gap has put Romania further away from its ambition to join the EU’s single currency in years to come, Bolos said. "As long as we don’t enter on a clear fiscal consolidation path, euro-entry remains just a longer-term objective," the Minister noted.