European Commission Vice-President Valdis Dombrivskis and European Commissioner for Economic and Financial Affairs, Pierre Moscovici (photo), have sent a letter to the Finance Minister Viorel Stefan calling on the Romanian government to act ‘credibly’ in order to cut the budget deficit within the threshold set by the Stability Pact, Curs de guvernare informs.
According to Grindeanu cabinet, the estimated budget deficit in 2017 will reach 2.96% of the GDP, whereas the European Commission claims the deficit will reach 3.6% of GDP.
Last week, Pierre Moscovici said in Brussels the EC believes Romania will not meet the budget deficit of 3% of the GDP: “I inform you I have sent a letter to the Romanian authorities in order to stress the risk to exceed the deficit limit this year and next year. (…) These developments are generated by a combination of tax cuts and wages and pensions increases,” Moscovici said.
The letter reads, according to the source:
“The Commission has recently published in its 2017 Forecast, which includes budgetary projections for Romania. The Commission estimates Romania’s general government deficit for 2016 to have sharply increased, compared to the previous year, to 2.8% of GDP. It also forecasts the deficit at 3.6% of GDP in 2017 and, on a no-policy-change principle, at 3.9% of GDP in 2018.
On this basis, there is a clear risk, based on the Commission forecast for 2017 and 2018, that the criterion in the sense of the Treaty and Council regulation (EC) No. 1467/97 of 7 July 1997 will not be fulfilled. Furthermore, Romania is estimated to have significantly deviated from its medium-term budgetary objective (MTO) in 2016, while the Commission forecast points to further deterioration of the structural balance in 2017 and 2018. These adverse fiscal developments mainly stem from fiscal easing that includes a number of tax cuts combined with increased wages and pensions.
The Commission will reassess Romania’s compliance with its obligations under the Stability Growth Pact on the basis of the Commission 2017 Spring Forecast, including the budgetary data for 216, as validated by Eurostat in April, and Romania’s forthcoming Convergence Programme, which is expected before mid-April. It will be important that the necessary measures to ensure compliance with the deficit criterion and with the adjustment path towards the MTO are credibly announced by that time.”
Finance Ministry: The budget deficit will remain below 3pc
The Finance Ministry, referring to the letter from the EC, says the government will not exceed the budget deficit of 3%. It claims the difference in numbers comes from different methodologies applied for forecasts, according to news.ro.
The ministry also claims the letter is a formal procedure within a constructive institutional dialogue, an exercise for transparency. It claims “the Romanian government is committed to implement the governing programme to lead to sustainable development and to meet the deficit target of 3% of GDP.”