Gov’t failed to remove the ceiling of 9.4% of GDP for the pension system from the PNRR

The measures by which the Government wants to reduce the budget deficit are not sufficient for the targets that Romania has assumed. The message was sent to the Ministers of Finance, European Funds and Labor who went to Brussels to negotiate the deficit.

After returning to the country, the three entered the meeting with Marcel Ciolacu, the prime minister discussing, on Wednesday, at the government with the ministers.

The ministers from Bucharest presented the measures agreed in the Coalition to Brussels, but they were considered insufficient. The negotiations will be continued by Marcel Ciolacu who will go to Brussels from tomorrow.

The Minister of Finance, Marcel Boloș, asked in Brussels to increase the deficit to 5.5%, compared to the assumed 4.4%. The prime minister had already publicly announced that he would negotiate the increase of the budget deficit target assumed by the government within the excessive budget deficit procedure.

In 2023, Romania must fall within a budget deficit of 4.4 of GDP in 2023, according to the commitment made in the PNRR (National Recovery and Resilience Program). Political sources within the Coalition told HotNews.ro last week that Marcel Ciolacu intends to negotiate with European Commission officials to increase the deficit from 4.4% to 4.9% of GDP for 2023, so that there are no sanctions or problems in complying with PNRR.

Eliminating the ceiling of 9.4% of GDP for total pension system expenditures from the National Recovery and Resilience Plan was the main requirement of Prime Minister Marcel Ciolacu for all PSD Ministers of Labor. In the discussions held in Brussels by the Ministers of Labor and European Funds, one of the topics addressed was the elimination of this ceiling. The discussion ended quickly, however, because Commission officials were willing to discuss modifying, not eliminating, the cap, but only when the general pension law was presented to them.

The law on general pensions does not exist at this moment in a concrete form, therefore it could not be presented. Moreover, the Commission was waiting for a new indicator that, to the same extent, would bring “financial discipline”, but without affecting the possibility of updating or increasing pensions in the future. This did not happen either.

Procedurally, the Government has only one chance to change the ceiling of 9.4% of GDP. This change must occur at the time the amended PNRR with the new chapter of RePowerEU is submitted. So the agreement and the new indicator should exist until the Minister of European Funds sends the National Recovery and Resilience Plan to the Commission. Which, according to government sources, should happen on or around August 31. Because of this, because the Ministry of Labor failed to offer the Commission an alternative, Romania risks missing the chance to change the ceiling of 9.4% of GDP for pension system expenses.

On the other hand, the Ministry of European Funds cannot delay much longer with the submission of the modified PNRR, because the possibility of sending payment request number 3, worth over 3 billion euros, depends on this modification.

Until now, according to the information, 17 countries from the European Union have submitted their National Recovery Plans with the new chapter of RePowerEU, and 10 of them have already been approved. After a country submits its amended NRDP, the Commission has two months to review it and respond whether it approves or rejects it.