Romanian PM in Brussels: There is a flexibility of the Commission for Romania’s deficit

Ciolacu: I do not agree with the VAT increase above 19%.

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Prime Minister Marcel Ciolacu declared, on Friday, in Brussels, after the meeting with the president of the European Commission, that the European executive understood the context in which Romania is and showed a “flexibility” regarding the budget deficit target that Romania must respect. He said, in the context of the fiscal measures prepared by the Government, that he does not agree with the VAT increase above the 19% level.

“The technical commissions stayed with Mrs. Celine Gauer (Director General of the Task Force for Recovery and Resilience of the European Commission – ed.) to discuss certain aspects. They will continue at the technical level next week as well. Instead, we set the principles.

I announced very clearly that I do not agree, as Prime Minister of Romania, to increase the VAT rate above 19%, something that would obviously lead to an increase in inflation and an economic decline, respectively if it would have increased by one percentage point of VAT, it would have brought an inflation of 0.5%. It is the first time in almost two years that we managed to bring inflation to a single digit. We will continue to decrease as much as possible. This is the only way we can increase the purchasing power of Romanians”, stated Marcel Ciolacu in a press conference after the meetings with the European leaders.

The Prime Minister said that there is “flexibility” on the part of the European Commission “following the arguments brought, to come up with a new plan regarding Romania’s deficit”.

The European Commission is not the one approving a new budget deficit. It is obvious that following Romania’s effort to support Ukraine and the Republic of Moldova, and it is also obvious as a border country – having the longest border with Ukraine, a country in a totally unfair armed conflict with Russia – that we have a negative influence, from insurance, on loan interest, because we are a higher risk country than Austria, for example, which is further away than the conflict with Ukraine.

The Commission understood this whole context and it is the main argument, because Romania is in an excessive deficit agreement (…) and we are the only European state that is under an agreement with the European Commission regarding the reduction of the deficit to 3%, according to The Maastricht Agreement. There is flexibility at this moment, following the arguments brought, to come up with a new plan regarding Romania’s deficit. After that, the Commission, following the reforms we are implementing in the country, will propose this new renegotiation to the Council. This is the calendar. I found a flexibility and an understanding of the whole context. We are not only talking about numbers. Both the president of the Commission, the president of the Council (European – ed.) and the president of the Parliament, they are all political people just like me. So, things are moved to the technical area to find the best solutions”, Ciolacu said.

President Klaus Iohannis said on Friday that he had a discussion with Prime Minister Marcel Ciolacu before he left for Brussels for talks with European officials about the budget deficit and the National Recovery and Resilience Plan. The Romanian President says that they discussed VAT, but, from his point of view, the solution to cover the budget hole is not to increase VAT, but to “increase the degree of collection”.

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