Commissioner Cretu warns Romania risks infringement procedures on wage hikes. Poor EU funds absorption affects other countries as well

European Commissioner for Regional Policies Corina Cretu has warned on Monday that, if the government cannot prove it can support the increases of wages and pensions and that the budget deficit can be met, Romania might go in the infringement procedure.

“Mr. Prime Minister assured Mr. Moscovici calculations are being made so that this ambitious project to increase the wages fits into the budget deficit framework of 3% of GDP. The European Commission is waiting for the documentation from the Romanian government to see if there hikes are sustainable and can improve the people’s lives. (…) We have money, we have economic growth. Nevertheless, we need to see the sustainability of these proposals for wage increases in order to avoid the infringement procedure,” Corina Cretu told Europa FM.

If the budget deficit threshold is exceeded, the EC will take restrictive measures.

Commissioner Cretu warned that the poor absorption of European funds, including in the road infrastructure sector, affects not only Romania, but other countries as well.

“For the next period, until 2023, there is money for the Bucharest ring, for the Sibiu-Pitesti highway – which is essential as it is the missing link on the pan-European corridor between Rotterdam and Constanta. Thus, it’s not only the Romanians who suffer, but also the entire economic activity in this part of Europe due to the lack of this motorway section,” Cretu also said.

She added there is money also for the Ploiesti-Bacau motorway, for the Bucharest subway on the line to Otopeni. The problem is that the most advanced project is in the phase of feasibility studies, Cretu mentioned.

The European Commission wants credible assurances from Grindeanu cabinet that the budget deficit target will not be exceeded. The request came in February from the European Commissioner for Economic and Financial Affairs, Pierre Moscovici, in the context that the EC believes Romania will not meet the budget deficit of 3% of the GDP. According to the latest estimates, the deficit will reach 3.6% in 2017 and could reach 3.9% in 2018.

Pierre Moscovici said in Brussels:  “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. Our estimates show that Romania’s budget deficit will reach 3.6% of GDP this year, if no changes in (economic) polices take place and 3.9% of GDP in 2018. These developments are generated by a combination of tax cuts and wages and pensions increases. We have urged the Romanian authorities to announce in due time and in a credible way, before our spring outlook, the needed measures to ensure the meeting of the budget pact,” Moscovici said.