Correcting the significant observed deviation from the adjustment path toward the medium-term budgetary objective in Romania - Main contents

EN

Official Journal of the European Union

C 216/1

In accordance with Article 121 of the Treaty on the Functioning of the European Union, Member States are to promote sound public finances over the medium term through the coordination of economic policies and multilateral surveillance in order to avoid the occurrence of excessive government deficits.

The Stability and Growth Pact (SGP) is based on the objective of sound government finances as a means of strengthening the conditions for price stability and for strong sustainable growth conducive to employment creation.

On 12 July 2016, the Council recommended that Romania limit the deviation from the medium-term budgetary objective in 2016 and achieve an annual fiscal adjustment of 0,5 % of GDP in 2017 unless the medium-term budgetary objective is met with a lower fiscal effort (2).

In 2016, based on the Commission 2017 spring forecast and the 2016 outturn data validated by Eurostat, the structural balance has deteriorated from a position of -0,6 % of GDP, namely, above the medium-term budgetary objective of -1 % of GDP, to -2,6 % of GDP, which indicates a significant deviation from the medium-term budgetary objective (namely, a deviation of 1,6 % of GDP). The growth of government expenditure, less discretionary revenue measures and one-offs, was well above the expenditure benchmark, which also indicates a significant deviation (namely a deviation of -2,0 % of GDP). The difference in the indicators is mainly due to different annual nominal potential GDP growth rates used in their computation. Irrespective of that difference, both indicators confirm a significant deviation from the requirements of the preventive arm of the SGP in 2016.

On 22 May 2017, following an overall assessment, the Commission considered that there is a significant observed deviation from the medium-term budgetary objective in Romania, and issued a warning to Romania in accordance with Article 121(4) of the Treaty and Article 10(2), first subparagraph, of Regulation (EC) No 1466/97.

According to Article 10(2), second subparagraph, of Regulation (EC) No 1466/97, within 1 month of the date of the adoption of the warning, the Council is toprovide the Member State concerned with a recommendation to take the necessary policy measures. Regulation (EC) No 1466/97 provides that the recommendation will set a deadline of no more than 5 months for the Member State to address the deviation. On that basis, a deadline of 15 October 2017 for Romania to address the deviation appears appropriate. Within that deadline, Romania should report on action taken in response to this Recommendation.

Romania’s structural balance in 2016 is estimated to have been 1,6 % of GDP short of its medium-term budgetary objective. Based on the output gap projections of the Commission 2017 spring forecast, Romania is experiencing normal economic times in 2017. Romania’s general government debt ratio is below the 60 % of GDP threshold. The minimum required structural effort prescribed by Regulation (EC) No 1466/97 and the adjustment matrix,...