# EUR-Lex - 52012DC0325 - EN

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# 52012DC0325

**Recommendation for a COUNCIL RECOMMENDATION on Romania’s 2012 national reform programme and delivering a Council opinion on Romania’s convergence programme for 2012-2015 /* COM/2012/0325 final*/**

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Recommendation for a

COUNCIL RECOMMENDATION

on Romania’s 2012 national reform
programme
and delivering a Council opinion on Romania’s convergence programme for
2012-2015

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the
Functioning of the European Union, and in particular Articles 121(2) and 148(4)
thereof,

Having regard to Council Regulation (EC) No
1466/97 of 7 July 1997 on the strengthening of the surveillance of budgetary
positions and the surveillance and coordination of economic policies[1], and in particular Article 5(2)
thereof,

Having regard to the recommendation of the
European Commission[2],

Having regard to the resolutions of the
European Parliament[3],

Having regard to the conclusions of the
European Council,

Having regard to the opinion of the
Employment Committee,

After consulting the Economic and Financial
Committee,

Whereas:

(1)       On 26 March 2010, the European Council agreed to the
European Commission’s proposal to launch a new strategy for jobs and growth,
Europe 2020, based on enhanced coordination of economic policies, which will
focus on the key areas where action is needed to boost Europe’s potential for
sustainable growth and competitiveness.

(2)       On 13 July 2010, the
Council adopted a recommendation on the broad guidelines for the economic
policies of the Member States and the Union (2010 to 2014) and, on 21 October
2010, adopted a decision on guidelines for the employment policies of the
Member States[4],
which together form the ‘integrated guidelines’. Member States were invited to
take the integrated guidelines into account in their national economic and
employment policies.

(3)       On 12 July 2011, the
Council adopted a recommendation on Romania’s national reform programme for 2011
and delivered a Council Opinion on Romania’s updated convergence programme
2011-2014.

(4)       On 23 November 2011, the
Commission adopted the second Annual Growth Survey, marking the start of the second
European semester of ex-ante and integrated policy coordination, which is
anchored in the Europe 2020 strategy.

(5)       On 2 March 2012, the
European Council endorsed the priorities for ensuring financial stability,
fiscal consolidation and action to foster growth. It underscored the need to pursue
differentiated, growth-friendly fiscal consolidation, to restore normal lending
conditions to the economy, to promote growth and competitiveness, to tackle
unemployment and the social consequences of the crisis, and to modernise public
administration.

(6)       On
2 March 2012, the European Council also invited the Member States participating
in the Euro Plus Pact to present their commitments in time for inclusion in
their stability or convergence programmes and their national reform programmes.

(7)       On 23 April 2012, Romania
submitted its 2012 national reform programme and, on 11 May 2012, its convergence
programme covering the period 2012-2015.

(8)       On 6 May 2009, the Council
adopted Decision 2009/459/EC[5]
to make available to Romania medium-term financial assistance for a period of
three years under the provisions of Article 143 of the Treaty. The
accompanying Memorandum of Understanding signed on 23 June 2009
and its successive supplements lay down the economic policy conditions on the
basis of which the financial assistance was disbursed. Decision 2009/459/EC
was amended on 16 March 2010 by Decision 2010/183/EU[6]. Following Romania’s successful
implementation of the programme, and given a partial adjustment of the current
account because of remaining structural weaknesses in Romania’s product and
labour markets which make the country sensitive to international price shocks,
on 12 May 2011 the Council adopted Decision 2011/288/EU[7] to make precautionary medium‑term
financial assistance available to Romania for a period of three years under
Article 143 of the Treaty. The accompanying Memorandum of Understanding was
signed on 29 June 2011 and its first supplement to it on 27 December 2011.

(9)       The second formal review
of the medium-term financial assistance programme that took place in late
April-early May 2012 established that Romania's implementation of the programme
remains on track. The cash fiscal deficit target for 2011 was met, while the
ESA[8] target would have been met had
there not been a sizeable one-off measure linked to court decisions obliging
the government to pay compensation to certain categories of employees. The 2012
budget remains on track to achieve a deficit below 3 % of GDP in ESA terms. The
Romanian banking sector has remained resilient, in spite of the on-going
deterioration in asset quality, which has continued weighing on banking sector
profitability. The programme conditionality in the financial sector was met,
albeit with some delays in certain cases. Progress in key structural reform
areas, such as energy and transport and EU funds absorption have been uneven.

(10)     After two years of decline,
real GDP of Romania grew in 2011 by 21⁄2%. For 2012 growth is expected to
decelerate to 1.4 %. Domestic demand is forecast to be the major driver of
growth. Public investment, supported by improving EU funds absorption, is
expected to play a key role in 2012.

(11)     Based on the assessment of
the 2012 convergence programme pursuant to Council Regulation (EC) No 1466/97,
the Council is of the opinion that the macroeconomic scenario underpinning the
budgetary projections in the programme is plausible. The objective of the
budgetary strategy outlined in the programme is to reach a budget deficit below
3% of GDP in 2012, in line with the Council recommendations given to Romania under
the Excessive Deficit Procedure. Thereafter, it aims at achieving a medium-term
budgetary objective (MTO) defined as a deficit of 0.7% of GDP in structural
terms. The MTO adequately reflects the requirements of the Stability and Growth
Pact. Following the planned correction of the excessive deficit in 2012, the
deficit is expected to decrease further to 2.2% of GDP in 2013, to 1.2% of GDP
in 2014 and 0.9% of GDP in 2015. Based on the (recalculated) structural budget
balance,[9]
this implies an improvement in the deficit by 1.5% in 2012, 0.5% in 2013 and
0.7% in 2014, in line with the 0.5% of GDP benchmark of the Stability and
Growth Pact. The growth rate of government expenditure is in line with the
expenditure benchmark of the Stability and Growth Pact over the 2012-2015
period. The programme foresees the achievement of the MTO in 2014. The main
risks to the budgetary targets are the arrears of state owned enterprises, as
well as potential re-accumulation of arrears at local government level and in
the health sector. As regards public debt, it was below 34% of GDP by end 2011
thus remaining substantially below 60% of GDP.

(12)     Romania has made a number
of commitments under the Euro Plus Pact. These commitments, and the
implementation of the commitments presented in 2011, relate to fostering
competitiveness and employment, to making public finances more sustainable and
to reinforcing financial stability.

HEREBY RECOMMENDS that Romania
should take action within the period 2012-2013 to:

Implement the measures laid down in
Decision 2009/459/EC, as amended by Decision 2010/183/EU, together with
the measures laid down in Decision 2011/288/EU and further specified in the
Memorandum of Understanding of 23 June 2009 and its subsequent supplements, and
in the Memorandum of Understanding of 29 June 2011 and its subsequent
supplements.

Done at Brussels,

For
the Council

The
President

[1]               OJ L 209, 02.08.1997, p. 1

[2]               COM(2012)325 final

[3]               P7_TA(2012)0048 and P7_TA(2012)0047

[4]               Council Decision 2012/238/EU of 26 April 2012

[5]               OJ L 150, 13.6.2009, p. 8.

[6]               OJ L 83, 30.3.2010, p. 19.

[7]               OJ L 132, 19.5.2011, p. 15.

[8]               European System of Accounts

[9]               Cyclically adjusted balance net of one-off and
temporary measures, recalculated by the Commission services on the basis of the information provided in the programme, using
the commonly agreed methodology.