Recommendation for a COUNCIL RECOMMENDATION on Romania’s 2013 national reform programme and delivering a Council opinion on Romania’s convergence programme for 2012-2016
Date: 2013-05-29
Institutions: European Commission
Subjects: EU aid, administrative formalities, budget deficit, budgetary equilibrium, educational reform, health care system, in-service training, job access, small and medium-sized enterprises, stability programme, tax reform, trans-European network, youth unemployment

EUROPEAN 
COMMISSION 

Brussels, 29.5.2013  
COM(2013) 373 final 

Recommendation for a 

COUNCIL RECOMMENDATION 

on Romania’s 2013 national reform programme  

and delivering a Council opinion on Romania’s convergence programme for 2012-2016

{SWD(2013) 373 final} 

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Recommendation for a 

COUNCIL RECOMMENDATION 

on Romania’s 2013 national reform programme  

and delivering a Council opinion on Romania’s convergence programme for 2012-2016 

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 
policies1, and in particular Article 9(2) thereof, 
Having regard to the recommendation of the European Commission2, 
Having regard to the resolutions of the European Parliament3, 

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) 

(2) 

(3) 

On  26  March  2010,  the  European  Council  agreed  to  the  Commission’s  proposal  to 
launch  a  new  strategy  for  growth  and  jobs,  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. 

On 13 July 2010, the Council, on the basis of the Commission's proposals, 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  States4,  which  together  form 
the  ‘integrated  guidelines’.  Member  States  were  invited  to  take  the  integrated 
guidelines into account in their national economic and employment policies. 

On 29 June 2012, the Heads of State or Government decided on a Compact for Growth 
and  Jobs,  providing  a  coherent  framework  for  action  at  national,  EU  and  euro  area 
levels using all possible levers, instruments and policies. They decided on action to be 
taken  at  the  level  of  the  Member  States,  in  particular  expressing  full  commitment  to 
achieving the objectives of the Europe 2020 Strategy and to implementing the country-
specific recommendations. 

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OJ L 209, 2.8.1997, p. 1. 
COM(2013) 373 final. 
P7_TA(2013)0052 and P7_TA(2013)0053. 
Council Decision 2013/208/EU of 22 April 2013. 

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(4) 

(5) 

(6) 

(7) 

(8) 

On 6 July 2012, the Council adopted a recommendation on Romania’s national reform 
programme  for  2012  and  delivered  its  opinion  on  Romania’s  updated  convergence 
programme for 2011-2015. 
On  28  November  2012,  the  Commission  adopted  the  Annual  Growth  Survey5, 
marking  the  start  of  the  2013  European  Semester  of  economic  policy  coordination. 
Also  on  28  November  2012,  the  Commission,  on  the  basis  of  Regulation  (EU)  No 
1176/2011,  adopted  the  Alert  Mechanism  Report6,  in  which  it  did  not  identify 
Romania as one of the Member States for which an in-depth review would be carried 
out. 

On  14  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. 

On 30 April 2013, Romania submitted its 2013 convergence programme covering the 
period 2012-2016 and its 2013 national reform programme. In order to take account of 
their interlinkages, the two programmes have been assessed at the same time. 

Based  on  the  assessment  of  the  2013  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 and in 
line  with  the  assessment  in  the  latest  European  Commission  forecast.  Thanks  to 
substantial  consolidation  efforts  and  in  line  with  the  Council  recommendation, 
Romania  reduced  its  general  government  deficit  to  below  3%  in  2012.  .  The 
convergence programme aims at an MTO of -1% of GDP (previously -0.7% of GDP), 
which is in line with the requirements of the Stability and Growth Pact. The objective 
of  the  budgetary  strategy  outlined  in  the  programme  is  to  reach  the  MTO  by  2014 
which,  when  recalculated  by  Commission  based  on 
the  commonly  agreed 
methodology,  corresponds  to  reaching  the  MTO  by  2015.  The  progress  in  structural 
terms towards the MTO is higher than 0.5% of GDP in 2013 and about 0.4% in 2014. 
The expenditure benchmark over the programme period was met. Adjustment is front-
loaded  in  2013  with  revenue-enhancing  measures  including  reductions  in  tax-
deductible  items,  improvement  in  the  taxation  of  agriculture,  the  introduction  of  a 
windfall levy following the deregulation of gas prices and introduction of a special tax 
on transmission of electricity and gas. The main risks to the convergence programme 
relate to further possible financial corrections linked to the absorption of EU funds, or 
the  financing  from  the  national  budget  of  priority  projects,  renewed  accumulation  of 
arrears, especially at local government level, and limited progress with restructuring of 
state-owned  enterprises.  Romania's  public  debt  remains  relatively  low,  at  37.8%  of 
GDP in 2012. It is expected to rise to 38.6% in 2014 but will remain well below the 
60% of GDP threshold over the programme period 

(9) 

Following a request by Romania on 17 February 2011, the European Commission and 
the  IMF  negotiated  a  precautionary  economic  adjustment  programme  with  the 
Romanian  authorities.  In  the  context  of  the  EU’s  precautionary  assistance,  Romania 
undertook  to  implement  a  comprehensive  economic-policy  programme  with  a 
particular  focus  on  structural  reform  measures  to  improve  the  functioning  of  labour 

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COM(2012) 750 final. 
COM(2012) 751 final. 

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and product markets and increase the resilience and growth potential of the Romanian 
economy. In parallel, the programme has ensured that fiscal consolidation continues, 
that  management  and  control  of  public  finances  improve,  and  that  reforms  are 
implemented  in  external,  monetary,  financial  stability,  and  financial  market  policies. 
In  March  2013,  Romania  formally  requested  a  three-month  extension  of  the  IMF 
programme. While the possibility to draw on funds under the EU programme expired 
at the end of March 2013, the final programme review will take place by the end of 
June 2013. 

(10)  Romania's fiscal position has been improving with the budget deficit decreasing below 
3% in 2012 and a further fiscal consolidation expected for 2013. Low tax compliance 
represents  a  major  challenge  for  Romania’s  tax  system,  in  particular  in  the  areas  of 
VAT and labour taxation. Environmental taxes are below the EU average. Romania's 
public  debt  remains  low,  at  34.7%  of  GDP  in  2011.  It  is  expected  to  rise  to  38%  in 
2014 but will remain below the 60% of GDP threshold. While Romania does not face 
a risk of fiscal stress in the short or medium-term, it is at medium risk in the long-term 
due  to  age-related  expenditure.  There  are  concerns  as  regards  the  sustainability  and 
adequacy of the pension system due to a low ratio of employed contributors to people 
drawing  pensions.  Romania  is  now  one  of  the  two  Member  States  that  have  not  yet 
decided to equalise the pensionable age for women and men and the employment rate 
of older workers (41.4 % in 2012) is substantially below the EU average. 

(11)  The  health  sector  in  Romania  features  major  inequities  in  terms  of  access  to  and 
quality of services provided. This is due also to the inefficient use of resources and to 
poor  management.  Reforms  to  improve  the  efficiency  of  the  healthcare  sector  have 
begun but continuous efforts are needed. The cost-effectiveness of the system could be 
increased  by  reducing  the  excessive  use  of  hospital  in-patient  care  and  by 
strengthening primary care and referral systems. 

(12)  Romania continued to have a low employment rate (63.8 %) in 2012 although a slight 
improvement  was  registered  on  the  year  before  (up  from  62.8 %).  The  country’s 
Europe  2020  target  of  70 %  by  2020  remains  difficult  to  reach.  Romanian  labour 
productivity  is  still  one  of  the  lowest  in  the  EU.  The  quality  of  public  employment 
activation,  job  search  and  retraining  services  is  still  relatively  low.  Limited 
administrative  capacity  does  not  allow  for  the  efficient  delivery  of  active  labour 
market policies through quality personalised services, nor for the better integration of 
active  and  passive  labour  market  policies.  Adult  participation  in  lifelong  learning 
remains stagnant at  very  low  levels (1.6 % in 2011), significantly lower than the EU 
average  (8.9 %). The youth  employment  and activity rates were among the lowest in 
the  EU  in  2012  (23.9%  and  30.9%  respectively),  whereas  the  youth  unemployment 
rate  was  high  at  22.7%  in  2012.  Romania  registers  a  high  and  increasing  share  of 
young people neither in employment, nor in education and training (16.8% in 2012). 

(13)  Poverty reduction continues to be a major challenge. In 2011, 40.3 % of the population 
are at risk of poverty and social exclusion, about two thirds more than the EU average 
of  24.2 %.  Children  are  particularly  affected  (49.1 %).  The  impact  of  social  transfers 
(excluding  pensions)  in  reducing  poverty  remains  significantly  below  the  average 
efficiency  of  transfers  in  the  EU,  both  for  the  population  as  a  whole  (23.7 %  in 
Romania  as  against  37.5 %  for  the  EU  in  2011)  and  for  children  (22 %  compared  to 
42.8 % for the EU). The low take-up, coverage and adequacy of social benefits remain 
a  challenge  for  the  efficiency  of  social  benefits  in  reducing  poverty.  In  the  field  of 
social assistance, several pieces of legislation were adopted in 2012 as follow-up to the 
reform of 2011. The adoption of the remaining legislation would be an important step 

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towards  completing  the  reform.  However  the  link  with  activation  measures  could  be 
further  strengthened.  The  implementation  of  the  National  Roma  Integration  Strategy 
started  in  2012,  but  the  results  are  modest.  Better  coordination  between  different 
stakeholders  is  needed  for  an  effective  implementation  of  the  strategy,  including  the 
allocation of financing.  

(14)  The education law of 2011, a major reform that set a long-term agenda for upgrading 
the  quality  of  education  at  all  levels,  is  not  yet  fully  operational.  For  a  successful 
implementation of the education reform the necessary financial and human resources 
will  have  to  be  devoted  to  building  up  administrative  capacity  and  policy  making. 
Romania  faces  a  major  challenge  in  raising  the  quality  of  its  education  and  training 
system.  Early  school  leaving  is  a  significant  challenge;  at  17.3 %  in  2012,  the 
Romanian early school-leaving rate is well above both the EU average of 13.5 % and 
the national target of 11.3 %. Problems persist especially in rural and remote areas and 
for  the  Roma.  Romania  also  lacks  an  adequate  data  collection  mechanism  regarding 
early school leavers; a comprehensive strategy, to be adopted this year, should help in 
this  regard.  Access  to  quality  affordable  early  childhood  education  and  care  remains 
problematic. Mismatches between skills and labour market demand are characteristic 
of a large proportion of vocational and tertiary education programmes, with the poor 
level  of  vocational  skills  being  a  specific  challenge.  The  high  unemployment  rate 
among tertiary graduates and the rate of over-qualification make a further alignment of 
tertiary  education  with  the  labour  market  a  high  priority.  Positive  but  slow  progress 
was  registered  in  the  transition  from  institutional  to  alternative  care  for  children 
deprived of parental care but further efforts are needed. 

(15)  Poor administrative capacity is a core concern for Romania. The public administration 
is  characterised  by  an  inconsistent  legal  framework,  frequent  recourse  to  emergency 
ordinances, low levels of inter-ministerial cooperation and excessive bureaucracy. It is 
also  undermined  by  a  lack  of  skills,  a  lack  of  transparency  in  staff  recruitment  and 
high  management  turnover  rates.  Poor  administrative  capacity  contributes  to  low 
absorption of EU funds. The end-2012 absorption target agreed under the EU financial 
assistance  programme  was  missed  by  a  wide  margin.  Cumulative  absorption  by  the 
end  of  2012  stood  at  EUR  5.53  billion  or  20.2 %  of  the  total  available  structural, 
cohesion and agricultural funds. This was EUR 2.47 billion short of the programme’s 
end-2012 target of EUR 8 bn. The absorption rate of structural and cohesion funds is 
even lower, standing at 13 % at the end of March 2013. The absorption of EU funds 
stalled for most of the second half of 2012, after several deficiencies in management 
and  control  systems  and  in  public  procurement  were  identified  by  national  and 
European auditors. There  is  a  significant risk that a substantial part of structural and 
cohesion funds will be de-committed in 2013. 

(16)  Romania faces a number of challenges in economic competitiveness with productivity 
in  industry  and  services  remaining  low.  Major  challenges  are  a  weak  business 
environment and low support for research and development (R&D). Improvements to 
the  business  environment  should  be  integrated  into  a  wider,  coherent  e-government 
strategy to promote an administrative culture of transparency and  legal certainty and 
provide  for  better  public  online  services.  Romania  should  also  undertake  efforts  to 
ease  access  to  finance  and  to  reduce  the  administrative  burden  on  SMEs.  R&D 
intensity  is  extremely  low  (0.48 %  in  2011)  and  the  efficiency  and  effectiveness  of 
investment  need  to  be  substantially  improved.  Investors  in  R&D  need  to  prioritise 
activities  that  have  potential  to  attract  private  investment.  Romania  should  also 

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strengthen  the  intellectual  property  rights  framework  with  a  view  to  increasing  the 
commercialisation of research results. 

(17)  Romania  has  a  low degree of competition and efficiency in the energy and transport 
industries. Inefficiency and intransparent governance of the state-owned enterprises in 
these  sectors  represent  a  major  challenge.  Increasing  energy  efficiency  in  buildings, 
district heating, industry and transport is a further key challenge. Romania is the third 
most energy-intensive economy in the EU whose energy intensity is 2.5 times higher 
than  the  EU  average.  It  is  also  the  third  most  carbon-intensive  economy  in  the  EU. 
Residential buildings in Romania use eight times more energy than the EU-15 average 
due to an inefficient district heating system and the fact that buildings are not insulated 
appropriately.  The  integration  of  Romania's  electricity  and  gas  markets  in  the  EU 
markets  remains  incomplete  and  crossborder  connections  for  gas  still  have  to  be 
implemented.  

(18) 

In  the  context  of  the  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Romania’s  economic  policy.  It  has  assessed  the 
convergence programme and national reform programme. It has taken into account not 
only their relevance for sustainable fiscal and socio-economic policy in Romania but 
also  their  compliance  with  EU  rules  and  guidance,  given  the  need  to  reinforce  the 
overall economic governance of the European Union by providing EU-level input into 
future  national  decisions.  Its  recommendations  under  the  European  Semester  are 
reflected in recommendations (1) to (8) below. 

(19) 

In  the  light  of  this  assessment,  the  Council  has  examined  Romania’s  convergence 
programme, and its opinion7 is reflected in particular in recommendation (1) below, 

HEREBY RECOMMENDS that Romania should take action within the period 2013-2014 to: 

1. 

2. 

3. 

4. 

Complete the EU/IMF financial assistance programme. 

Ensure growth-friendly fiscal consolidation and implement the budgetary strategy for 
the year 2013 and beyond as envisaged, thus ensuring achievement of the medium-
term  objective  by  2015.  Improve  tax  collection  by  implementing  a  comprehensive 
tax  compliance  strategy  and  fight  undeclared  work.  In  parallel,  explore  ways  to 
increase reliance on environmental taxes. Equalise the pensionable age for men and 
women  and  underpin  the  pension  reform  by  promoting  the  employability  of  older 
workers. 

Pursue  health  sector  reforms  to  increase  its  efficiency,  quality  and  accessibility,  in 
particular  for  disadvantaged  people  and  remote  and  isolated  communities.  Reduce 
the excessive use of hospital care including by strengthening outpatient care.  

Improve labour market participation, as well as employability and productivity of the 
labour  force,  by  reviewing  and  strengthening  active  labour  market  policies,  to 
provide  training  and  individualised  services  and  promoting  lifelong  learning. 
Enhance  the  capacity  of  the  National  Employment  Agency  to  increase  the  quality 
and coverage of its services. To fight youth unemployment, implement without delay 
the  National  Plan  for  Youth  Employment,  including  for  example  through  a  Youth 
Guarantee.  To  alleviate  poverty,  improve  the  effectiveness  and  efficiency  of  social 
transfers  with  a  particular  focus  on  children.  Complete  the  social  assistance  reform 
by  adopting  the  relevant  legislation  and  strengthening  its  link  with  activation 
measures. Ensure concrete delivery of the National Roma integration strategy. 

7 

Under Article 9(2) of Council Regulation (EC) No 1466/97. 

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5. 

6. 

7. 

8. 

Speed up the education reform including the building up of administrative capacity at 
both central and local level and evaluate the impact of the reforms. Step up reforms 
in vocational education and training. Further align tertiary education with the needs 
of  the  labour  market  and  improve  access  for  disadvantaged  people.  Implement  a 
national  strategy  on  early  school  leaving  focusing  on  better  access  to  quality  early 
childhood  education,  including  for  Roma  children.  Speed  up  the  transition  from 
institutional to alternative care for children deprived of parental care.  

Strengthen governance and the quality of institutions and the public administration, 
in  particular  by  improving  the  capacity  for  strategic  and  budgetary  planning,  by 
increasing  the  professionalism  of  the  public  service  through  improved  human 
resource  management  and  by  strengthening  the  mechanisms  for  coordination 
between  the  different  levels  of  government.  Significantly  improve  the  quality  of 
regulations through the use of impact assessments, and systematic evaluations. Step 
up  efforts  to  accelerate  the  absorption  of  EU  funds  in  particular  by  strengthening 
management and control systems and improving public procurement. 

Improve  and  simplify  the  business  environment  in  particular  through  reducing 
administrative  burdens  on  SMEs  and  implementing  a  coherent  e-government 
strategy. Ease and diversify access to finance for SMEs. Ensure closer links between 
research,  innovation  and  industry,  in  particular  by  prioritising  research  and 
development  activities  that  have  the  potential  to  attract  private  investment.  Step  up 
efforts to improve the quality, independence and efficiency of the judicial system in 
resolving cases and fight corruption more effectively. 

Promote  competition  and  efficiency  in  network  industries,  by  ensuring  the 
independence and capacity of national regulatory authorities, and by continuing the 
corporate governance reform of state-owned enterprises in the energy and transport 
sectors.  Adopt  a  comprehensive  long-term  transport  plan  and  improve  broadband 
infrastructure. Continue  to  remove regulated gas and electricity prices  and improve 
energy  efficiency.  Improve  the  cross-border  integration  of  energy  networks  and 
speed up implementation of the gas interconnection projects. 

Done at Brussels,  

For the Council 
The President 

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