COMMISSION STAFF WORKING DOCUMENT Assessment of the 2013 national reform programme and convergence programme for ROMANIA Accompanying the document Recommendation for a COUNCIL RECOMMENDATION on Romania’s 2013 national reform programme and delivering a Council Opinion on Romania’s 2013 convergence programme for 2012-2016
Date: 2013-05-29
Institutions: European Commission
Subjects: Romania, Structural Funds, administrative reform, competitiveness, economic recession, economic reform, educational reform, labour market, public debt, public sector, tax reform, youth unemployment

EUROPEAN 
COMMISSION 

Brussels, 29.5.2013  
SWD(2013) 373 final 

COMMISSION STAFF WORKING DOCUMENT 

Assessment of the 2013 national reform programme and convergence programme for 
ROMANIA 

Accompanying the document 

Recommendation for a COUNCIL RECOMMENDATION  

on Romania’s 2013 national reform programme and delivering a Council Opinion on 
Romania’s 2013 convergence programme for 2012-2016 

{COM(2013) 373 final} 

EN 

   EN 

 
 
 
 
  
 
 
CONTENTS 

Executive Summary ................................................................................................................... 2 

1. 

Introduction......................................................................................................................... 4 

2.  Economic situation and outlook.......................................................................................... 5 

3.  Programme implementation................................................................................................ 6 

4.  Further challenges and assessment of policy agenda........................................................ 10 

4.1.  Fiscal policy and taxation .......................................................................................... 10 

4.2.  Labour market, social policies and education ........................................................... 14 

4.3.  Structural measures promoting growth and competitiveness .................................... 21 

4.4.  Modernisation of public administration .................................................................... 28 

5.  Overview Table (CSR, targets)......................................................................................... 30 

EN 

   EN 

 
 
 
EXECUTIVE SUMMARY  

Economic Outlook 

The  Romanian  economy  expanded  by  0.7 %  in  2012  and  the  Commission  forecasts  a 
modest recovery for 2013, with growth picking up to around 1.6 %, driven primarily by 
domestic demand and investment. Headline consumer price inflation, at 3.4 % in 2012, is 
projected  to  remain  high,  at  around  4.3 %  in  2013  on  average.  On  the  external  side,  the 
current account improved significantly from a deficit of 4.5% of GDP in 2011 to 4% of GDP 
in 2012, and is expected to remain below 4 % in 2013 and 2014. 

The  labour  market  recovered  somewhat  in  2012  but  challenges  remain,  in  particular 
regarding  high  youth  unemployment.  Unemployment  fell  from  7.4 %  in  2011  to  7 %  in 
2012 but youth unemployment, currently at around 23%, is expected to remain high.  

As  regards  fiscal  policies,  Romania  met  the  programme  target  for  2012  to  reduce  its 
headline  government  deficit  to  below  3%  of  GDP.  Romania's  2013  budget  targets  a 
headline deficit of 2.4% of GDP, although the Commission's spring forecast indicates a deficit 
of  2.6 %  for  2013  and  2.4 %  for  2014.  To  reach  its  target,  Romania  intends  to  improve  its 
structural balance by 1.0 % of GDP in 2013, which is appropriate. Romania’s medium-term 
objective is a structural deficit of 1 % of GDP, planned to be  reached  in  2014  which,  when 
recalculated  by  Commission  based  on  the  commonly  agreed  methodology,  corresponds  to 
reaching the MTO by 2015. Romania’s public debt is relatively low (37.8 % of GDP in 2012) 
and while it is expected to rise to 38.6 % in 2014, it is still well below the 60% of GDP limit. 

Key Issues 

Romania is currently completing the implementation of the second economic adjustment 
programme with the EU and the IMF. The programme should be formally completed after 
a final review in the summer 2013.  

•  As regards fiscal policies, Romania has fulfilled its programme commitment to reduce 
its  general  government  deficit  to  below  3  %  of  GDP  in  2012.  Fiscal  governance 
reforms  are  being  pursued,  notably  through  closer  monitoring  of  state-owned 
enterprises  that  are  part  of  the  general  government  sector  and  the  prioritisation  of 
public investment projects. 

•  Important  progress  has  also  been  made  in  the  areas  of  structural  reforms  such  as 

taxation, the banking sector, and energy and transport. 

•  However, the reform of key state-owned enterprises has been insufficient. Arrears 
incurred by the key state-owned  enterprises under review remained somewhat above 
the  target  in  2012.  Progress  in  terms  of  introducing  professional  management  and 
selling minority and majority stakes in SOEs has been inadequate.   

•  A number of corrective measures were agreed in January and are to be implemented 
before the final review in summer 2013. Progress needs to be made on reducing local 
government arrears, enacting a law on the winding-up of insurance undertakings and 
continuing the reforms in the gas, electricity, rail and healthcare.  

•  Moreover, the overall absorption rate of EU funds remains very low (at 20.2 % of 
the total available structural, cohesion and agricultural funding by end 2012), leading 

3 

 
 
 
to a significant risk that an important part of structural and cohesion funds will be no 
longer be available to Romania in 2013.  

In addition to short-term challenges identified under the programme, Romania faces a 
number of further, medium-term challenges in the bid to secure smart, sustainable and 
inclusive growth. At 46 % of the EU average, Romania’s GDP per capita is one of the most 
telling indicators of the country’s developmental gap. Particular challenges include the need 
to  increase  labour  market  participation,  improve  overall  competitiveness  and  reform  the 
public  administration.  EU  funds  can  provide  an  important  source  of  public  investment  to 
support Romania in addressing these challenges.  

•  Labour  market/education/social:  Increasing  the  number  of  people  in  the  labour 
market  is  the  main  challenge.  Although  unemployment  is  relatively  low  (7.0  %  in 
2012), the overall employment rate is only 63.8 %, which is amongst the lowest in the 
EU.  Meanwhile,  youth  unemployment  is  high  (reaching  22.8 %  in  2012)  and 
disadvantaged people, in particular Roma, face great difficulties, with unemployment 
for  Roma  people  more  than  six  times  the  average  national  rate  (48.6 %).  Poverty 
reduction continues to be a major challenge; Romanians are the second highest most 
likely to be at risk of poverty or social exclusion in the EU, and almost one in three 
Romanians  is  severely  materially  deprived.  Romania  faces  a  major  challenge  in 
raising the quality of education and training, with more than two out of five 15-year-
olds with inadequate reading, mathematical and scientific literacy. 

for 

low  support 

•  Competitiveness:  Romania  has  low  general  economic  competitiveness.  The  major 
challenges  are  the  underdeveloped  transport and  ICT  infrastructure,  a  weak  business 
environment  and 
research  and  development.  Romania’s 
underdeveloped  basic  transport  and  broadband  infrastructure  continue  to  present  an 
obstacle to growth. The research and development intensity is extremely low while the 
research  and  innovation  system  is  highly  fragmented  and  there  are  few  linkages 
research  and  businesses.  Rapidly  changing  governance 
between  education, 
arrangements and a heavy regulatory environment and the red tape impact negatively 
on  the  business  climate.  Increasing  energy  efficiency  (Romania  is  the  third  most 
energy-intensive economy) will be crucial for industrial competitiveness. 

•  Public administration: 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.  The  poor 
administrative  capacity  contributes  to  a  low  absorption  of  EU  funds.  Romania  has 
scope  to  improve  tax  collection  by  implementing  a  comprehensive  tax  compliance 
strategy.  Preventing and combating corrupt practices, particularly in the area of public 
procurement,  is  a  challenge,  while  Romania  has  the  second  worst  rating  in  the  EU 
when it comes to the perceived independence of the justice system. 

4 

 
 
 
 
1.  INTRODUCTION  

Romania is currently completing the implementation of the second economic adjustment 
programme  with  the  EU  and  the  IMF.  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. A two-year programme was agreed by 
the European Council on 12 May 2011 and by the IMF board on 25 March 2011. Its financial 
package  envisaged  up  to  EUR  4.9  billion,  comprising  EUR  1.4 billion  from  the  EU  and 
around  SDR1  3.1  billion  from  the  IMF.  Both  the  EU  and  the  IMF  programmes  have  been 
treated  as  precautionary  and  no  disbursements  have  taken  place.  The  programme  seeks  to 
facilitate  a  continued  orderly  adjustment  of  the  fiscal  and  the  external  deficits  by 
strengthening  the  credibility  of  the  government’s  economic  policy,  including  the  ongoing 
fiscal adjustment, the consolidation of financial market reform, greater focus on product and 
labour  market  reforms  and  increased  absorption  of  EU  funds.  The  attainment  of  these 
objectives  was  expected  to  enhance  Romania’s  growth  potential,  underpin  monetary  and 
financial stability, strengthen confidence in Romania’s currency, and reduce the likelihood of 
negative balance sheet effects on companies and households. Since the programme could not 
be completed on time because of delays in reforms, the authorities requested and obtained 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 programme will not be completed 
until the final programme review that is scheduled to take place in summer2. The economic 
adjustment  programme  implementation  is  monitored  by  the  Commission  and  the  IMF  on  a 
quarterly  basis  by  verifying  compliance  with  the  terms  set  out  in  the  Memorandum  of 
Understanding  (MoU)  and  the  Memorandum  of  Economic  and  Financial  Policies  (MEFP). 
Given the conditionality attached to the programme under the MoU and the regular reporting 
and monitoring requirements, programme countries have been exempted from the obligation 
to submit national reform programmes (NRP) and stability or convergence programmes.3 

This  Staff  Working  Document  (SWD)  under  the  2013  European  Semester  provides  a 
synthesis  of  recent  progress  in  implementing  the  programme  and  an  assessment  of 
further challenges. Additional details on the implementation of the programme can be found 
in  the  Commission's  quarterly  reviews  of  programme  implementation4.  The  SWD  assesses 
policy  measures  in  light  of  the  findings  of  the  Commission's  2013  Annual  Growth  Survey 
(2013  AGS)5,  published  in  November  2012,  and  Romania’s  Europe  2020  targets.  The  2013 
AGS sets out the Commission's proposals for building the necessary common understanding 
about the priorities for action at national and EU level in 2013. It identifies five priorities to 
guide  Member  States  to  renewed  growth:  pursuing  differentiated,  growth-friendly  fiscal 

1 Special drawing rights, equivalent to around EUR 3.5 billion. 

2 As regards further support from international financial institutions, the World Bank's development policy loan 
with a deferred drawdown option of EUR 1 billion became effective on 11 January 2013. The World Bank also 
continues to provide EUR 500 million through results-based financing of social assistance and health reforms in 
Romania. 

3 As per the Secretariat General’s letter to ambassadors of 13 September 2012 (Ares(2012)1063684). 
4  These  reports,  along  with  other  information  related  to  the  financial  assistance  programme,  can  be  found  at 
http://ec.europa.eu/economy_finance/eu_borrower/balance_of_payments/romania/romania_en.htm. 
5 COM(2012) 750 final. 

5 

 
 
 
                                                 
lending 

restoring  normal 

consolidation; 
the  economy;  promoting  growth  and 
to 
competitiveness for today and tomorrow; tackling unemployment and the social consequences 
of  the  crisis;  and  modernising  public  administration.  Against  this  background,  and  although 
Romania  was  formally  exempted  from  the  obligation,  Romania  presented  an  updated  NRP 
and a convergence programme in April 2013. These programmes provide detailed information 
on  progress  made  since  early  2012  and  on  the  government’s  future  plans.  The  information 
contained  in  these  programmes  provides  the  basis  for  the  assessment  made  in  this  Staff 
Working  Document.  The  national  reform  programme  confirms  Romania’s  commitment  to 
addressing  shortcomings  in  the  areas  of  public  administration,  the  business  environment, 
economic  competitiveness  and  local  development,  the  labour  market  and  education,  social 
inclusion  and  poverty  reduction,  research  and  development  and  climate  change  and  energy. 
The  convergence  programme  demonstrates  Romania’s  commitment  to  improving  its 
budgetary  position 
long-run 
sustainability of public finances in line with the Stability and Growth Pact. The programme 
submitted had gone through a limited consultation process: both programmes were approved 
by government via a memorandum. 

the  medium-term  objective  and  ensuring 

towards 

the 

2.  ECONOMIC SITUATION AND OUTLOOK  

The Romanian economy expanded by 0.7 % in 2012 and a modest recovery is forecast 
for  2013.  Growth  in  2012  was  dragged  down  by  a  severe  summer  drought  that  affected 
agricultural output and by a weak external environment. In 2013, GDP growth is expected to 
pick  up  to  around  1.6 %  with  domestic  demand,  in  particular  investment,  being  the  main 
driver. Whilst exports are expected to grow somewhat, imports are expected to grow faster on 
the  back  of  economic  recovery.  Headline  consumer  price  inflation,  at  3.4 %  in  2012,  is 
projected  to  remain  high,  at  around  4.3 %  in  2013  on  average.  On  the  external  side,  the 
current account improved significantly from a deficit of 4.5% of GDP in 2011 to 4 % of GDP 
in 2012; it is expected to remain below 4 % in 2013 and 2014. 

As regards fiscal policies, Romania met the programme’s 2012 fiscal target of reducing 
its  general  government  deficit  to  below  3 %  of  GDP  in  ESA6  terms.  For  2013,  fiscal 
adjustment is expected to continue. The budget adopted in February 2013 targets a headline 
deficit of 2.4 % of GDP which would allow for a further structural budgetary adjustment of at 
least 0.5 % of GDP. 

Financial  market  conditions  have  significantly  improved  since  summer  2012,  moving 
broadly in line with the regional peers. The 5-year sovereign spreads dropped to below 200 
basis points in early January 2013. Results in the banking sector have continued to suffer from 
the increase in impaired assets and the related provisioning. Despite the on-going pressures on 
asset quality, capital adequacy at system level remained at a re-assuring 14.7 % at the end of 
December 2012. 

The  labour  market  recovered  somewhat  in  2012  but  challenges  remain,  in  particular 
regarding high youth unemployment. In 2012, employment grew by 1.9 % in comparison 

6 The European System of Integrated Economic Accounts (ESA) is the system of national accounts and regional 
accounts used in the EU.  

6 

 
 
 
                                                 
to 2011, while unemployment was brought down from 7.4 % of the labour force (age group 
15-74) in 2011 to 7 % in 2012. However, youth unemployment, currently at around 23 %, is 
expected to be somewhat reduced but is to remain high in 2013. In 2013, as in the previous 
year, public sector wage increases are expected to outstrip private sector wage growth due to 
the last part of the restoration of public wages following the earlier 25 % wage cut in 2010.  

The macroeconomic assumptions on which the national reform programme (submitted 
on  30  April  2013)  and  the  convergence  programme  (submitted  on  30  April  20137)  are 
based are plausible. Both programmes reflect the objectives and actions required under the 
economic  reform  programme  agreed  under 
the  EU/IMF  financial  assistance.  Both 
programmes reflect the same macroeconomic scenario. The macroeconomic scenario set out 
in the convergence programme and in the national reform programme is close to Commission 
forecast. 

3.  PROGRAMME IMPLEMENTATION  

As  regards  fiscal  policies,  Romania  has  fulfilled  its  programme  commitment  to  reduce 
its  general  government  deficit  to  below  3%  of  GDP  in  ESA  terms  in  2012.  Arrears 
continue  to  be  an  important  issue,  especially  at  local  government  level.  Romania  has 
missed the end-December IMF arrears' targets at both the central and local government levels. 
Although  specific  measures  were  taken  in  the  autumn  of  2012  to  reduce  local  government 
arrears,  the  reduction  at  the  end  of  December  2012  was  significantly  less  than  expected.  In 
January 2013, the authorities agreed to additional measures to bring local government arrears 
under  control,  including  through  accelerating  the  parliamentary  approval  of  the  insolvency 
law for local governments, containing commitments on local government investment projects 
co-financed by central government within the budgetary allocations and stricter measures for 
monitoring and enforcing the local government public finance law. The compliance with these 
additional commitments has yet to be verified. For 2013, Romania should be able to cover its 
gross financing needs (related to the budget shortfall, the rollover of government debt, and the 
government part of the repayment to the IMF) from the markets. 

The budget for 2013 targets a deficit of 2.1% of GDP in cash terms corresponding to an 
ESA  deficit  of  2.4 %  of  GDP.  It  allows  for  a  4%  increase  in  pensions,  an  allocation  to 
implement the EU Late Payments Directive in the health sector, and a clear prioritisation of 
public investments. Revenue measures include reductions in tax-deductible items, improving 
the  taxation  of  agriculture  and  making  the  turnover  tax  of  3 %  on  small  enterprises 
mandatory.  The  property  tax  and  excise  rates  will  also  be  increased  in  an  effort  to  keep  up 
with inflation and a windfall tax will be introduced following the deregulation of gas prices. 
Moreover,  the  minimum  wage  was  raised  from  RON  700  to  RON  750  on  1  February  2013 
and is expected to be further increased to RON 800 on 1 July 2013.  

Fiscal governance reforms are being pursued through closer monitoring of state-owned 
companies (SOEs) that are part of the general government sector and the prioritisation 
of public investment projects. The latter has become a top priority for the authorities who 
pledged to ensure funding for projects that have at least an 80 % completion rate. Furthermore 
a decision was taken to reorient a number of projects from being fully financed through the 

7 A corrigendum was submitted on 9 May 2013. 

7 

 
 
 
                                                 
national budget to being co-financed with EU funds and at the same time to cancel a number 
of further projects previously fully financed through the national budget. Further delays have 
been encountered in integrating the accounting reporting system with the Treasury payment 
system in the Ministry of Public Finance because of yet another appeal against the tendering 
process. 

Further  progress  was  made  in  the  banking  sector.  These  relate  to  bank  resolution,  the 
implementation  of  European  Systemic  Risk  Board  recommendations  on  foreign-exchange 
lending  to  unhedged  SMEs,  permanent  arrangements  for  prudential  filters  on  solvency, 
reserves  and  loan-loss  provisions  and  the  fiscal  treatment  of  bank  receivables  sold  to  asset 
recovery  companies  incorporated  in  Romania.  The  outstanding  commitment  for  the  final 
review in summer 2013 is the enactment of the amended law on the winding-up of insurance 
undertakings,  for  which  the  authorities  did  not  meet  the  end-October  2012  programme 
deadline.  

While  the  regulatory  reform  commitments  in  the  energy  sector  have  been  largely 
honoured,  a  number  of  outstanding  commitments  need  to  be  implemented  before  the 
end  of  June  2013.  A  considerable  part  of  the  third  energy  package  was  transposed  by 
legislation  passed  in  2012,  but  certain  provisions  still  remain  to  be  transposed.  The  first 
phases  of  electricity  price  deregulation  have  been  implemented  in  accordance  with  the 
electricity  roadmap  that  envisages  complete  deregulation  of  electricity  prices  for  corporate 
customers by the end of 2013 and for households by the end of 2017. The gas roadmap (with 
gas  prices  converging  to  market  prices  by  end-2014/2015  for  corporates  and  by  the  end  of 
2018  for  households)  has  so  far  been  implemented  but  uncertainties  regarding  its  future 
implementation  remain.  The  authorities  launched  a  new  gas  trading  platform  in  December 
2012  in  testing  mode.  The  outstanding  commitments  to  be  honoured  before  the  final 
programme review mainly refer to: (i) allowing a better integration of Romania into the EU 
gas  market8  by  lifting  the  implicit  gas  export  restrictions  and  enabling  reverse  flows  on  the 
gas  interconnectors  on  the  Hungarian  and  Bulgarian  borders;  (ii) ensuring  proper  protection 
for  energy  consumers  linked  to  energy  price  increases;  and  (iii) starting  the  certified 
unbundling of transmission networks in electricity and gas by issuing preliminary certification 
of the transport operators by the national energy regulator.  

Government  regulatory  reform  commitments  in  the  area  of  transport  have  also  been 
largely honoured. Policy steps to improve the regulatory framework under which the railway 
companies  operate  have  been  taken.  The  rail  regulator  gained  in  independence  through  the 
removal  of  ministry  representatives  from  the  regulator's  board  in  October  2012.  The 
regulatory  framework  was  revised  to  allow  the  rail  infrastructure  company  to  determine 
access  charges  independently,  while  a  study  on  competitive  tendering  of  the  public  service 
obligation  contract  for  the  passenger  rail  was  completed.  With  regard  to  the  efficiency 
measures  for  the  rail  sector,  in  line  with  programme  commitments,  the  passenger  company 
took the intercity and international trains out of the public service obligation which allowed 

8 The gas interconnection with Hungary that opened in 2010 is not yet bi-directional. Two other interconnection 
projects with Bulgaria are currently ongoing. Besides the the lack of availability of export capacity (virtual as 
well as physical reverse flows) this is also due to the existence of legal provisions or equivalent measures that 
prevent gas exports.  

8 

 
 
 
                                                 
 
for  free  price-setting  on  these  lines  and  reformed  the  public  service  obligation  subsidy  by 
introducing a 20 % passenger-km factor into a previously purely line-km subsidy. Among the 
outstanding measures to be honoured before the final review are: (i) leasing out the last part of 
underperforming  rail  lines;  (ii)  introducing performance  schemes  related  to  delays  between 
the 
(iii) 
signing performance-based  contracts  with  the  rail  infrastructure  company  to  reinforce 
accountability on meeting investment and maintenance targets. 

passenger/freight 

infrastructure 

companies; 

company 

and 

and 

the 

Regarding  reforms 
in  key  state-owned  enterprises  (SOEs),  progress  has  been 
insufficient. This was one of the main reasons to postpone the completion of the programme 
review.  The  operational  performance  of  the  key  SOEs  under  review  worsened  somewhat  in 
2012 in comparison to 2011 (losses of around 0.6 % of GDP by the end of 2012) but remained 
within  the  IMF’s  indicative  programme  ceiling.  The  arrears  incurred  by  these  companies 
declined over the course of 2012 and came down to 2% of GDP by the end of 2012 but still 
remained  above  the  1.5 %  ceiling  that  was  the  indicative  programme  target  for  the  end  of 
2012.  While  there  was  some  progress  on  privatising  and  restructuring  the  SOEs,  overall 
progress in terms of introducing professional management and selling minority and majority 
stakes  in  state-owned  enterprises  was  clearly  inadequate  and  fell  behind  programme 
commitments.  A  number  of  commitments  regarding  corrective  measures  were  agreed  in 
January and are to be implemented before the final review in summer 2013. 

Healthcare  reforms  have  been  initiated  but  progress  so  far  has  been  slow.  Rather  than 
introducing  a  comprehensive  framework  law,  the  government  intends  to  implement  the 
healthcare  reforms  via  an  action  plan.  This  action  plan  aims  to  strengthen  ambulatory  and 
preventive care, re-evaluate hospital financing to lower the risk of building up arrears, revise 
the  National  Health  Programmes,  define  the  basic  benefits  package  and  improve  the 
regulatory framework for healthcare services. To further increase the efficiency of healthcare 
spending,  the  government  plans  to  prepare  a  medium-term  financing  strategy  by  September 
2013. The government has established a monthly financial reporting tool for hospitals in order 
to monitor their budgets in a timely way. The introduction of the legal possibility to replace 
hospital  managers,  if  a  hospital  has  run  arrears  for  three  consecutive  months,  has  been 
introduced in the framework contract between the National Health Insurance House and the 
hospitals. However, it needs further legislative approval, and did not meet the deadline of end-
March  2013.  Legislation  on  introducing  a  small  co-payment  for  elective  hospital  inpatient 
services  was  approved  in  mid-March  2013,  but  the  extent  of  implementation  has  yet  to  be 
evaluated. In line with the MoU conditionality, the Ministry of Health provides information 
on both local and central government-level hospital budgets to the Ministry of Public Finance, 
which checks for over-spending on the part of individual hospitals.  

The overall absorption rate of EU funds remains very low, leading to a significant risk 
that an important part of structural and cohesion funds will be de-committed in 20139.  
The end-2012 absorption target was missed by a wide margin. Cumulative absorption as at the 
end  of  December  2012  stood  at  EUR  5.53  billion,  some  20.2 %  of  the  total  available 
structural,  cohesion  and  agricultural  funds.  It  was  thus  EUR  2.47  billion  short  of  the 

9  According  to  the  Commission’s  current  estimations  (at  end-March  2013),  the  de-commitment  risk  for  the 
European  Regional  Development  Fund  and  the  Cohesion  Fund  for  2013  is  at  EUR  5.8  billion  and  EUR  1.16 
billion for the European Social Fund. 

9 

 
 
 
                                                 
programme's end-2012 target of EUR 8 billion. The absorption of EU structural and cohesion 
funds stalled for most of the second half of 2012, due to systemic deficiencies revealed in the 
management and control system. Certain operational programmes (parts of the transport and 
regional  operational  programmes,  and  all  of  the  competitiveness,  environment  and  human 
resource  operational  programmes)  were  pre-suspended.  The  proposed  financial  corrections 
have been accepted by the Romanian authorities. For parts of the regional and environmental 
programmes  payments  resumed  in  December  2012  and  in  March  2013,  respectively,  and  in 
February 2013 for the human resources programme. For other programmes (competitiveness 
and  transport)  payments  are  expected  to  resume  only  in  the  first  half  of  2013,  once  the 
necessary  checks  by  national  and  EU  auditors  have  taken  place  and  yielded  satisfactory 
results.  The  rural  development  programme  made good progress in 2012 with the  cumulated 
expenditure by the end of 2012 amounting to around EUR 3.9 billion, some 48.6% of the total 
fund allocation for 2007-2013. However, this is substantially below the EU-27 average which 
is 62.7%. Financial uptake has accelerated in early 2013 with EUR 408 million in expenditure 
declared for the first quarter of 2013. 

As regards reforms of administrative capacity, the authorities continued to make some 
progress  in  implementing  the  action  plans  based  on  the  recommendations  from  the 
functional  reviews  carried  out  in  2011.  Most  of  the  contracts  with  the  World  Bank  for 
implementing key medium- and long-term actions have been signed. Moreover, through the 
General  Secretariat  of  the  Government  and  in  coordination  with  the  Ministry  of  Public 
Finance, a monitoring and evaluation system for public policies is being developed with the 
support of the World Bank. Based on the outcomes of the functional reviews, the authorities 
committed to develop personnel norms for each ministry and to apply the 1-for-710 rule more 
flexibly  while  keeping  the  wage  bill  close  to  7 %  of  GDP.  The  authorities  have  also 
committed to reviewing the Unified Public Wage Law in order to identify key bottlenecks and 
challenges in its implementation. 

There  has  been  good  progress  in  putting  in  place  a  fully  functional  Point  of  Single 
Contact required under the Services Directive but further steps to complete the reform 
are  needed.  Not  all  administrative  procedures  are  available  online  and  the  involvement  of 
certain  authorities  (especially  at  local  level)  is  not  yet  ensured.  The  usability  of  the  portal 
needs  to  be  greatly  improved  if  it  is  to  be  useful  for  service  providers.  Moreover,  Romania 
still needs to implement proper solutions for the e-identification of users from other Member 
States. Furthermore, the Romanian authorities could be more ambitious in setting up the Point 
of  Single  Contact  by  offering  e-government  services  beyond  the  scope  of  the  Services 
Directive and integrating various procedures that affect companies at different stages of their 
business cycle. 

10 The 1-for-7 rule implies that only one in seven public sector workers is replaced. 

10 

 
 
 
 
                                                 
4.  FURTHER CHALLENGES AND ASSESSMENT OF POLICY AGENDA 

In addition to short-term challenges identified under the programme, Romania faces a 
number of further, medium-term challenges identified in the AGS 2013 and through the 
Europe 2020 targets. At 46 % of the EU average, Romania’s GDP per capita is one of the 
most telling indicators of the country’s developmental gap. There are specific challenges with 
regard  to  labour  market  participation  (low  employment  rate),  education  (high  early  school 
leaving rate, skill mismatches), poverty and social exclusion (high number of people at risk of 
poverty  or  exclusion)  and  low  general  economic  competitiveness,  as  reflected  in  a  weak 
research and innovation system, underdeveloped infrastructure endowment, deficiencies in the 
business environment as well as low energy efficiency and poor waste management. There are 
further  challenges  in  the  area  of  the  justice  system  (low  level  of  independence  and  poor 
efficiency), and in the government’s generally weak administrative capacity and in the wide 
regional disparities. These challenges are reflected in the country-specific recommendations. 
EU funds can help addressing these challenges, thereby fully supporting the policy priorities 
set out in the Europe 2020 agenda. They provide an important source of public investment to 
support Romania in tackling these challenges.  

4.1. 

Fiscal policy and taxation 

Budgetary developments and debt dynamics 

After having brought down the general government deficit to under 3 % in 2012, in line 
with the Council recommendation, the main goal of the 2013 convergence programme is 
to  continue  fiscal  consolidation  with  a  view  to  achieving  the  medium  term  objective 
(MTO) during the programme period. The programme  tables a medium-term objective of 
-1 % of GDP. The MTO was lowered from -0.7 % of GDP following a regular horizontal re-
assessment  of  the  sustainability  of  public  finances  in  line  with  Regulation  1466/97.  The 
updated medium-term objective reflects the objectives of the Stability and Growth Pact. The 
main goal 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 macroeconomic scenario underpinning the budgetary projections in the programme 
is  plausible  and  in  line  with  the  assessment  in  the  latest  Commission  forecast.  The 
programme  provides  for  a  reduction  in  the  general  government  deficit  to  2.4 %  of  GDP  in 
2013, from 2.9 % of GDP in 2012, which corresponds to a (recalculated)11 structural deficit of 
1.7 %  of  GDP.  Revenue-enhancing  measures  include  reductions  in  tax-deductible  items, 
improvements in the taxation of agriculture, the introduction of a windfall levy following the 
deregulation  of  gas  prices  and  the  introduction  of  a  special  tax  on  the  transmission  of 
electricity and gas. The 2013 budget also allows for an increase in the minimum wage, a 4 % 

11 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. 

11 

 
 
 
                                                 
increase in pensions, and an allocation to implement the EU Late Payments Directive12 in the 
health  sector.  The  Commission’s  spring  forecast  indicates  a  general  government  deficit  of 
2.6 % of GDP in 2013, as it assumes fewer gains from the prioritisation of investment projects 
and a reduced impact from the package of revenue measures. 

In  2014,  the  general  government  deficit  is  set  to  decrease  further  to  2 %  of  GDP, 
according to the programme, which corresponds to a (recalculated) structural deficit of 
1.3 % of GDP13. Based on the programme, the adjustment of the headline deficit in 2014 will 
be  mainly  drawn  from  higher  revenues  as  a  proportion  of  GDP,  while  expenditure  to  GDP 
will be broadly stable. The programme mentions the main elements of fiscal consolidation in 
a  medium-term  framework,  without  quantifying  them.  According  to  the  programme,  on  the 
revenue  side,  the  authorities  intend  to  enlarge  the  tax  base,  increase  tax  collection,  simplify 
the taxation system and reduce tax evasion. On the expenditure side, the authorities intend to 
ensure a sustainable level of wage and pension related-expenditure and to implement the law 
related  to  the  restitution  of  properties  seized  during  the  communist  regime.  Based  on  the 
customary no-policy-change assumption, the Commission services forecast a higher headline 
deficit for 2014, of 2.4 % of GDP, which reflects increases in the revenue-to-GDP ratio in line 
with  the  expected  acceleration  in  economic  activity  and  a  higher  expenditure-to-GDP  ratio. 
The main risks associated with the budget plans for 2013-2014 relate to: (i) further possible 
financial  corrections  linked  to  the  absorption  of  EU  funds  or  to  the  financing  of  priority 
projects from the national budget; (ii) a renewed accumulation of arrears in the second part of 
2013 and possibly continuing in 2014, especially at local government level; and (iii) limited 
progress with restructuring state-owned enterprises which could result in renewed pressure on 
the budget. 

Based  on  the  2012  budget  outcome  of  2.9 %  of  GDP  and  given  that  the  Commission 
services  forecast  deficits  below  3 %  in  2013-2014,  Romania  appears  to  have  corrected 
the  excessive  deficit  (see  box  1  for  detals  about  the  excessive  deficit  procedure).  For  the 
coming  years,  in  accordance  with  the  preventive  arm  of  the  Stability  and  Growth  Pact, 
Romania should make appropriate progress towards achieving the MTO. In structural terms, 
the  programme's  fiscal  adjustment  is  front-loaded  in  2013  with  a  (recalculated)  structural 
adjustment  of  1.0 %  of  GDP,  higher  than  the  0.5 %  benchmark.  The  adjustment  in  2013  is 
therefore  appropriate.  Moreover,  targeting  a  higher  adjustment  than  the  benchmark  at  the 

12 According to the EU late payments directive all new contracts signed after March 2013 will have to be paid by 
the  public  administration  within  60  days  in  the  healthcare  sector  and  within  30  days  in  the  other  sectors. 
Currently payment delays in the healthcare sector stand at 210 days. 

13  Due  to  differences  in  methodology  to  estimate  the  potential  output,  the  structural  balance,  as  recalculated 
based on the commonly agreed methodology that uses the macroeconomic scenario from the programme, may 
depart from the structural balance as calculated by the national authorities. The structural deficit of 1.3% of GDP 
in 2014 is based on the commonly agreed methodology. If national authorities' methodology is used, structural 
deficit would be at the MTO of 1% of GDP already in 2014. 

12 

 
 
 
                                                 
beginning of the year is a prudent approach, given the uncertainty of estimations. For 2014, 
the (recalculated) structural adjustment of 0.4 % can also be considered appropriate.  

Box 1. Excessive deficit procedure for Romania 

On  7  July  2009,  the  Council  decided  that  an  excessive  deficit  existed  in  Romania  and  addressed  a 
recommendation to Romania with a view to bringing the excessive deficit situation to an end by 2011 
at the latest.  

The  most  recent  Council  Recommendation  under  Art.  126(7)  TFEU  was  adopted  on  12  February 
2010.  The  Council,  acknowledging  that  the  Romanian  authorities  had  taken  effective  action  in 
compliance with the Council Recommendation of 7 July 2009 and that unexpected adverse economic 
events  with  major  unfavourable  consequences  for  government  finances  had  occurred  in  Romania, 
addressed  a  revised  recommendation  to  Romania  with  a  view  to  bringing  the  excessive  deficit 
situation to an end by 2012 at the latest. Specifically, in order to bring the general government deficit 
below 3% of GDP in a credible and sustainable manner, the Romanian authorities were recommended 
to (a) implement the fiscal measures in 2010 as planned in the budget law and continue consolidation 
in 2011 and 2012; (b) ensure an average annual fiscal effort of 1¾% of GDP over the period 2010-
2012; and (c) specify the measures that are necessary to correct the excessive deficit by 2012, cyclical 
conditions permitting, and accelerate the reduction of the deficit if economic or budgetary conditions 
turned out better than expected at the time the EDP recommendations were issued. 

the 

An  overview  of  the  current  state  of  excessive  deficit  procedures,  including  additional  steps  adopted 
after 
on: 
http://ec.europa.eu/economy_finance/economic_governance/sgp/deficit/index_en.htm  (please  refer  to 
country sections at the bottom of the page). 

Staff  Working  Document, 

finalisation 

available 

this 

of 

is 

The expenditure benchmark is expected to be met. According to the information provided 
in  the  convergence  programme,  the  growth  of  government  expenditure,  net  of  discretionary 
revenue  measures,  over  2013-2014,  is  expected  to  contribute  to  the  necessary  annual 
structural adjustment towards the medium-term objective. This is because the growth rate of 
this  expenditure  is  below  1.43 %  in  2013  and  1.09 %  in  2014,  the  lower  rates  under  the 
expenditure  benchmark.  Following  an  overall  assessment  of  the  Member  State's  budgetary 
plans, with the structural balance as a reference, including an analysis of expenditure net of 
discretionary  revenue  measures,  the  adjustment  path  towards  the  medium-term  objective 
seems to be appropriate. 

Long-term sustainability  

Romania does not seem to be at risk of fiscal stress in the short term or in medium term 
perspectives  but  is  at  medium  risk  in  the  long  term.  Romania’s  public  debt  remains 
relatively low, at 37.8 % of GDP in 2012. While it is expected to rise to 38.6 % in 2014, it 
will remain well below the 60% of GDP reference rate over the programme period. Since the 
debt-to-GDP ratio is below the reference rate, the debt reduction benchmark is not applicable. 
Medium-term  debt  projections  (see  Graph  below  Table  V  in  annex)  indicate  that  full 
implementation  of  the  programme  would  allow  for  a  slight  reduction  of  the  debt  by  2020, 
thereby  remaining  well  below  the  60 %  of  GDP  reference  value.  Containing  age-related 
expenditure growth is warranted in order to contribute to the sustainability of public finances 
13 

 
 
 
in the long term. In order to improve the adequacy of the pension system prolonging working 
and contributory careers would be necessary.  

Fiscal framework  

The  fiscal  framework  has  remained  largely  unchanged  since  2010,  when  it  was 
significantly  reformed  following  the  adoption  of  the  Fiscal  Responsibility  Law.  In 
particular,  the  framework  provides  for  three-year  rolling  medium-term  budget  planning  (the 
Fiscal  and  Budgetary  Strategy),  numerical  ceilings  for  the  overall  and  primary  balance, 
personnel  expenditure,  total  expenditure  (excluding  the  impact  of  EU  Funds)  —  and  the 
establishment  of  the  Fiscal  Council.  In  addition,  Romania  ratified  the  Treaty  on  Stability, 
Coordination and Governance in the Economic and Monetary Union and declared its intention 
to  be  bound  by  the  provisions  of  Title  III  (Fiscal  Compact)  as  of  1  January  2013,  thereby 
committing  to  putting  in  place  a  structural  budget  balance  rule  and  the  corresponding 
correction mechanism by the end of 2013.  

Although  the  national  fiscal  framework  has  contributed  to  stronger  fiscal  discipline, 
further fine-tuning is warranted to increase its effectiveness and ensure compliance with 
the European fiscal governance framework. While the Fiscal Council started operating in 
2010, restrictions on the hiring of public servants put in place to achieve the required fiscal 
consolidation  have  prevented  the  Council  from  hiring  additional  staff.  However,  at  the 
beginning  of  2013,  a  derogation  from  these  restrictions  was  granted  to  the  Fiscal  Council, 
allowing  it  to  complete  the  recruitment  of  its  staff.  Ensuring  adequate  resources  is 
instrumental  for  its  functioning  and  independence,  especially  considering  the  requirements 
stemming  from  the  Council  Directive  2011/85/EU  on  requirements  for  the  budgetary 
frameworks  of  the  Member  States  and  from  the  Fiscal  Compact14  which  was  ratified  by 
Romania. Regarding the budgetary process, while the management of capital budgeting and 
the  reporting  system  for  the  state-owned  enterprises  (SOEs)  that  are  part  of  general 
government have been enhanced in the context of the EU/IMF assistance programme, several 
aspects  could  be  further  improved.  There  is  room  for  improvement  in  the  context  of  the 
medium-term budgetary framework as well as in terms of compliance with the existing budget 
ceilings.  Despite  some  steps  taken  to  prioritise  public  investments,  a  strategy  needs  to  be 
developed  and  implemented  in  this  area  and  to  be  properly  reflected  in  the  medium-term 
budget planning. 

Tax system  

At  27.2%  in  2011,  Romania’s  tax-to-GDP  ratio  is  the  second  lowest  in  the  EU.  The 
composition of tax revenue is favourable to growth. Romania has the EU’s second-highest 
share  of  ‘growth-friendly’  taxes  (mainly  driven  by  consumption  taxes).  Indirect  taxes 
accounted for 46.9 % of overall tax revenues in 2011 and direct taxation accounted for 21.2% 
(against  an  EU-27  average  of  33.1 %),  while  social  contributions  accounted  for  31.9 % 
(against an EU-27 average of 33.5 %).  

Low tax compliance and high tax evasion represent major challenges for Romania's tax 
system, in particular in the areas of VAT and labour taxation.  Tax evasion in these two 

14 Title III of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union 

14 

 
 
 
 
                                                 
fields was estimated at 10.3 % of GDP in 2010.15 In 2011, actual VAT receipts amounted to 
only  51.9  %  of  the  theoretical  revenues  at  standard  rates  despite  the  relatively  limited 
application  of  the  reduced  rates.  To  tackle  VAT  fraud  in  particular,  Romania  is  currently 
implementing recommendations agreed with the Commission. There has been an increase in 
revenues from indirect taxation compared to last years, mainly driven by the increase of the 
standard  VAT  rate  in  2010.  Additional  measures  to  increase  tax  collection  could  be 
warranted.  There  is  also  scope  to  improve  the  efficiency  of  the  tax  administration:  despite 
certain  improvements,  the  use  of  electronic  filing  for  tax-related  information  remains 
suboptimal  for  VAT  and  for  corporate  and  personal  income  taxes.  Furthermore,  the  high 
reliance on cash transactions — according to a recent Eurobarometer survey16 only 27 % of 
residents  have  a  bank  current  account,  which  is  the  lowest  ratio  in  the  EU  —  implies  an 
elevated  risk  of  tax  non-compliance.  In  the  field  of  labour  taxation,  the  high  amount  of 
concealed earnings is reflected in the discrepancy between the  relatively high  tax wedge on 
labour (calculated on the basis of  the theoretical tax obligation) and the low implicit tax rate 
on labour (calculated on the basis of actual tax receipts). The relative ease with which the self-
employed  can  avoid  taxes  could  also  be  a  factor.  The  share  of  self-employment  in  total 
employment is particularly high, amounting to 20 % (ranking third in the EU). 

There  is  scope  to  further  increase  the  reliance  of  the  tax  system  on  the  taxes  that  are 
considered  less  detrimental  to  growth,  in  particular  recurrent  property  taxes  and 
environmental  taxes.  Revenues  from  recurrent  taxes  on  immovable  property,  which  are 
considered among the least detrimental to growth only accounted for 0.7 % of GDP in 2011, 
while  the  EU  average  was  1.3%.  The  tax  base  currently  does  not  reflect  the  actual  market 
value of property. Romania’s environmental taxation is predominantly based on energy taxes: 
energy accounts for most of the revenue, namely 1.6 % of GDP, while taxation on transport 
only delivers 0.2 % of GDP and pollution taxes are a negligible share. While acknowledging 
the burden on companies and citizens, one may question whether these taxes serve Romania's 
environmental goals. The implicit tax rate on energy is among the lowest in the EU and tax on 
transport  fuels  is  well  below  EU  average  rates  (excise  duties  on  both  diesel  and  petrol  are 
among the lowest).  

Several  measures  to  increase  the  environmental  taxes  are  being  prepared.  The  new 
pollution  tax  legislation  for  cars  entered  into  force  in  mid-January  2012,  but  its  application 
has been suspended. More recently a new ‘environmental stamp tax’ which differentiates car 
purchase taxation based on CO2 emissions was introduced. This is consistent with efforts to 
tax environment-related negative externalities. In early 2013 Romania also adopted a tax on 
the exploitation of natural resources other than natural gas and a tax on the surplus revenues 
gained  as  a  consequence  of  natural  gas  price  deregulation.  A  landfill  tax  is  expected  to  be 
introduced in 2013. 

4.2. 

Labour market, social policies and education  

Weak labour market participation continues to be a challenge for Romania. The insufficient 
institutional  capacity  and  low  quality  and  coverage of  the national employment  services, an 

15 România —  Consiliul Fiscal (2012) —  Raport anual pe anul 2011 — Evoluții și perspective macroeconomice 
și bugetare: http://www.consiliulfiscal.ro/Raport2011.pdf 
16 Source: Special Eurobarometer 373: Retail Financial Services (2011).  
http://ec.europa.eu/internal_market/finservices-retail/docs/policy/eb_special_373-report_en.pdf  

15 

 
 
 
                                                 
inadequate level of basic skills acquired during compulsory education and a high early school 
leaving  rate,  the  persistent  mismatch  between  the  qualifications  offered  by  the  education 
sector and the requirements of the labour market, difficult transitions from school to work, a 
low  rate  of  participation  in  life-long  learning  and  education  for  adults  and  the  under-
investment  by  businesses  in  continuous  vocational  training  are  all  likely  to  have  a  negative 
impact  on  employment.  Poverty  reduction  continues  to  present  another  major  challenge, 
People in Romania are the second most likely to be at risk of poverty or social exclusion and 
suffer  severe  material  deprivation  rates  that  are  almost  twice  the  EU  average.  Access  to 
healthcare for disadvantaged people continues to be an issue, as does the quality of services 
provided. 

Employment 

Increasing  labour  market  participation  is  one  of  the  most  crucial  challenges  for 
Romania. As the unemployment rate stands at a fairly acceptable level (7.0 % in 2012), the 
low  participation  in  the  labour  market  is  mainly  driven  by  an  activity  rate  that  is  the  third-
lowest  in  the  EU.  In  2012,  the  country  continued  to  register  a  low  employment  rate  among 
those aged 20-64 years (63.8 %), although a slight improvement  was achieved  compared to 
the  year  before  (62.8  %).  Yet  it  is  still  to  be  seen  if  this  reverse  of  the  previously  negative 
trend is sustainable. Despite this recent improvement, the national Europe 2020 target of 70 
%  by  2020  remains  difficult  to  reach.  Moreover,  labour  productivity  measured  as  a 
percentage of the EU27 total is still one of the lowest in the EU (at 49.4 %) despite having 
improved in the recent years. 

Employment  challenges  are  particularly  severe  for  a  number  of  disadvantaged  people. 
The  youth  employment  and  activity  rates  (20-29  years)  were  among  the  lowest  in  the  EU, 
whereas the youth unemployment rate increased reaching 22.8 % in 2012. Additionally, there 
is  a  high  and  increasing  number  of  young  people  in  Romania  that  are  not  in  employment, 
education or training (17.4 % in 2011). Other employment challenges concern older workers 
and women. Moreover, Romania has the highest share of employment in agriculture in the EU 
(28.6  %  in  2011),  with  a  major  part  in  low  productive  subsistence  and  semi-subsistence 
farming.  Disadvantaged  people,  in  particular  Roma,  face  great  difficulties  in  accessing  the 
formal labour market. In 2011, the employment rate among Roma people was 36.3 %, about 
two thirds that of the overall population, while the unemployment rate among Roma people 
(48.6 %) was more than six times higher than the average national unemployment rate.17 

Close monitoring of the effectiveness of the recent labour market reforms is warranted. 
In  2011,  the  Romanian  government  amended  the  Labour  Code  to  address  the  limited 
flexibility of the Romanian labour market.18 The main changes are related to the extension of 
the  probation  period  for  newly-hired  employees,  the  conditions  governing  fixed-term 
individual  employment  contracts,  new  terms  related  to  collective  dismissals  and  individual 
redundancies,  working-time  flexibility  and  temporary  agency  contracts.  In  2011,  the 
government  also  changed  the  legislation  on  social  dialogue  in  order  to  make  collective 

17 ‘Roma from Romania, Bulgaria, Italy and Spain between Social Inclusion and Migration: comparative study’, 
2012,  http://www.soros.ro/en/publicatii.php#  
18According to the Global Competitiveness Index Report 2012-2013, Romania ranks 104th out of 144 countries 
on  labour  market  efficiency  (with  the  rankings  for  cooperation  in  labour-employer  relations  141/144  and  for 
hiring and firing practices 97/144). 

16 

 
 
 
                                                 
bargaining  more  flexible  and  continued  the  reform  by  adopting  the  Law  on  organising  the 
Economic and Social Council in March 2013.  

At  0.02 %  in  2012,  spending  on  active  labour  market  policies  as  a  share  of  GDP  in 
Romania  is  still  very  low  compared  to  the  EU27  average  and  it  is  decreasing.19. 
Moreover,  most  of  the  spending  goes  on  various  forms  of  employment  subsidies,  while 
training,  guidance  and  counselling  are  underdeveloped.  In  addition,  the  quality  of 
employment  activation,  job  search  and  retraining  services  is  still  relatively  low.  Romania  is 
currently  modifying  the  legislation  on  the  unemployment  insurance  system  and  on 
employment stimulation. In this context, it would be useful to reassess the current package of 
active employment measures. Beyond efforts to strengthen the administrative capacity of the 
National Employment Agency, it may be helpful to focus policy efforts on better integrating 
active and passive labour market policies, with improved targeting to the skill profiles and the 
needs  of  the  unemployed.  Increased  attention  should  also  be  given  to  anticipating  labour 
market needs. 

A  number  of  measures  have  recently  been  undertaken  to  address  the  difficult  labour 
market  situation  of  young  people.  While  the  law  on  apprenticeship  in  the  workplace  was 
amended, the results of its implementation are rather modest and could be further improved 
by providing incentives to employers to hire apprentices. Moreover, the Romanian authorities 
financed  programmes  dedicated  to  improving  young  people’s  entrepreneurial  skills  and 
helping  young  entrepreneurs  to  set  up  microenterprises.  The  government  is  currently 
preparing  the  National  Plan  for  Youth  Employment,  which  is  a  starting  point  for  the 
introduction of the Youth Guarantee20. The measures focus on improving the entrepreneurial 
culture among youth and support the SMEs, as well as on adapting education and vocational 
training  to  the  labour  market  needs.  To  facilitate  youth  transition  from  school  to  labour 
market,  the  plan  proposes  various  measures,  such  as:  granting  mobility  bonuses  and  job 
subsidies,  offering  professional  guidance  and  entrepreneurship  counselling,  business 
simulation, 
traineeships,  developing 
partnerships  between  schools,  universities,  companies  and  other  organizations,  and 
monitoring  the  labour  market  insertion  of  young  graduates.  The  plan's  effectiveness  may 
benefit from improved coordination and partnership across policy fields for ensuring quality 
jobs, apprenticeships and traineeships. Better targeted employment measures and services to 
young  people  could  help  improving  their  labour  market  integration.  The  European  Social 
Fund  will  remain  the  main  source  of  funding  for  youth  employment  policies,  in  particular 
through the support of the EU Youth Employment Initiative, which should deliver measures 
targeted to young people not in employment, education or training. 

supporting  apprenticeships,  higher  graduates’ 

Further  measures  to  promote  longer  working  lives  need  to  be  undertaken,  as  older 
workers  have  a  high  potential  for  growth.  An  entrenched  culture  of  early  retirement, 
notably  for  women,  as  also  indicated  by  the  employment  rates  for  older  workers  and  the 
duration  of  working  lives,  which  are  among  the  lowest  in  the  EU,  is  a  key  reason  for  low 
benefits. Going beyond the 2011 pension reform, Romania is currently rolling out a number 

19 0.04 % for Romania compared with 0.54 % for the EU27 in 2009. 
20 Council Recommendation of 22 April 2013 on establishing a Youth Guarantee (2013/C 120/01) to ensure that 
all young people under the age of 25 years receive a good-quality offer of employment, continued education, an 
apprenticeship or a traineeship within four months of becoming unemployed or leaving formal education). 

17 

 
 
 
                                                 
of  fiscal  incentives  for  the  employment  of  older  workers  but  labour  market  measures  to 
promote longer working lives are too few and too isolated to deliver the necessary change in 
working and retirement practices. A comprehensive active ageing strategy to facilitate longer 
working  lives  could  enhance  synergies  between  the  different  current  initiatives  and  would 
complement efforts on lifelong learning, career guidance policies and good age management 
in work places. 

In order to overcome women’s low level of participation in the labour market, measures 
are being implemented to support the development of business infrastructure and help 
women  start  companies.  However,  the  provision  of  full-time  childcare  facilities  is 
particularly  low,  as  is  availability  of  part-time  childcare  facilities  for  those  under  3 years 
old21. Moreover, flexible working arrangements and the review of fiscal treatment for second 
earners could facilitate women’s participation in the labour market. 

Some  measures  have  been  adopted  to  tackle  low  agricultural  productivity  and  under-
employment  in  agriculture  but  further  efforts  are  needed.  The  European  Agricultural 
Fund for Rural Development continues to be the main EU source of funding to tackle these 
challenges.  Using  this  fund,  the  government  has  taken  measures  aimed  at  diversifying  of 
economic  activities  in  rural  areas  such  as  by  investing  in  non-agricultural  activities  and  the 
tertiary sector. The fund is also used for the modernisation of the agricultural sector, including 
through  investment  support  to  increase  competitiveness  of  farms  and  food  processing 
businesses, and to help young farmers set up semi-subsistence holdings that offer the potential 
to develop into viable market-based farm businesses). However, underdeveloped services in 
rural  areas  and  poor  quality  infrastructure  are  impeding  other  economic  activities  and  the 
creation  of  alternative  employment  opportunities.  Continued  investments  and  upgrading  of 
skills in agriculture as well as provision of new skills for ex-farmers are needed so as to turn 
semi-subsistence  employment  into  steady-income  employment,  and  to  exploit  agri-food 
sector’s potential as a competitive and sustainable engine of growth.  

There  need  to  be  further  reforms  to  allow  for  a  better  integration  of  disadvantaged 
people, including Roma, into the labour market. To improve the skills and employability 
of  disadvantaged  people,  including  Roma,  an  integrated  approach  bringing  together  literacy 
improvement  measures,  personalised  counselling  services  and  tailored  training  could  be 
considered.  Gaps  identified  by  the  Commission  when  assessing  the  National  Roma 
Integration  Strategy  2012-202022  concern  reducing  unemployment  among  women,  young 
people  and  those  living  in  disadvantaged  micro-regions  and  segregated  neighbourhoods  as 
well  as  to  increasing  skills  and  promoting  the  transition  from  undeclared  to  regular 
employment.  A  revised  strategy  and  a  new  action  plan  to  be  prepared  by  the  Romanian 
authorities  in  the  summer  of  2013  are  expected  to  take  on  board  the  Commission’s 
assessment. 

Poverty reduction  

21 In 2010, only 4 % of children less than three years old were in formal childcare up to 29 hours per week and a 
further  3 %  were  in  formal  childcare  for  30  or  more  hours  per  week.  Among  those  aged  from  3  years  to 
compulsory school age, 49 % were in formal childcare for up to 29 hours of care per week and 17 % were in 
services providing 30 hours of more of care per week. 
22 http://ec.europa.eu/justice/discrimination/files/com2012_226_en.pdf 

18 

 
 
 
 
                                                 
Poverty  reduction  continues  to  be  a  major  challenge  for  Romania.  Romanians  are  the 
second highest most likely to be at risk of poverty or social exclusion in the EU, and almost 
one  in  three  Romanians  is  severely  materially  deprived.  In  general,  the  impact  of  social 
transfers  (excluding  pensions)  in  reducing  poverty  remains  significantly  below  the  EU 
average, although values were on the rise in the years preceding the crisis. Romania also has 
an extremely high proportion of ‘in-work poverty’ (double the EU average), especially among 
men. The risk of poverty has a strong impact, especially on children, of whom 49.1 % were at 
risk of poverty or social exclusion in 2011. Poverty has also a strong territorial dimension, as 
it particularly affects people living in rural areas in the north-east, south-east and south-west 
of the country. 

The situation of people with disabilities and Roma continues to be a key issue. Faced with 
low  participation  in  the  labour  market,  difficult  access  to  public  services,  low  skills,  poor 
infrastructure  and  housing,  and  discrimination,  these  people  have  been  among  the  worst 
affected by the crisis. In addition, the Roma’s lack of identity cards and registration prevents 
them  from  accessing  the  health  system,  social  benefits  or  education.  Given  the  high 
proportion of Roma people in the country (8.3% of the overall population), making sufficient 
progress  towards  the  Europe  2020  employment,  social  inclusion  and  education  targets  will 
require  the  Roma’s  situation  to  be  addressed  explicitly  and  quickly.  The  implementation  of 
Romania’s National Roma Integration strategy is stalling. Particular attention needs to be paid 
to  involving  all  stakeholders  in  the  process,  ensuring  an  effective  coordination  of 
responsibilities  and  instruments  between  the  different  layers  of  governance,  setting  up  a 
robust  national  monitoring  system,  and  allocating  adequate  financial  resources.  Stronger, 
more  integrated,  efforts  are  needed  to  address  Roma  inclusion,  including  coordinated 
measures in the fields of education, employment, housing and health.  
There is also a high risk of poverty for the people older than 65 years.23 The 2011 pension 
reform brought significant improvements but pension benefits are low, contributing to a high 
at  risk-of-poverty  rate  for  this  age  group.  In  order  to  improve  the  adequacy  of  the  pension 
system  prolonging  working  and  contributory  careers  would  thus  be  necessary.  Age-related 
expenditure growth needs to be contained, as pension adequacy can only be addressed if the 
sustainability of the pension system is guaranteed. 

To  alleviate  poverty,  the  effectiveness  and  efficiency  of  social  transfers  could  be 
strengthened  by  improving  adequacy,  take-up  and  coverage.  In  2012,  several  pieces  of 
legislation were adopted to follow up the 2011 social assistance reform. The adoption of the 
remaining  subsequent  legislation  (social  economy,  minimum  insertion  income,  social 
protection  measures  for  vulnerable  customers)  would  constitute  an  important  step  towards 
completing the reform. The link between social transfers and activation measures also needs 
to be strengthened. 

Education 

Romania faces a major challenge in raising the quality of its education and training. The 
quality of and access to upper secondary and tertiary education remain low. The level of basic 
skills  is  also  very  low.  A  particularly  difficult  challenge  is  low  achievement:  Romania  is 
among  the  worst  performers  in  the  EU  on  basic  skills  (40.4 %  in  reading;  47 %  in 

23  The  rate  of  people  at  risk  of  poverty  and  social  exclusion  in  old  age  (above  65)  is  35.3 %  in  Romania 
compared to 20.5 % in the EU (2011). 

19 

 
 
 
                                                 
mathematics and 41.4 % in science).24 More than two out of five 15-year olds have inadequate 
reading  literacy,  mathematical  and  scientific  literacy  for  adult  life.  Although  the  number  of 
low achievers has declined since 2006, Romania is still one of the worst performing countries 
in  the  EU.  A  number  of  actions  for  primary  and  secondary  education  aimed  at  increasing 
access  to  quality  education  and  raising  school  attainment  rate  are  being  prepared.  These 
actions include initial assessment tests for students and a framework programme designed to 
improve  the  results  of  national  evaluation  exams.  Early-school  leaving  is  also  a  significant 
challenge  as,  despite  a  number  of  measures  implemented,  the  early-school  leaving  rate  was 
estimated at 17.4 % in 2012 which is well above the EU average of 12.8 %. Romania lacks an 
adequate mechanism to collect data on early school-leavers; a comprehensive strategy to be 
adopted in 2013 should help in this regard. 

The very low use of early childhood education and care services still present a challenge. 
A high quality early childhood education and care can have a particularly positive impact on 
children’s  development  and  contribute  to  breaking  the  cycle  of  disadvantage.  The 
underfinancing of the sector is one of the main reasons why Romania is underperforming in 
this  area.  In  2009,  Romania  allocated  the  lowest  proportion  of  GDP  to  investment  in 
education  in  the  EU  and  the  education  budget  has  been  cut  even  further  over  the  last  three 
years.  

There has been positive but slow progress in the implementation of the transition from 
institutional  to  alternative  care  for  children  deprived  of  parental  care.  Current  efforts 
should  be  maintained  to  strengthen  prevention  services,  improve  staff  qualifications  and 
quality  of  delivery  and  to  improve  the  social  and  professional  integration  of  young  people 
leaving 
the 
deinstitutionalisation of children deprived of parental care. 

the  child  protection  system.  More  efforts  are  needed 

to  speed  up 

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. Once implemented, it will 
overhaul the management of higher education institutions and raise requirements for masters 
and  doctoral  programmes.  A  number  of  shortcomings  remain.  There  is  not  enough 
differentiation  between  universities  according  to  each  one’s  mission  which  hampers  their 
internationalisation.  There  is  also  a  need  to  adjust  the  provisions  for  distribution  of  higher 
education  funding  by  taking  into  account  the  cycle  of  studies  in  accordance  with  best 
international  practices,  and  to  develop  performance  indicators  in  universities’  strategic  and 
operational plans.  

Mismatches  between  skills  and  labour  market  demands  are  characteristic  of  a  large 
proportion of vocational and tertiary education, with the poor level of vocational skills 
being a specific challenge. There are a number of national programmes that aim to improve 
vocational  training  but  the  overall  vocational  training  system  remains  largely  embryonic. 
Completing  upper-secondary  general  or  vocational  education  is  a  prerequisite  for  skilled 
employment  and  access  to  higher  education.  The  employment  rate  of  recent  graduates  has 
declined further during the economic crisis and is well below the EU average. This situation 
reflects, at least in part, a significant mismatch between the education offered by universities 
and the needs of the labour market. The links between higher education and business could be 

24 PISA 2009 results 

20 

 
 
 
                                                 
transversal  skills 

strengthened  through  the  inclusion  in  the  university  curricula,  in  addition  to  core 
competencies,  of  critical  skills  needed  for  a  knowledge-based  economy,  such  as 
like  communication,  marketing  and 
entrepreneurship  as  well  as 
management. For the 20-24 age group, 29.4 % of tertiary graduates were unemployed in 2011 
compared  to  22.9 %  of  secondary  graduates.  Attracting  more  students  from  lower-income 
families,  particularly  those  from  rural  areas,  to  higher  education  remains  an  important 
challenge. While the legal framework on adult training has been reformed, adult participation 
in lifelong learning remains stagnant at very low levels (1.6 % in 2011), significantly lower 
than  the  EU  average  (8.9 %).  Participation  rates  are  particularly  low  among  low-skilled 
adults.  According  to  CEDEFOP  skill  forecasts,  Romania  will  have  a  deficit  of  medium  and 
high-level skills by 2020. Initiatives to strengthen the national qualification framework and to 
encourage  the  recognition  of  informal  learning  would  facilitate  labour  mobility.  Romania 
lacks an adequate skills forecasting system which could provide better guidance to individuals 
and to industry as to the future needs of the labour market but a lifelong learning strategy that 
has been long delayed is currently under preparation.  

Health 

Healthcare reforms that aim to improve the efficiency of the sector have been initiated 
but continuous efforts are needed. The Romanian population is increasingly ageing but the 
old-age dependency ratio is still below the European average.25 Regarding the health status, 
Romania  has  one  of  the  highest  rates  of  infant  mortality26  in  the  EU  and  life  expectancy  at 
birth is one of the lowest in the EU.27 Romania also has one of the highest instances of the 
population  stating  that  they  have  unmet  needs  for  medical  examination  because  it  is  ‘too 
expensive’.  The  national  health  budget  for  2010  represented  9.0 %  of  public  government 
expenditure (far below the EU average of 14.9 %). Public expenditure on health accounted for 
4.5 % of GDP in 2009 (far below the EU GDP-weighted average of 8 %).28 This is against a 
backdrop of a cumulative annual increase of 15.5 % in public expenditure between 2003 and 
2009..As described in Section 4, to better use existing resources some measures, such as claw-
back tax and co-payments, have already been implemented, while other structural measures, 
such  as  hospital  reform,  e-health,  health  technology  assessment  and  a  new  medium-term 
financing strategy are being developed. Health sector reforms need to be continued to increase 
the  efficiency  of  the  healthcare  system.  In  particular,  a  hospital  master  plan  should  be 
developed  to  increase  to  increase  cost-efficiency  and  reduce  the  excessive  use  of  hospital 
inpatient  care  by  strengthening  primary  care  and  referral  systems  and  by  improving  the 
monitoring of the quality of health services provided. These investments in the health system 
can  have  a  positive  spill-over  effect  as  any  successful  move  toward  the  Europe  2020 
employment  target  will  also  require  an  improvement  in  health  outcomes.  Romanians  of 
working age are currently among the least healthy in the EU. 

25 Old-age-dependency ratio is 21.4 against 25.9 for the EU. 
26 9.8 per 1000 live births against 4.2 in the EU. 
27 77.4 for females and 69.8 for males, against 82.6 and 76.7 respectively in the EU. 
28Romania provides to Eurostat two different figures regarding public expenditure on health. The first is based 
on  national  accounts,  on  the  functional  classification  of  government  expenditure  (statistics  on  general 
government expenditure by function). According to this statistic, public expenditure on health in Romania was 
3.8 %  of  GDP  in  2009  and  3.6 %  of  GDP  in  2010.  The  second  is  based  on  the  system  of  health  accounts. 
According to this statistic, public expenditure on health was 4.5  % of GDP in 2009, the latest available data. 

21 

 
 
 
                                                 
4.3. 

Structural measures promoting growth and competitiveness 

Romania  faces  a  number  of  challenges  in  economic  competitiveness  with  productivity  in 
industry  and  services  remaining  low.  The  major  challenges  here  are  the  underdeveloped 
transport and ICT infrastructure, a weak business environment and low support for research 
and development (R&D). 

Research and Innovation 

The  R&D  intensity  is  extremely  low  (0.48 %  in  2011),  making  the  achievement  of  the 
2 %  target  by  2020  rather  unrealistic.  The  government  and  the  private  sector  continue  to 
underinvest, with a serious risk to fall below a critical mass needed to maintain a viable base 
for the knowledge economy. Considering national fiscal constraints, a sensible strategy would 
be to tap into European Structural and Investment Funds as much as possible, now and during 
the  next  programming  period.  If  underpinned  by  adequate  administrative  capacity,  this 
strategy would allow Romania, if not to achieve the Europe 2020 strategy targets, than at least 
to improve its position significantly. 

In  parallel,  the  efficiency  and  effectiveness  of  the  investment  need  to  be  substantially 
improved.  The  system  is  highly  fragmented,  as  reflected  in  the  large  number  of  research 
institutions (universities, national research institutes and institutes of the Romanian Academy) 
combined  with  a  lack  of  critical  mass  of  quality  research  results.  Romania  scores  badly  in 
terms  of  both  high-impact  scientific  publications  and  patent  applications.  A  process  of 
certification  of  national  R&D  institutes  was  carried  out  during  2012  while  the  university 
reform of 2011 paved the way towards greater autonomy and differentiation between research 
universities  and  those  more  oriented  towards  teaching  and  local  needs.  However,  these 
measures are not being implemented well. This is also the case both for the National Research 
and  Innovation  (R&I)  Strategy  2007-2013  and  for  the  Action  Plan  for  R&I  adopted  in  July 
2011. The wider reform of the R&I system is hampered by a lack of long-term vision and a 
lack  of  awareness  of  the  added  value  of  research  and  innovation  in  terms  of  increasing 
competitiveness and securing high-quality jobs. The governance of the system could also be 
improved:  while  the  research  and  innovation  policies  are  developed  mainly  by  the  research 
part of the Ministry of National Education, the links to policy instruments that are under the 
responsibility of the other ministries are weak, as is the involvement of these ministries in the 
identification of priorities.  

There  is  a  need  to  prioritise  those  research  and  development  activities  that  have  the 
potential to attract private investment and to strengthen the intellectual property rights 
framework with a view to increasing the marketability of research results. Business R&D 
expenditure is extremely low (0.17 % of GDP in 2011, one of the lowest values in the EU) 
and  there  is  almost  no  patenting  activity.  Furthermore,  businesses  do  not  exploit  research 
results  to  any  great  extent  and  there  are  few  linkages  between  education,  research  and 
businesses.  Intellectual  property  rights  are  regulated  by  a  variety  of  laws  and  ordinances, 
providing  unclear  and  contradictory  provisions.  Also,  the  finalisation  of  the  Patents  Law 
(which has been under revision since 2010) would need to be accelerated and its provisions 
aligned to international best practices. The finalisation of the law is expected to contribute to 
an  increase  in  foreign  direct  investments  for  innovative  activities  that  would  contribute  to 
higher  productivity.  There  is  a  need  to  explore  to  what  extent  the  current  Romanian 

22 

 
 
 
intellectual property rights legislation hampers the development of knowledge-based activities 
in Romania. 

To improve its competitiveness, Romania needs to increase synergies between research, 
innovation  and  industry,  in  particular  by  prioritising  research  and  development 
activities  that  have  the  potential  to  attract  private  investment.  Romania’s  economy  is 
characterised by the prevalence of low- and medium-technology sectors, with a weak demand 
for knowledge and an underdeveloped innovation culture. Research, innovation and industrial 
policies  are  not  sufficiently  integrated,  due  to  the  lack  of  a  national  strategy  for  industrial 
policy  and  to  insufficient  cooperation  between  the  institutions  responsible  for  policy  design 
and  implementation.  As  a  result,  the  current  R&I  Strategy  for  2007-2013  is  somewhat 
disconnected  from  the  economic  development  of  the  country.  To  foster  structural  change, 
Romania should further examine how knowledge is transferred into industry. Currently there 
are two strategies under preparation: a National Competitiveness Strategy for the period 2014-
2020,  which  aims  to  ensure  a  horizontal  approach  to  industry,  SMEs,  and  business 
environment  policies,  and  a  Strategy  for  Research  and  Innovation  for  2014-2020,  which 
focuses strongly on the smart specialisation required for the next programming period of the 
structural  funds.  It  will  be  essential  to  align  and  coordinate  the  two  strategies,  in  order  to 
ensure closer links between research, innovation and industry.   

Transport infrastructure and ICT 

Physical accessibility is a major driver in attracting investors and laying the foundations 
for  development.  This  is  particularly  so  in  the  regions  with  high  growth  potential  but 
also  in  remote  and  landlocked  regions,  such  as  rural  areas.  Romania’s  underdeveloped 
basic transport infrastructure continues to present an obstacle to growth and employment. The 
declining quality of the railway infrastructure and the very low motorway endowment mean 
that it is difficult to access Romania from abroad and to travel between regions, in particular 
between growth poles. The underdeveloped infrastructure is the result of underinvestment in 
new infrastructure and poor maintenance of the existing one. This is due both to the lack of a 
strategic vision for the development of the transport system (e.g. there is no comprehensive 
long-term transport plan for all modes of transport) and to the lack of matching identification 
and  programming  of  financing  sources.  At  the  same  time,  the  implementation  of  trans-
European transport network projects is advancing slowly, due mainly to the low absorption of 
the EU funds.29 

There are still a number of policy challenges in the rail transport sector. First, the length 
of  the  rail  network  is  excessive  with  respect  to  the  traffic  and  the  capacity  to  finance  it. 
Second,  private  railway  undertakings  perceive  discrimination  as  regards  the  prices  charged 
and  conditions  imposed  to  access  tracks.  Third,  Romania  often  makes  direct  awards  of 
infrastructure concessions and rail passenger services. This results in low value for money for 
the state and for the user, while contractors run the risk of incurring losses. Fourth, the link 
currently in place between the safety authority and the body responsible for procuring services 
contracts  creates  conflicts  of  interest.  Moreover,  the  current  administrative  handling  of 
railway  undertakings’  certification  is  unnecessarily  laborious  and  costly  both  for  the 

29  Long  procedures  for  land  acquisition,  limited  administrative  capacity,  inadequate  project  preparation  and 
limited availability of national funding are the main factors underlying this low absorption capacity. 

23 

 
 
 
                                                 
companies and for the safety authority. Underinvestment and poor maintenance of the railway 
network  have  led  to  increases  in  travel  time  due  the  introduction  of  speed  restrictions  and 
disruptions  and  also  to  reduced  reliability  and  safety  of  the  network.  As  a  consequence, 
railway transport has witnessed a decline of freight and passenger demand.30 

There are also a number of policy challenges in the road transport sector. The quality of 
road infrastructure, including motorway endowment, is particularly poor compared to that in 
other  EU  Member  States.31  Romania  ranked  highest  in  the  EU  in  2010  in  terms  of  road 
fatalities. The cost recovery for road infrastructure is very low (about 10 % of total outlays on 
national roads,  including construction). Furthermore, all revenues from road tolls have been 
committed  by  the  Romania  National  Company  for  Motorways  and  National  Roads  to 
servicing debt on supplier credits from commercial banks loans until at least 2016, leaving the 
company with no own sources to finance maintenance. In addition, there is no differentiation 
of  toll  rates  according  to  environmental  standards.  The  Ministry  of  Transport  and 
Infrastructure  has  not  established  a  multimodal  transport  master  plan  that  would  map  the 
future structural network based on realistic and politically endorsed budgetary assumptions.  

There  are  also  some  outstanding  issues  with  regard  to  freight  transport  on  inland 
waterways. While freight transport on inland waterways has been growing steadily over the 
past two decades, it remains far below its actual potential, particularly on the Danube. There 
is  no  policy  strategy  in  place  to  upgrade  or  develop  the  inland  waterways  infrastructure. 
Intermodal transport also remains underdeveloped.  

One ongoing challenge is that the take-up of broadband in Romania is the lowest in the 
EU.  This  is  linked  to  a  lack  of  ICT  skills,  literacy  and  lack  of  investments.  Both  the 
proportion of ICT professionals and the share of the population that have advanced ICT skills 
are  among  lowest  in  the  EU.  Romania  also  has  the  highest  proportion  of  the  population 
having  no  or  limited  computer  and  internet  skills  among  the  EU  Member  States.  The 
implementation of e-government is still a challenge for Romania. The country has the lowest 
levels  of  use  of  e-government  services  by  both  citizens  and  small  businesses.  Broadband 
infrastructures needs to be extended to areas where there are market failures to boost regional 
attractiveness and the economy. In parallel, the extension of New Generation Access needs to 
be promoted where there are market failures. Monitoring and mapping tools of ICT coverage 
and performance need to be developed. In parallel, the use of and demand for ICT should be 
fostered  through  developing  products  and  services  and  e-commerce,  but  also  through 
awareness-raising  in  areas  where  these  is  low  take-up  and  supporting  ICT  training  and 
certification. 

Energy and environment  

30 Romania’s railways services are considered by consumers as performing relatively poorly. According to the 
Commission’s 8th Consumer Markets Scoreboard, it has the third lowest assessment in the EU and second lowest 
assessment 
markets.  
(See: http://ec.europa.eu/consumers/consumer_research/editions/docs/8th_edition_scoreboard_en.pdf). 

domestic 

services 

among 

the 

30 

31 According to the World Economic Forum Global Competitiveness Report 2011-2012, Romania ranks lowest 
in  the  EU  on  satisfaction  with  the  quality  of  road  infrastructure.  See  World  Economic  Forum,  The  Global 
Competitiveness  Report  2011-2012,  available  at:  http://www3.weforum.org/docs/WEF_GCR_Report_2011-
12.pdf. 

24 

 
 
 
                                                 
Reforms  to  enhance  competition  and  efficiency  in  network  industries,  as  promoted  by 
the  IMF/EU  financial  assistance  programme,  need  to  continue.  In  2012,  Romania  made 
progress in transposing the third energy package directives. However, transposition of some 
provisions  is  still  outstanding,  including  those  relating  to  the  protection  of  vulnerable 
consumers and certain duties of the energy regulator. To improve market efficiency, Romania 
has  committed  to  a  roadmap  for  the  liberalisation  of  gas  and  electricity  prices  that  is  to  be 
completed by the end of 2017 for gas and by the end of 2018 for electricity. The third energy 
package  requires  that  the  Romanian  gas  and  electricity  transmission  system  operators  be 
certified. It is essential to continue with the unbundling of transmission system operators that 
should  be  able  to  perform  all  their  core  tasks.  The  corporate  governance  reform  of  state-
owned  enterprises  which  promotes  a  more  transparent  and  merit-based  appointment  of  the 
supervisory  boards  and  management  of  these  companies  is  currently  in  its  early  stage  of 
implementation  with  only  slow  progress  and  regular  delays.  More  appointments  of 
professional board members and managers and less political interference are needed to show 
that the corporate governance legislation put in place in 2011 is effective. 

issue 

is  a 

strategic 

for  Romania’s 

Increasing  energy  efficiency 
industrial 
competitiveness.  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.  While  this  partly  reflects  the  high  proportion  of  energy-
intensive industries in the production structure in Romania, there are also strong indications of 
large  energy  inefficiencies.  Residential  buildings  in  Romania  use  eight  times  more  energy 
than  the  EU-15  average  due  to  an  inefficient  district  heating  system  and  the  lack  of 
appropriate thermal isolation of buildings. The reforms of recent years aimed to achieve more 
consistent  use  of  high-efficiency  cogeneration  and  to  improve  industrial  efficiency.  Large-
scale  programmes  were  set  up  to  insulate  buildings  and  to  revamp  district  heating  systems. 
These projects resulted in significant savings but some of them have been put on ice. Progress 
has been made in implementing the road maps on gas  and electricity price deregulation but 
efforts need to continue in order to provide the right incentives to reduce energy consumption. 
Due  to  the  rapid  and  steady  rise  of  the  transport  sector’s  share  in  final  energy  consumption 
(from 15.8 % in 2000 to 24.1 % in 2010), the limited improvements in energy efficiency in 
road,  rail  and  inland  waterway  transport  need  to  be  significantly  stepped-up  and  specific 
attention  needs  to  be  paid  to  upgrading  the  urban  transport  infrastructure.  In  general,  the 
housing,  district  heating,  industry  and  transport  sectors  are  in  a  need  of  comprehensive, 
decisive and effective action to improve energy efficiency. 

Waste management is another key challenge for Romania. The country’s recycling rate 
(1.3 %)  is  well  below  the  EU  average.  Romania  produces  below-average  volumes  of 
municipal waste (365 kg of waste per capita in 2012 compared to the EU average of 502 kg), 
due for a large part to its below EU-average income per capita. However, it has the highest 
landfilling rate in the EU (98.7 %) and without further policy action it will most likely have 
difficulties  in  meeting  the  EU  targets  for  waste  management  on  time.  There  is  currently  no 
landfill  tax  but  it  is  expected  to  be  introduced  in  2013.  Private  waste  collection  and  cost-
efficient  recycling  are  made  difficult  by  a  lack  of  effective  schemes  for  collecting 
reusable/recyclable waste separately, the limited implementation of the Extended Producer’s 
Responsibility principle and the lack of a 'Pay As You Throw' system. Full implementation of 

25 

 
 
 
the  existing  waste  legislation  and  meeting  the  targets  under  the  Resource  Efficient  Europe 
Roadmap  has  the  potential  to  boost  ‘green  growth’  generating  additional  jobs  in  the  waste 
sector while reducing pollution and greenhouse gas emissions.  

While Romania is well on track to meet its overall commitments regarding greenhouse 
gas  emissions,  the  emissions  have  increased  substantially  in  the  transport  sector.  The 
current  projection  is  that  Romania  will  increase  its  non-ETS  greenhouse  gas  emissions  by 
9 %,  thus  staying  within  the  target  by  a  margin  of  10  percentage  points.  While  taxation  of 
transport is low, newly registered vehicles are significantly less efficient in Romania than in 
many  other  Member  States.  Aside  from  existing  taxes  on  fuels,  a  quota  for  biofuels,  and  a 
new  one-off  vehicle  registration  fee,  no  other  significant  policies  are  being  implemented  in 
order to address the increasing emissions from transport. 

Romania  is  also  on  track  to  meet  its  Europe  2020  renewable  energy  target.  Romania’s 
use  of  renewable  energy  has  increased  steadily  since  2005  to  reach  21.4 %  of  total  energy 
consumption  in  2011,  almost  hitting  the  country’s  goal  of  24 %  by  2020,  but  back  down 
below  levels  before  2008.  In  the  electricity  sector,  the  proportion  of  renewable  energy 
dropped after 2005 but recovered in 2010 to hit 2005-levels of approximately 35 %. In 2012, 
Romania  installed  1.58 GW  of  new  renewable  power  capacity,  now  totalling  2.68 GW. 
Romania is revising its Green Certificate support scheme to avoid overcompensation and to 
reduce  prices  for  customers.  However,  attention  should  be  given  to  maintaining  a  stable 
investment climate and to avoiding changes that would affect the legitimate expectations of 
investors. To further improve the cost-effective use of renewables and ensure a level playing 
field with other power sources, Romania needs to also develop the electricity grid further and 
ensure  that  non-discriminatory  rules  are  implemented  so  that  a  higher  share  of  renewable 
energy  sources  can  be  integrated  into  the  grid.  A  functioning  and  non-discriminatory 
balancing  market  for  all  power  sources  is  necessary  for  further  cost-effective  market 
integration of renewable electricity. Romania also needs to make greater efforts with regard to 
transport in order to reach the 10 % target by 2020.  

Wholesale market trading in gas and electricity is underdeveloped in Romania and it is 
not yet fully integrated with the EU. To achieve this for gas, there needs to be a proper gas 
balancing  system  and  gas-grid  rules  that  facilitate  the  trading  of  day-ahead  products.  With 
regard  to  electricity  it  is  important  that  traded  products  reflect  the  demand  from  electricity 
market participants. Romania’s participation in market coupling with the electricity  markets 
of Hungary, the Czech Republic and Slovakia is still in its early stages. Similarly, pending full 
implementation  of  the  interconnection  projects  with  Bulgaria  and  Hungary,  Romania’s  gas 
networks  are  integrated  in  the  EU  market  only  to  a  very  limited  degree.  In  line  with  the 
obligations  under  Regulation  994/2010  regarding  the  security  of  gas  supplies,  Romania  still 
has  to  notify  to  the  European  Commission  several  pieces  of  information,  in  particular  its 
preventive action and emergency plans if gas supplies are disrupted. 

SMEs and business environment 

Manufacturing, a key factor for Romania’s export performance, plays a bigger role in 
Romania than in the EU as a whole32 but productivity is low due to a number of factors. 
Productivity in industry and services  remains  at  60 %  of  the  EU average as the  economy is 
overwhelmingly composed of small and medium-size enterprises that are concentrated in low 

32 RO — 22  % vs. EU — 14.5 % of total value added in 2009. 

26 

 
 
 
                                                 
in 

labour-intensive 

value-added  areas,  with  specialisation 
is  an 
overwhelming dominance of microenterprises that represent 90 % of all companies. There are 
persistent territorial imbalances in the location of SMEs, between regions and between urban 
and  rural  areas.  Export  performance  is  predominately  driven  by  manufacturing33  but 
productivity improvements are hampered by several obstacles: a shortage of a medium- and 
high-skilled labour force, access to finance, excessive bureaucratisation and a weak business 
institutional  set  up  as  well  as  weak 
environment,  a  fragmented  and 
entrepreneurship, in particular in rural and maritime areas.  

industries.  There 

inconsistent 

institutional  set-up  and 

Romania  faces  important  challenges  in  creating  a  business  environment  conducive  to 
the  rapidly  changing  governance 
growth.  The  fragmented 
arrangements  for  the  business  environment  are  major  bottlenecks  that  are  responsible  for  a 
lack  of  continuity  and  efficiency  in  the  implementation  of  business-friendly  policies.  In 
addition, the heavy regulatory environment and the significant red tape in all sectors of public 
administration  impact  negatively  on  the  business  climate.  According  to  the  World  Bank 
Doing  Business  report  2013,  Romania  ranked  72nd  in  the  global  ranking  on  ease  of  doing 
business. Despite some progress, for instance in business start-up procedures, fiscal reporting 
requirements  and  in  the  registration  and  transfer  of  property,  there  continue  to  be  complex 
procedures  that  need  to  be  improved  in  many  areas  that  are  important  for  doing  business. 
These  include  obtaining  an  electricity  connection,  paying  taxes,  dealing  with  construction 
permits  and  resolving  insolvency.  Two  strategies  containing  provisions  for  the  business 
environment and SMEs sector have been elaborated — the Strategy for the improvement and 
development of the business environment until 2014, and the Strategy for the development of 
the SME sector until 2013 — but neither of them has been adopted so far. Romania needs a 
comprehensive  and  effective  strategy  for  improving  the  business  environment,  with  clear 
principles,  objectives,  targets  and  monitoring  indicators,  to  be  applied  to  the  whole 
government. In this regard, there is scope to improve the governance structure, as a functional 
institutional design is fundamental to ensuring the much-needed coordination, oversight and 
enforcement of policies for improving the business environment.  

Making  legislation  clearer,  more  accessible  and  easy  to  comply  with  is  a  major 
challenge.  In  the  area  of  regulatory  tools  and  mechanisms  to  improve  the  business 
environment, no major advances have yet been made. The regulatory environment is still not 
stable  with  legislative  acts  often  changing.  The  implementation  of  the  Strategy  for  Better 
Regulation for 2008-2013 has been very slow. While some progress has been made with the 
monitoring  of  administrative  costs,  a  key  challenge  is  to  improve  the  regulatory  quality 
through adopting and implementing a comprehensive and coherent strategy, in line with the 
EU Smart Regulation Agenda. In this respect, it is essential to identify unnecessary costs and 
areas  for  performance  improvement.  At  the  same  time,  this  requires  the  full  implement  and 
use of evidence-based tools such as quantified impact assessments, competitiveness proofing 
and fitness checks to reduce the overall costs of regulation for businesses.  

Greater  reliance  on  electronic  data  exchange  and  online  interfaces  could  significantly 
facilitate  administrative  procedures  for  businesses  and  citizens.  The  Strategy  for  the 
Broadband  Communications  Development  in  Romania  for  the  period  2009-2015  sets  out 
ambitious  objectives  for  e-government  and  e-business.  However,  the  implementation  of  this 
strategy  has  been  limited.  According  to  the  2013  Digital  Agenda  Scoreboard  report,  e-

33 In particular, in motor vehicles, electrical equipment, machinery and equipment and basic metals. 

27 

 
 
 
                                                 
government take-up by Romanian citizens aged 24-54 years old is, at 37 %, the third lowest in 
the EU and e-government take-up by enterprises is, at 59 %, the lowest in the EU. The take-
up  of  e-commerce  is  the  lowest  in  the  EU,  with  only  5.3%  of  the  population  buying  online 
(the  EU  average  is  44.8 %).34  A  National  Strategy  on  the  Digital  Agenda  and  a  Next 
Generation  Access  network  plan  are  currently  being  developed.  In  order  to  improve  the 
communication  flow  between  public  administrations  and  enterprises  and  to  reduce 
administrative burdens, priority should be given to the application of the EU Small Business 
Act ‘only once’ principle in order to avoid requesting enterprises and citizens to provide the 
same information that has already been made available in the context of other procedures.  

Access to finance is one of the most pressing problems facing Romanian SMEs. Romania 
ranks  among  the  lowest  performers  in  the  EU  in  terms  of  total  loan  volumes  granted  to 
SMEs.35  At  the  same  time,  Romania  ranks  second  highest  in  terms  of  the  average  interest 
rates  for  loans  up  to  EUR  1  million.36  Alternative  forms  of  financing  and  new  financial 
products  are  underdeveloped,  in  particular  in  the  venture  capital  market.  The  risk  facility 
under the JEREMIE37 programme became operational at the end of 2011 but its success has 
been  rather  limited  mainly  due  to  the  lack  of  local  expertise  in  using  financial  engineering 
instruments.  Financial  support  to  SMEs  is  being  provided  primarily  through  multi-annual 
national  programmes  and  guarantee  instruments.  Recent  initiatives  of  2011  include  Mihail 
Kogalniceanu  Programme,  which  aimed  to  facilitate  SMEs’  access  to  guarantees  and  credit 
by granting a credit line with subsidised interest and, if need be, partially guaranteed by the 
state under certain conditions, and the Programme for Young Entrepreneurs, which aimed to 
stimulate young entrepreneurs (those under 35 years) to set up and develop small businesses. 
However,  these  measures  should  be  made  more  accessible,  in  particular  by  providing 
assistance on the application procedures and cutting red tape. 

Often  unclear  land  ownership  rights  represent  a  further  challenge  for  Romania's 
business  environment.  Currently,  less  than  one  third  of  the  country  is  covered  by  the 
traditional  land  registry  thus  making  investment  in  land  or  infrastructure  difficult  and 
hampering the development of the real estate market. Developing a digitalised systematic land 
registry covering the whole country is thus essential. 

More efforts are needed to help Romanian companies to access international markets, in 
order  to  offset  the  decline  in  domestic  demand.  In  this  respect,  further  support  for  the 
internationalisation  of  SMEs  could  be  important.  Some  services  for  SMEs,  such  as  trade 
missions, co-financing participation in international trade fairs and developing market studies, 
are already provided through the annual SME export development programme but a number 
of  challenges  remain  in  supporting  the  internationalisation  of  the  SMEs,  in  particular  in 

34 As regards companies, in 2012, only 5.0 % sold online (EU average is 14 %), and only 4.8 % of SMEs sold 
on-line (EU average is 13.4 %). 

35 EUR 1.9 million per EUR 1 million GDP, well below the EU average of EUR 5.3 million loan volume per 
EUR 1 million GDP. 
36  European  Central  Bank’s  Statistical  Data  Warehouse,  the  Monetary  Financial  Institution  (MFI)  interest  rate 
and Loan volumes sections — data for January-March 2012. 
37  JEREMIE  (Joint  European  Resources  for  Micro  to  Medium  Enterprises)  is  an  initiative  of  the  European 
Commission developed together with the European Investment Fund promoting the use of financial engineering 
instruments to improve access to finance for SMEs via Structural Funds interventions. 

28 

 
 
 
                                                 
providing training and practical guidance on procedures and in enabling access to financing 
instruments. Furthermore, a National Export Strategy for the period 2012-2016 has not been 
adopted. 

The  general  lack  of  transparency  in  the  regulatory  process  and  the  persisting  high 
number  of  non-fiscal  barriers  continue  to  affect  the  retail  sector.  Non-fiscal  barriers, 
mostly the requirement to pay for authorisations, remain very high. While efforts have been 
made  to  render  the  retail  supply  chain  more  efficient  by  introducing  legislation  that 
strengthens  the  position  of  suppliers,  a  heavily  fragmented  retail  market  could  indicate  that 
competition  could  be  further  strengthened.  Given  the  economic  importance  of  the  sector, 
which  contributes  around  4 %  to  the  GDP  and  employs  7 %  of  the  workforce,  smooth 
functioning for the regulatory framework of the retail market is essential.  

Romania  has  been  engaged  in  a  process  of  reforms  with  the  goal  of  improving  the 
quality  of  justice  and  the  independence  of  the  judicial  system  but  a  number  of 
deficiencies  persist.  They  include  a  decreasing  efficiency  in  resolving  cases  and  a  lack  of 
consistency between judgments. Romania’s progress with judicial reform and the fight against 
corruption is monitored under the Cooperation and Verification Mechanism of the European 
Commission.  Although  the  EU  Justice  Scoreboard38  shows  that  the  time  needed  to  resolve 
non-criminal cases, administrative cases and litigious civil and commercial cases is within the 
EU average (but lags behind for insolvency cases) the case resolution rate for all categories 
has been falling continuously. The courts’ low capacity to resolve cases will, if not improved, 
create backlogs and increase the time to resolve cases. The use of e-justice tools needs to be 
improved significantly. Furthermore, there are no regular evaluations of courts’ activities or 
defined  quality  standards,  although  some  steps  have  been  taken  recently.39  The  perceived 
independence  of  justice  in  Romania  has  the  second  worst  rating  in  the  EU.40  The  January 
201341 report of the Cooperation and Verification Mechanism shows that Romania could not 
implement  commitments  aimed  at  enhancing  the  independence  of  the  judiciary  and  that 
politically  motivated  attacks  on  the  judiciary  have  not  ended.  Studies  and  polling  evidence 
also  reveal  a  perception  that  the  level  of  corruption  in  Romania  is  particularly  high  by 
European standards. This has a direct bearing on the efficiency of economic activity and can 
act  as  a  serious  disincentive  to  inward  investment.  Implementing  the  National  Anti-
Corruption  Strategy  would  have  a  positive  impact  on  the  confidence  of  economic  operators 
that commercially significant decisions taken by the national and local government and by the 
judicial authorities are fully transparent. 

4.4.  Modernisation of public administration 

Poor  administrative  capacity  is  a  core  concern  for  Romania.  The  ineffectiveness  of  the 
Romanian  public  administration  with  overregulation  and  cumbersome  and  inefficient 
procedures  hampers  the  business  environment  and  the  capacity  for  public  investment.  The 
public administration is characterised by an inconsistent legal framework, frequent recourse to 
emergency ordinances, inadequate inter-ministerial cooperation and excessive bureaucracy. It 

38 The EU Justice Scoreboard: a tool to promote effective justice and growth, COM(2013) 160 final. 

39 A comprehensive evaluation of the Romanian judicial system http://courtoptimization.wix.com/ewmi# 
40 The EU Justice Scoreboard: a tool to promote effective justice and growth - COM(2013) 160 final, p. 21. 
41 COM(2013) 47 final. 

29 

 
 
 
                                                 
is also undermined by a lack of skills, poor transparency in staff recruitment and management, 
and high turnover rates. This situation has contributed to a low rate of absorption of EU funds 
under  the  current  programming  period,  with  Romania  in  last  place  in  the  EU  rankings  for 
structural, cohesion and fishery funds. It will be essential to reinforce the effectiveness of the 
public  administration.  This  will  imply  shifting  to  a  streamlined,  stable  and  more  consistent 
legal  framework,  and  ensuring  that  procedures  are  simpler  and  are  proportionate.  One  way 
forward would be to improve the coordination and policy making-capacity of the government 
and to undertake comprehensive ministerial modernisation, relying whenever relevant on the 
action  plans  derived  from  the  functional  reviews.  To  give  one  example,  Romania  does  not 
have a comprehensive system for impact assessment of policies and legislative proposals. A 
comprehensive and coherent e-government strategy would promote an administrative culture 
of  transparency  and  certainty  while,  at  the  same  time,  improving  the  business  environment. 
This should include in particular the completion of a fully functioning Point of Single Contact 
that  allows  for  the  electronic  completion  of  procedures,  including  beyond  the  scope  of  the 
Services Directive, and integrating various procedures affecting companies at different stages 
of their business life cycle.  

Weak  management  and  control  systems  and  a  poorly  functioning  public  procurement 
system  are  the  source  of  systemic  irregularities  leading  to  financial  corrections  and 
suspension  of  payments  of  EU  funds.  While  the  legislation  is  appropriate,  frequent 
amendments  to  the  national  public  procurement  legislation,  together  with  a  lack  of  uniform 
practice  and  guidance  by  the  institutions  concerned  and  inconsistent  decisions  by  review 
bodies and courts are a source of uncertainty for stakeholders. Contracting authorities are not 
well  equipped  to  prepare  sound  tender  documents,  define  adequate  selection  and  award 
criteria  or  to  evaluate  the  offers,  all  of  which  creates  inefficiency  and  lack  of  transparency. 
Similarly,  there  are  problems  with  the  frequent  recourse  to  artificial  shortcuts  such  as 
shortening  deadlines  or  transferring  unreasonable  risks  and  obligations  to  contractors.  No 
adequate  solution  for  preventing  of  conflicts  of  interest  has  yet  been  found.  Nor  has  the 
independent status of the Romanian review authority been fully secured. Reforms in this area 
need to continue, in line with the recommendations of the Commission inter-service group on 
public procurement. 

There are serious concerns that  corruption that continues to be  a systemic  problem in 
Romania.  There  are  considerable  difficulties  with  the  ineffectiveness  of  policies  to  prevent 
and combat corrupt practices, notably in the area of public procurement. 96 % of Romanian 
respondents to the Eurobarometer survey agreed that corruption has been a major problem in 
Romania,  3  points  higher  than  in  2009.  Romania  scores  poorly  on  Transparency 
International’s  Corruption  Perception  Index  for  2012  and  on  the  World  Bank’s  control  of 
corruption  ranking  for  2011.  Particularly  vulnerable  sectors  appear  to  be  healthcare  and 
infrastructure projects. Romania’s progress in preventing and sanctioning corruption related to 
public  procurement,  as  evaluated  on  a  regular  basis  by  the  Commission  in  the  Cooperation 
and Verification Mechanism, has been limited. Few perpetrators of public procurement fraud 
have  been  handed  down  dissuasive  sanctions  by  the  courts.  A  more  systematic  approach  to 
ex-ante checks that would ensure uniform and systemic implementation could offer a useful 
way forward. 

30 

 
 
 
5.  OVERVIEW TABLE (CSR, TARGETS) 

2012 commitments 

Summary assessment 

Europe 2020 (national targets and progress) 

Employment rate target: 70 % 

R&D target: 2 % by 2020 

Greenhouse gas emissions target: maximum increase of 
greenhouse gas emissions not covered by the EU 
Emission Trading Scheme by 19 % in 2020, compared to 
2005. 

Renewable energy target:  24 % 

Share of renewable energy in the transport sector:  10 %  

National  indicative  energy  efficiency  target  for  2020: 
Reduction  of  10  Mtoe  (19%)  in  the  primary  energy 
consumption 

Early-school leaving target: 11.3 % 

31 

In  2012  the  employment  rate  rose  to  63.8 %,  1 
percentage  point  higher  than  in  2011  and  6.2 
percentage points below the national employment 
target  (20-64  age group). It  remains  to  be seen  if 
this  reverse  of  the  previously  negative  trend  is 
sustainable.  Despite  the  recent  improvement,  the 
national target of 70 % by 2020 under the Europe 
2020 strategy remains ambitious. 

In  the  last  decade,  R&D  intensity  in  Romania 
increased from 0.37 % in 2000 to 0.59 % in 2008, 
to drop back to 0.48% in 2011. Romania currently 
has one of the lowest R&D intensity scores in the 
EU,  at  less  than  a  quarter  of  its  2  %  target  for 
2020. Private R&D investments of 0.17% of GDP 
in  2011  are  also  among  the  lowest  in  the  EU.  It 
would be welcome if the new R&I Strategy 2014-
2020,  under  preparation,  was  accompanied  by  a 
multi-annual funding framework and a monitoring 
system. 

in  non-Emission  Trading  Scheme 
Change 
greenhouse  gas  emissions  between  2005  and 
2011:  decrease  of  7  %.  According  to  the  latest 
national projections submitted to the Commission, 
when  existing  measures  are  taken  into  account, 
the  target  is  expected  to  be  achieved  with  an 
increase of 9 %, thus staying within the target. 

Share  of  total  renewable  energy  in  gross  final 
energy  consumption  was  21.4 %  in  2011  and 
2.1 %  in  the  transport  sector.  (Source:  Eurostat. 
April  2013.  For  2011,  only  formally  reported 
biofuels  compliant  with  Art.  17  and  18  of 
Directive 2009/28/EC are included). 

of 

Romania  has  set  an  indicative  national  energy 
efficiency target in accordance with Articles 3 and 
the  Energy  Efficiency  Directive 
24 
(2012/27/EU).  However,  it  has  neither  expressed 
it,  as  required,  in  terms  of  an  absolute  level  of 
primary  and  final  energy  consumption  in  2020, 
nor  has  provided  information  on  the  basis  on 
which data this has been calculated. 
The early school-leaving rate (17.4 % in 2012) is 
well above both the EU average (12.8 %) and the 
10 %  EU  benchmark  and  is  the  same  as  in  2011 
(17.5 %).  Problems  persist  especially  for  rural 

 
 
 
 
 
 
Tertiary education target: 26.7 % 

Risk of poverty or social exclusion target: reducing by 
580 000 people (compared to 2008). 

areas and the Roma minority. 

The tertiary or equivalent attainment rate (21.8 % 
in  2012)  is  14  percentage  points  below  the  EU 
average  (35.8 %).  However 
there  has  been 
constant  progress  over  the  past  five  years  with  a 
noteworthy increase from 2011 (20.4 %). There is 
still a significant mismatch between the education 
labour  market 
offered  by  universities  and 
requirements. 

In order to monitor this target, Romania has opted 
to  use  one  of  the  three  sub-indicators  of  the 
headline  indicator,  more  precisely  the  ‘at  risk  of 
poverty  rate’.  The  latest  Eurostat  data  show  a 
slight  improvement  in  this  indicator  to  22.2 %  in 
2011,  from  23.4 %  in  2008.  In  absolute  terms, 
240 000 people were lifted out of poverty between 
2008 and 2011.   

32 

 
 
 
 
Table I. Macroeconomic indicators 

Core indicators
GDP growth rate
Output gap 1
HICP (annual % change)
Domestic demand (annual % change) 2
Unemployment rate (% of labour force) 3
Gross fixed capital formation (% of GDP)
Gross national saving (% of GDP)
General Government (%  of GDP)
Net lending (+) or net borrowing (-)
Gross debt
Net financial assets 
Total revenue 
Total expenditure
  of which: Interest
Corporations (%  of GDP)
Net lending (+) or net borrowing (-)

1995-
1999

2000-
2004

2005-
2009

2010

2011

2012

2013

2014

0.6
-4.1
74.6
2.0
5.6
20.1
14.0

-3.5
14.1
43.0
31.9
35.4
3.4

5.4
-1.2
26.0
7.5
7.1
20.8
17.6

-2.6
22.7
29.9
32.8
35.4
2.6

3.8
4.7
6.8
6.1
6.7
27.2
17.7

-4.2
15.6
5.3
33.4
37.6
1.0

-1.1
-1.8
6.1
-1.1
7.3
24.7
21.2

-6.8
30.5
-12.1
33.3
40.1
1.5

2.2
-1.1
5.8
2.5
7.4
26.0
22.4

-5.6
34.7
-16.0
33.8
39.4
1.6

0.7
-2.1
3.4
1.4
7.0
26.7
23.0

-2.9
37.8
n.a
33.5
36.4
1.8

1.6
-2.6
4.3
2.3
6.9
27.0
23.5

-2.6
38.6
n.a
34.1
36.6
1.8

2.2
-3.0
3.1
2.7
6.8
27.7
24.1

-2.4
38.5
n.a
34.4
36.8
1.8

-0.8

-5.4

-3.3

9.8

13.0

8.9

8.8

7.9

n.a
n.a
20.0
30.3

n.a
n.a
18.9
30.1

n.a
n.a
18.9
30.0

-85.8
-0.9
10.3
26.7

-85.1
0.3
17.0
23.3

n.a
n.a
32.2
7.5
n.a
n.a

-107.2
0.1
20.7
27.2

-106.0
8.0
16.6
31.8

-102.6
7.2
14.1
29.8

-6.2
41.4
33.9
-0.1
17.5
-4.9

-1.2
35.8
28.6
5.0
21.0
2.5

-1.9
52.7
33.7
1.0
15.5
-4.9

4.1
33.9
32.0
3.5
15.9
-1.9

-12.5
40.2
33.4
-1.1
15.2
-8.5

Net financial assets; non-financial corporations
Net financial assets; financial corporations
Gross capital formation
Gross operating surplus
Households and NPISH (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Gross wages and salaries
Net property income
Current transfers received
Gross saving
Rest of the world (%  of GDP)
Net lending (+) or net borrowing (-)
Net financial assets
Net exports of goods and services
Net primary income from the rest of the world
Net capital transactions 
Tradable sector
Non tradable sector
  of which: Building and construction sector
Real effective exchange rate (index, 2000=100)
Terms of trade goods and services (index, 2000=100)
Market performance of exports (index, 2000=100)
Notes:
1 The output gap constitutes the gap between the actual and potential gross domestic product at 2005 market prices.
2 The indicator on domestic demand includes stocks.
3  Unemployed persons are all persons who were not employed, had actively sought work and were ready to begin working immediately or within two weeks. 
The labour force is the total number of people employed and unemployed. The unemployment rate covers the age group 15-74.

-4.2
69.6
-5.7
-1.2
0.2
50.8
38.3
9.1
116.3
122.5
119.5

-2.6
n.a
-5.2
-0.9
1.4
49.1
38.3
8.6
114.2
128.5
123.3

-3.9
77.3
-5.3
-1.3
0.5
49.9
37.6
8.5
116.9
125.3
125.8

-3.0
n.a
-5.2
-1.1
0.9
n.a
n.a
n.a
123.7
131.7
123.8

-9.2
51.1
-11.0
-2.8
0.6
54.2
34.6
9.1
119.0
112.6
105.6

-2.9
n.a
-5.2
-1.1
1.0
n.a
n.a
n.a
120.7
130.2
125.0

-3.8
23.4
-7.0
-1.8
0.4
n.a
n.a
n.a
81.9
92.4
85.2

-5.6
10.8
-6.4
-1.1
0.3
n.a
n.a
n.a
63.9
82.9
63.8

n.a
n.a
30.6
7.2
n.a
n.a

n.a
n.a
29.2
6.8
n.a
n.a

Source :
Commission services’ 2013 spring forecasts (COM); Convergence programme (CP).

33 

 
 
 
 
 
Table II. Comparison of macroeconomic developments and forecasts 

Real GDP (% change)
Private consumption (% change)
Gross fixed capital formation (% change)
Exports of goods and services (% change)
Imports of goods and services (% change)
Contributions to real GDP growth:
- Final domestic demand
- Change in inventories
- Net exports
Output gap1
Employment (% change)
Unemployment rate (%)
Labour productivity (% change)
HICP inflation (%)
GDP deflator (% change)
Comp. of employees (per head, % change)
Net lending/borrowing vis-à-vis the rest of the 
world (% of GDP)

2012
COM CP
0.7
1.1
4.9
-3.0
-0.9

0.7
1.1
4.9
-3.0
-0.9

2013
COM CP
1.6
1.5
5.0
1.2
3.0

1.6
1.9
3.4
2.5
4.0

2014
COM CP
2.2
2.0
6.0
3.4
5.1

2.2
2.0
5.0
4.0
5.0

2.2
-0.7
-0.8
-2.1
1.9
7.0
-1.2
3.4
4.8
5.2
-2.6

2.2
-0.7
-0.8
-1.9
1.9
7.0
-1.2
3.4
4.8
5.2
-2.7

2.3
0.1
-0.8
-2.6
0.5
6.9
1.1
4.3
4.4
5.9
-2.9

2.6
-0.1
-0.9
-2.1
1.5
6.9
0.1
4.0
4.4
5.1
-2.2

2.9
0.0
-0.7
-3.0
0.8
6.8
1.4
3.1
3.6
5.5
-3.0

3.1
0.0
-0.9
-2.1
1.5
6.8
0.7
3.0
3.7
4.8
-2.6

2015
CP
2.4
1.7
6.7
5.1
5.9

3.1
0.0
-0.7
-2.3
1.0
6.6
1.4
2.2
2.9
4.4
-2.6

2016
CP
3.0
1.8
7.3
6.3
6.4

3.6
0.0
-0.4
-2.4
1.0
6.5
2.0
2.0
2.4
4.4
-2.5

Note:
1In percent of potential GDP, with potential GDP growth recalculated by Commission services on the basis of the programme 
scenario using the commonly agreed methodology.

Source :

Commission services’ 2013 spring forecasts (COM); Convergence programme (CP).

34 

 
 
 
 
 
 
 
Table III. Composition of the budgetary adjustment 

(% of GDP)

Revenue
of which:
- Taxes on production and imports
- Current taxes on income, wealth, etc.
- Social contributions
- Other (residual)
Expenditure
of which:
- Primary expenditure

of which:

Compensation of employees
Intermediate consumption
Social payments
Subsidies
Gross fixed capital formation
Other (residual)
- Interest expenditure
General government balance (GGB)
Primary balance
One-off and other temporary measures
GGB excl. one-offs
Output gap2
Cyclically-adjusted balance

2

3
Structural balance (SB)
Change in SB
Two year average change in SB 

3

Structural primary balance
Change in structural primary balance
Expenditure benchmark

Applicable reference rate

4

2012

2013

2014

2015

2016

COM COM
34.1
33.5

13.2
6.1
8.8
5.4
36.4

13.3
6.6
8.7
5.4
36.6

CP
33.8

13.2
6.5
8.7
5.4
36.2

1
COM
34.4

13.4
7.0
8.7
5.4
36.8

CP
34.1

13.1
6.5
8.8
5.7
36.1

CP
34.1

13.1
6.6
8.8
5.6
36.0

CP
34.0

13.1
6.6
8.7
5.6
35.8

34.6

34.9

34.3

35.0

34.2

34.2

34.1

7.8
5.9
12.7
0.4
4.6
3.2
1.8
-2.9
-1.1
0.5
-3.4

-2.1

-2.2

-2.7
1.4
1.8

-0.9

8.2
5.4
12.3
0.3
4.6
4.1
1.8
-2.6
-0.8
0.0
-2.6

-2.6

-1.7

-1.7
1.0
1.2

0.1
1.0

8.2
5.6
12.2
0.4
5.0
2.9
1.9
-2.4
-0.5
0.0
-2.4

-2.1

-1.7

-1.7
1.0
1.2

0.2
1.1

8.2
5.4
12.4
0.3
4.6
4.1
1.8
-2.4
-0.6
0.0
-2.4

-3.0

-1.4

-1.4
0.3
0.6

0.4
0.3

8.2
5.6
12.2
0.4
5.2
2.7
1.9
-2.0
-0.1
0.0
-2.0

-2.1

-1.3

-1.3
0.4
0.7

0.6
0.4

8.0
5.6
12.0
0.4
5.3
2.8
1.8
-1.8
0.0
0.0
-1.8

-2.3

-1.1

-1.1
0.3
0.3

0.7
0.2

7.7
5.6
11.8
0.4
5.6
3.0
1.7
-1.8
-0.1
0.0
-1.8

-2.4

-1.0

-1.0
0.0
0.2

0.7
-0.1

1.43

1.43

1.43

1.09

1.09

1.09

2.51

Change: 
2012-2016

CP
0.5

-0.1
0.5
-0.1
0.2
-0.6

-0.5

-0.1
-0.3
-0.9
0.0
1.0
-0.2
-0.1
1.1
1.0
-0.5
1.6

-0.3

1.2

1.7
-
-

1.6
-

-

5

0.0

-0.1

-0.3

-3.1

-0.2

-1.3

0.3

0.0

-0.2

-0.8

-2.7

-1.7

-2.4

 (% GDP)

Deviation
Two-year average deviation (% GDP)
Notes:
1On a no-policy-change basis.
2Output gap (in % of potential GDP) and cyclically-adjusted balance according to the programme as recalculated by Commission services 
on the basis of the programme scenario using the commonly agreed methodology.
3Structural (primary) balance = cyclically-adjusted (primary) balance excluding one-off and other temporary measures.
4 Reference medium-term rate of potential GDP growth. The (standard) reference rate applies from year t+1, if the country has reached its 
M TO in year t. A lower  rate applies as long as the country is adjusting towards its M TO, including in year t.The reference rates applicable 
to 2014 onwards have been updated in 2013. 
5 Deviation of the growth rate of public expenditure net of discretionary revenue measures and revenue increases mandated by law from the 
applicable reference rate. The expenditure aggregate used for the expenditure benchmark is obtained following the commonly agreed 
methodology. A positive sign implies that expenditure growth exceeds the applicable reference rate. 

0.0

-
-

Source :
Convergence programme (CP); Commission services’ 2013 spring forecasts (COM); Commission services’ calculations.

35 

 
 
 
 
 
 
 
Table IV. Debt dynamics 

(% of GDP)

1
Gross debt ratio
Change in the ratio
Contributions 2 :

1. Primary balance

2. “Snow-ball” effect

Of which:

Interest expenditure

Growth effect

Inflation effect

3. Stock-flow adjustment

Of which:

Cash/accruals diff.

Acc. financial assets

Privatisation

Val. effect & residual

Gap to the debt benchmark
7
Structural adjustment
To be compared to:

5,6

Required adjustment

8

Notes:

Average
2007-2011

23.0

4.5

4.8

-0.1

1.2

-0.2

-1.2

-0.1

2012

37.8

3.1

1.1

0.0

1.8

-0.2

-1.6

2.1

COM

38.6

0.8

0.8

-0.4

1.8

-0.6

-1.6

0.4

2013

2014

COM

38.5

0.0

0.6

-0.4

1.8

-0.8

-1.3

-0.3

2015
CP

38.6

0.1

2016
CP

38.9

0.3

0.0

-0.1

1.8

-0.9

-1.1

0.3

0.0

0.0

0.0
-1.7

0.1

-0.3

1.7

-1.1

-0.9

0.5

0.0

0.0

0.0
-1.5

CP

38.5

-0.1

0.1

-0.3

1.9

-0.8

-1.4

0.1

0.0

0.0

0.0
-2.1

2014

2015

2016

2013

2012

COM / 

3

CP
n.r.
n.r.

n.r.

n.r.
n.r.

n.r.

COM / 

3

CP
n.r.
n.r.

4

CP

n.r.
n.r.

n.r.

n.r.

n.r.

CP

n.r.
n.r.

n.r.

CP

n.r.
n.r.

n.r.

CP

38.6

0.8

0.5

-0.2

1.9

-0.6

-1.6

0.6

0.0

0.0

0.0
-1.6

4

CP

n.r.
n.r.

1End of period.
2The snow-ball effect captures the impact of interest expenditure on accumulated debt, as well as the impact of real GDP growth 
and inflation on the debt ratio (through the denominator). The stock-flow adjustment includes differences in cash and accrual 
accounting, accumulation of financial assets and valuation and other residual effects. 

3 Assessment of the consolidation path set in CP assuming growth follows the COM  forecasts.
4Assessment of the consolidation path set in the CP assuming growth follows the CP projections.
5Not relevant for M ember Sates that were subject to an EDP procedure in November 2011 and for a period of three years 
following the correction of the excessive deficit.
6Shows the difference between the debt-to-GDP ratio and the debt benchmark. If positive, projected gross debt-to-GDP ratio 
does not comply with the debt reduction benchmark.
7Applicable only during the transition period of three years from the correction of the excessive deficit for EDP that were ongoing 
in November 2011.

8Defines the remaining annual structural adjustment over the transition period which ensures that - if followed – M ember State 
will comply with the debt reduction benchmark at the end of the transition period, assuming that COM  (SP) budgetary 
projections for the previous years are achieved.

Source :

Convergence programme (CP); Commission services’ spring 2013 forecasts (COM); Commission services’ calculations.

36 

 
 
 
 
 
 
Table V. Sustainability indicators 

S2

of which:

Initial budgetary position (IBP)

Long-term cost of ageing (CoA)

of which:

Pensions

Health care

Long-term care

Others

S1 (required adjustment)*

of which:

Initial budgetary position (IBP)

Debt requirement (DR)

Long-term cost of ageing (CoA)

S0 (risk for fiscal stress)**

Debt,  % of GDP (2012)

Age-related expenditure, % of GDP (2012)

RO

EU27

No-policy 
change 
scenario 

Programme 
(SCP) 
scenario

No-policy 
change 
scenario 

Programme 
(SCP) 
scenario

4.1

0.4

3.6

2.4

0.7

0.6

-0.1

-0.8

0.0

-1.2

0.4

3.9

0.2

3.8

2.5

0.7

0.6

0.0

-1.1

-0.3

-1.3

0.4

3.0

0.8

2.2

1.0

0.9

0.6

-0.4

2.2

0.0

1.9

0.3

0.32

37.8

17.0

:

87.0

25.8

1.3

-0.9

2.2

1.1

0.8

0.6

-0.3

0.5

-1.8

1.9

0.4

Note: 
The 'No-policy change' scenario depicts the sustainability gap under the assumption that the budgetary position evolves 
according to the Commissions' spring 2013 forecast until 2014. The 'Programme (SCP)' scenario depicts the sustainability gap 
under the assumption that the budgetary plans in the programme are fully implemented.
* The required adjustment of the primary balance until 2020 to reach a public debt of 60% of GDP by 2030.              
** The critical threshold for the S0 indicator is 0.44. 

Source : 
Commission services; 2013 stability programme.                                                                                                                               

37 

 
 
 
 
Table VI.  Taxation indicators 

Total tax revenues (incl. actual compulsory social contributions, % of GDP)

28.1

28.5

28.0

26.9

26.7

28.2

2002

2006

2008

2009

2010

2011

Breakdown by economic function (% of GDP)1
     Consumption

              of which:

              - VAT

              - excise duties on tobacco and alcohol

             - energy

             - other (residual)

     Labour employed

     Labour non-employed

     Capital and business income

     Stocks of capital/wealth
     p.m.  Environmental taxes 2
3
VAT efficiency
     Actual VAT revenues as % of theoretical revenues at standard rate

10.9

12.1

11.2

10.3

11.3

12.6

7.1

1.0

1.7

1.1

7.9

1.2

1.7

1.2

7.9

1.2

1.4

0.7

6.6

1.5

1.6

0.5

7.6

1.5

1.8

0.4

8.7

1.8

1.7

0.4

12.3

11.5

11.5

11.6

10.9

11.0

0.0

3.8

1.1

2.1

0.0

3.9

1.0

1.9

0.1

4.2

1.0

1.8

0.2

3.8

1.0

1.9

0.2

3.2

1.1

2.0

0.2

3.4

1.0

1.9

48.8

53.7

56.3

47.2

43.9

51.9

Note: 
1 Tax revenues are broken down by economic function, i.e. according to whether taxes are raised on consumption, labour or capital. See European Commission 
(2013) Taxation trends in the European Union, for a more detailed explanation.
2 This category comprises taxes on energy, transport and pollution and resources included in taxes on consumption and capital.
3 The VAT efficiency is measured via the VAT revenue ratio. The VAT revenue ratio is defined as the ratio between the actual VAT revenue collected and the 
revenue that would theoretically be raised if VAT was applied at the standard rate to all final consumption. A low ratio can indicate a reduction of the tax base due 
to large exemptions or the application of reduced rates to a wide range of goods and services ('policy gap') or a failure to collect all tax due to e.g. fraud ('collection 
gap'). See European Commission (2012), Tax reforms in EU M ember States, European Economy 6/2012 and Taxation Papers 34/2012 for a more detailed 
explanation.

Source: Commission

38 

 
 
 
Table VII. Financial market indicators 

Total assets of the banking sector (% of GDP)

Share of assets of the five largest banks (% of total assets)

Foreign ownership of banking system (% of total assets)
Financial soundness indicators:
              - non-performing loans (% of total loans)1), 2)
              - capital adequacy ratio (%) 1)
              - return on equity (%) 1), 3)
Bank loans to the private sector (year-on-year % change)

Lending for house purchase (year-on-year % change)

Loan to deposit ratio

CB liquidity as % of liabilities

Banks' exposure to countries receiving official financial assistance  (% of GDP)

Private debt (% of GDP)
Gross external debt (% of GDP)4)
            - Public
            - Private

Long term interest rates spread versus Bund (basis points)*

Credit default swap spreads for sovereign securities (5-year)*
Notes: 

2008

2009

2010

2011

2012

60.5

54.0

86.8

2.8
13.8

17.0

23.8

29.1

73.1

52.4

76.1

7.9
14.7

2.9

-2.0

9.4

73.4

52.7

…

11.9
15.0

-1.7

6.3

16.6

69.9

54.6

…

14.3
14.9

-2.6

7.6

13.0

69.5

…

…

17.3
14.7

-0.3

-0.7

7.7

129.7

118.3

120.0

118.6

113.9

0.5

…

…

2.9

…

…

1.0

…

39.0

2.1

…

39.3

…

…

…

1) Latest data (September 2012).
2) Non-performing loans are defined as loans and interest past due for over 90 days and/or for which legal proceeding were initiated against the 
3) After extraordinary items and taxes.
4) Latest data 2012Q3.

* M easured in basis points.

Source :

Bank for International Settlements and Eurostat (exposure to macro-financially vulnerable countries), IMF (financial soundness indicators), 
Commission (long-term interest rates), World Bank (gross external debt) and ECB (all other indicators).

39 

 
 
 
Table VIII. Labour market and social indicators 

Labour market indicators
Employment rate
(% of population aged 20-64)
Employment growth 
(% change from previous year)
Employment rate of women
(% of female population aged 20-64)
Employment rate of men 
(% of male population aged 20-64)
Employment rate of older workers 
(% of population aged 55-64)
Part-time employment (% of total employment, 
15 years and more)
Part-time employment of women  (% of women employment, 15 
years and more)
Part-time employment of men  (% of men employment, 15 years 
and more)
Fixed term employment (% of employees with a fixed term 
contract, 15 years and more)
Transitions from temporary 
to permanent employment
Unemployment rate1 (% of labour force, 
age group 15-74)

Long-term unemployment rate2 (% of labour force)

Youth unemployment rate 
(% of youth labour force aged 15-24)

Youth NEET rate (% of population aged 15-24)

Early leavers from education and training (% of pop. 18-24 with at 
most lower sec. educ. and not in further education or training)

Tertiary educational attainment (% of population 30-34 having 
successfully completed tertiary education)
Formal childcare (from 1 to 29 hours; % over the population less 
than 3 years)
Formal childcare (30 hours or over; % over the population less 
than 3 year)

Labour productivity per person employed (annual % change)

Hours worked per person employed  (annual % change)

Labour productivity per hour worked (annual % change; constant 
prices)

Compensation per employee (annual % change; constant prices)

Nominal unit labour cost growth (annual % change)

Real unit labour cost growth (annual % change)

Notes:

2007

2008

2009

2010

2011

2012

64.4

64.4

63.5

63.3

62.8

63.8

0.0

57.9

71.0

41.4

9.7

0.0

57.3

71.6

43.1

9.9

-2.0

56.3

70.7

42.6

9.8

10.4

10.8

10.6

9.2

1.6

:

6.4

3.2

20.1

13.3

9.1

1.3

1.1

5.8

2.4

18.6

11.6

9.1

1.0

1.0

6.9

2.2

20.8

13.9

-0.3

55.9

70.8

41.1

11.0

11.4

10.6

1.1

0.8

7.3

2.5

22.1

16.4

-1.1

55.7

69.9

40.0

10.5

11.5

9.6

1.5

:

7.4

3.1

23.7

17.4

1.9

56.3

71.4

41.4

10.2

11.1

9.5

1.7

:

7.1

3.2

22.7

16.8

17.3

15.9

16.6

18.4

17.5

17.4

13.9

16.0

16.8

18.1

20.4

21.8

3.0

3.0

5.9

0.5

5.4

7.5

15.2

1.5

6.0

2.0

7.3

0.0

7.3

14.5

22.9

6.6

4.0

1.0

-4.7

-0.6

-4.2

-5.9

2.9

-1.2

4.0

3.0

-0.9

-0.4

-0.5

-8.5

-2.4

-7.7

1.0

1.0

3.3

0.7

2.6

-2.7

0.9

-3.1

:

:

-1.5

-2.1

0.6

-2.1

6.4

1.5

1 Unemployed persons are all persons who were not employed, had actively sought work and were ready to begin working immediately or within 
two weeks. The labour force is the total number of people employed and unemployed.

2 Long-term unemployed are unemployed persons for at least 12 months.

Sources: 
Commission (EU Labour Force Survey and European National Accounts) 

40 

 
 
 
 
Expenditure on social protection benefits (% of 
GDP)
Sickness/Health care

Invalidity

Old age and survivors

Family/Children

Unemployment

Housing and Social exclusion n.e.c.

Total

of which:  means tested benefits
Social inclusion indicators
At-risk-of-poverty or social exclusion1 
(% of total population)
At-risk-of-poverty or social exclusion of children 
(% of people aged 0-17)
At-risk-of-poverty or social exclusion of elderly 
(% of people aged 65+)
At-Risk-of-Poverty rate2 (% of total population)
Severe Material Deprivation3  (% of total population)
Share of people living in low work intensity households4 (% of 
people aged 0-59)

In-work at-risk-of poverty rate (% of persons employed)

Impact of social transfers (excluding pensions) on reducing 
poverty
Poverty thresholds, expressed in national currency at constant 
prices 5

2006

2007

2008

2009

2010

3.25

1.09

5.73

1.76

0.33

0.00

12.45

0.80

3.53

1.27

6.02

1.67

0.27

0.00

13.19

0.84

3.54

1.38

7.12

1.49

0.20

0.02

14.07

0.68

4.15

1.62

8.78

1.70

0.40

0.02

16.88

0.91

4.44

1.59

8.82

1.68

0.56

0.02

17.39

1.22

2007

2008

2009

2010

2011

45.9

50.5

57.7

24.8

36.5

8.4

18.5

19.7

44.2

51.2

49.2

23.4

32.9

8.2

17.7

23.8

43.1

52.0

43.1

22.4

32.2

7.7

17.9

23.0

41.4

48.7

39.9

21.1

31.0

6.8

17.3

23.3

40.3

49.1

35.3

22.2

29.4

6.7

19.0

23.7

3507

3725

4218

4334

4218

Gross disposable income (households)

249556

330147

307384

308773

311133

Relative median poverty risk gap (60% of median equivalised 
income, age: total)

Notes:

34.8

32.3

32.0

30.6

31.8

1 People at-risk-of poverty or social exclusion (AROPE): individuals who are at-risk-of poverty (AROP) and/or suffering from severe 
material deprivation (SM D) and/or living in household with zero or very low work intensity (LWI).

2 At-risk-of poverty rate (AROP): share of people with an equivalised disposable income below 60% of the national equivalised median 
income. 

3 Share of people who experience at least 4 out of 9 deprivations: people cannot afford to i) pay their rent or utility bills, ii) keep their 
home adequately warm, iii) face unexpected expenses, iv) eat meat, fish, or a protein equivalent every second day, v) enjoy a week of 
holiday away from home once a year, vi) have a car, vii) have a washing machine, viii) have a colour tv, or ix) have a telephone.

4 People living in households with very low work intensity: share of people aged 0-59 living in households where the adults (excluding 
dependent children) work less than 20% of their total work-time potential during the previous 12 months.

5 For EE, CY, M T, SI, SK, thresholds in nominal values in Euros; HICP -  index 100 in 2006 (2007 survey refers to 2006 incomes)

Sources: 
For expenditure for social protection benefits ESSPROS; for social inclusion EU-SILC.

41 

 
 
 
 
Table IX. Product market performance and policy indicators 

Performance indicators

Labour productivity1 total economy (annual 
growth in %)
Labour productivity1 in manufacturing (annual 
growth in %)
Labour productivity1 in electricity, gas, steam and 
air conditioning supply (annual growth in %)
Labour productivity1 in the construction sector 
(annual growth in %)
Total number of patent2 applications per million of 
labour force

Policy indicators

Enforcing contracts 3 (days)
Time to start a business 3 (days)
R&D expenditure (% of GDP)
Tertiary educational attainment 
(% of 30-34 years old population)
Total public expenditure on education 
(% of GDP)

Product market regulation4, Overall
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Retail
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Network Industries 5
(Index; 0=not regulated; 6=most regulated)

2003-
2007

7.3

7.6

1.2

6.6

2.4

2003-
2007

537

18

0.4

2008

2009

2010

2011

2012

7.3

4.8

-4.7

-0.9

3.3

-1.5

n.a.

n.a.

n.a.

n.a.

19.0

n.a.

n.a.

n.a.

n.a.

14.1

n.a.

n.a.

n.a.

n.a.

3.4

3.5

4.0

n.a.

n.a.

2008

2009

2010

2011

2012

512

9

0.6

512

9

0.5

512

9

0.5

512

14

0.5

512

10

n.a.

11.4

16.0

16.8

18.1

20.4

21.8

3.62

n.a.

4.24

3.53

n.a.

n.a.

2007

2008

2009

2010

2011

2012

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Notes:
1 Labour productivity is defined as gross value added (in constant prices) divided by the number of persons employed.
2 Total number of patent applications to the European Patent Office (EPO) per million of labour force
3 The methodologies, including the assumptions, for this indicator are presented in detail on the website 
http://www.doingbusiness.org/methodology. 
4 The methodologies of the product market regulation indicators are presented in detail on the website 
http://www.oecd.org/document/1/0,3746,en_2649_34323_2367297_1_1_1_1,00.html. The latest available product market 
regulation indicators refer to 2003 and 2008, except for Network Industries.
5 Aggregate Energy, Transport and Communications Regulation (ETCR).
*figure for 2007.

Source :
Commission, World Bank - Doing Business  (for enforcing contracts and time to start a business) and OECD (for the 
product market regulation indicators). 

42 

 
 
 
 
 
 
Table X. Green Growth  

Green Growth performance

Macroeconomic
Energy intensity 
Carbon intensity 
Resource intensity (reciprocal of resource productivity)
Waste intensity 
Energy balance of trade 
Energy weight in HICP
Difference between change energy price and inflation 
Environmental taxes over labour taxes
Environmental taxes over total taxes

Sectoral 

Industry energy intensity 
Share of energy-intensive industries in the economy
Electricity prices for medium-sized industrial users**
Gas prices for medium-sized industrial users***
Public R&D for energy 
Public R&D for the environment
Recycling rate of municipal waste
Share of GHG emissions covered by ETS*
Transport energy intensity
Transport carbon intensity
Security of energy supply
Energy import dependency

Diversification of oil import sources 
Diversification of energy mix
Share renewable energy in energy mix

kgoe / €
kg / €
kg / €
kg / €
% GDP
%
%
ratio
ratio

kgoe / € 
% GDP
€ / kWh
€ / kWh
% GDP
% GDP
ratio
%
kgoe / €
kg / €

%

HHI
HHI
%

2002-
2006

0.78
2.96
6.05
n.a.
-2.6%
n.a.
n.a.
19.1%
7.8%

0.54
10.9
n.a.
n.a.
n.a.
n.a.
1.1%
n.a.
n.a.
n.a.

n.a.

n.a.
n.a.
n.a.

2007

2008

2009

2010

2011

0.66
2.44
6.96
n.a.
-2.6%
19
2.8
17.8%
7.2%

0.42
10.3
0.09
0.03
0.03%
0.01%
0.4%
47.0%
0.51
1.49

31.5%

0.30
0.25
11.7%

0.61
2.22
8.34
2.86
-2.9%
18
1.3
15.5%
6.4%

0.40
9.8
0.09
0.03
0.03%
0.02%
0.9%
44.4%
0.55
1.62

27.7%

0.36
0.24
13.2%

0.58
2.00
7.01
n.a.
-1.6%
17
-0.5
16.1%
7.1%

0.29
27.2
0.08
0.02
0.02%
0.02%
1.1%
40.0%
0.62
1.81

20.2%

0.34
0.23
14.8%

0.58
1.99
n.a.
3.59
-2.2%
17
-2
18.6%
7.7%

0.29
n.a.
0.08
0.02
0.01%
0.03%
1.1%
39.8%
n.a.
n.a.

21.7%

0.27
0.23
16.4%

0.58
n.a.
n.a.
n.a.
-2.7%
18
1
n.a.
n.a.

n.a.
n.a.
0.08
0.02
0.02%
0.02%
n.a.
41.5%
n.a.
n.a.

21.3%

n.a.
0.23
13.9%

Country-specific notes: 
The year 2012 is not included in the table due to lack of data.
General explanation of the table items:
Source: Eurostat unless indicated otherwise; ECFIN elaborations indicated below
All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2000 prices)
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)
          Carbon intensity: Greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)
          Resource intensity: Domestic M aterial Consumption (in kg) divided by GDP (in EUR)
          Waste intensity: waste (in kg) divided by GDP (in EUR)
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP  
Energy weight in HICP: the share of the "energy" items in the consumption basket used in the construction of the HICP
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual %-change)
Environmental taxes over labour or total taxes: from DG TAXUD's database "Taxation trends in the European Union"
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2005 EUR) 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP
Electricity and gas prices medium industrial users: consumption band 500  - 2000M Wh and 10000 - 100000 GJ;  figures excl. VAT.
Recycling rate of municipal waste: ratio of municipal waste recycled over total municipal waste
Public R&D for energy or for the environment: government spending on R&D (GBAORD) for these categories as % of GDP
Share of GHG emissions covered by ETS: based on greenhouse gas emissions as reported by M ember States to EEA (excl LULUCF)
Transport energy intensity: final energy consumption of transport activity (kgoe) divided by transp industry gross value added (2005 EUR)
Transport carbon intensity:  greenhouse gas emissions in transport activity divided by gross value added of the transport sector
Energy import dependency: net energy imports divided by gross inland energy consumption incl. energy consumption international bunkers
Diversification of oil import sources: Herfindahl index (HHI), calculated as the sum of the squared market shares of countries of origin 
Diversification of the energy mix: Herfindahl Index over natural gas, total petrol products, nuclear heat, renewable energies and solid fuels
Share renewable energy in energy mix: %-share in  gross inland energy consumption, expressed in tonne oil equivalents
*Provisional figures provided by DG CLIM A. Final figures will be available on 15/04.
** For 2007 average of S1 & S2 for DE, LU, NL, FI, SE & UK. Other countries only have S2.
*** For 2007 average of S1 & S2 for IT, NL, FI, SE & UK. Other countries only have S2.

43