Recommendation for a COUNCIL DECISION establishing that no effective action has been taken by Romania in response to the Council Recommendation of 14 June 2019
Date: 2019-11-20
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Romania, budget deficit, budgetary assessment, budgetary control, economic policy, gross domestic product, medium-term forecast, multilateral surveillance, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 20.11.2019 COM(2019) 913 final  Recommendation for a COUNCIL DECISION establishing that no effective action has been taken by Romania in response to the Council Recommendation of 14 June 2019 {SWD(2019) 932 final}  
 
 
Recommendation for a 

COUNCIL DECISION 

establishing that no effective action has been taken by Romania in response to the 
Council Recommendation of 14 June 2019 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union,  

Having  regard  to  Council  Regulation  (EC)  No  1466/97  on  the  strengthening  of  the 
surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular the fourth subparagraph of Article 10(2) thereof, 

Having regard to the Recommendation from the European Commission, 

Whereas:  

(1) 

(2) 

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In June 2017 and June 2018, the Council found in accordance with Article 121(4) of 
the Treaty that in 2016 and 2017, respectively, there had been a significant observed 
deviation from Romania’s medium-term budgetary objective or from the adjustment 
path  towards  it.  In  view  of  those  established  significant  deviations,  the  Council 
issued Recommendations on 16 June 20172 and 22 June 20183, recommending that 
Romania  take  the  policy  measures  necessary  to  address  those  deviations.  The 
Council subsequently found that Romania had not taken effective action in response 
to  those  Recommendations  and  issued  revised  Recommendations  on  5  December 
20174  and  4  December  20185  respectively.  The  Council  subsequently  found  that 
Romania  had  not  taken  effective  action  in  response  to  those  Recommendations 
either. 

On  14  June  2019,  the  Council  found  that  in  2018  a  significant  observed  deviation 
from  the  adjustment  path  toward  the  medium-term  budgetary  objective  had  again 
occurred  in  Romania  and  issued  a  Recommendation  for  Romania  to  take  the 
necessary  measures  to  ensure  that  the  nominal  growth  rate  of  net  primary 
government  expenditure6  does  not  exceed  4.5%  in  2019  and  5.1%  in  2020, 
corresponding to an annual structural adjustment of 1.0% of gross domestic product 

OJ L 209, 2.8.1997, p. 1. 
OJ C 216, 6.7.2017, p. 1. 
OJ C 223, 27.6.2018, p. 3. 
OJ C 439, 20.12.2017, p. 1. 
OJ C 460, 21.12.2018, p. 1. 
Net primary government expenditure is comprised of total government expenditure excluding interest 
expenditure,  expenditure  on  Union  programmes  fully  matched  by  Union  funds  revenue  and  non-
discretionary  changes  in  unemployment  benefit  expenditure.  Nationally  financed  gross  fixed  capital 
formation is smoothed over a four-year period. Discretionary revenue measures or revenue increases 
mandated  by  law  are  factored  in.  One-off  measures  on  both  the  revenue  and  expenditure  sides  are 
netted out. 

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(GDP) in 2019 and 0.75% of GDP in 2020.7 It also recommended that Romania uses 
any  windfall  gains  for  deficit  reduction,  while  budgetary  consolidation  measures 
should secure a lasting improvement in the general government structural balance in 
a growth-friendly manner. The Council established a deadline of 15 October 2019 for 
Romania to report on the action taken in response to that Recommendation. 

On 25 September 2019 the Commission undertook an enhanced surveillance mission 
in Romania for the purpose of on-site monitoring under Article -11(2) of Regulation 
(EC) No 1466/97. After having transmitted its provisional findings to the Romanian 
authorities for comments, the Commission reported its findings to the Council on 20 
November  2019.  Those  findings  were  made  public.  The  Commission  report  finds 
that the Romanian authorities only plan to undertake structural adjustment from 2022 
and thus do not intend to act upon the Council Recommendation of 14 June 2019.  

On 15 October 2019, the Romanian authorities submitted a report on action taken in 
response  to  the  Council  Recommendation  of  14  June  2019.  The  report  does  not 
contain  a  comprehensive  projection  of  individual  budgetary  categories  nor  does  it 
include the budgetary impact  of  each mentioned measure. Thereby, the report does 
not  comply  with  the  reporting  requirements  recommended  by  the  Council.  In  the 
report, the authorities reiterated that their target for 2019 remains a headline deficit 
of  2.8%  of  GDP,  the  same  target  as  in  the  2019  Convergence  Programme.  If  this 
target  headline  deficit  were  to  be  achieved,  it  would  represent  only  a  marginal 
reduction  in  the  general  government  deficit  compared  to  2018,  despite  Romania 
experiencing  high  economic  growth.  For  2020,  the  authorities  target  a  headline 
deficit of 2.9% of GDP, which is higher than the target of 2.7% of GDP in the 2019 
Convergence  Programme.  Overall,  the  fiscal  impact  of  the  reported  measures  falls 
short of the requirement stated in the Council Recommendation of 14 June 2019. 

In 2019, based on the Commission 2019 autumn forecast, the growth of net primary 
government expenditure is projected to be 12.8%, well above the recommended rate 
of 4.5% (deviation of 2.5% of GDP). The structural balance is set to deteriorate by 
0.8% of GDP against the recommended improvement of 1.0% of GDP (deviation of 
1.8%  of  GDP).  Therefore,  both  pillars  point  to  a  deviation  from  the  recommended 
adjustment.  The  overall  assessment  confirms  a  deviation  from  the  recommended 
adjustment in 2019. 

In 2020, based on the Commission 2019 autumn forecast, the growth of net primary 
government expenditure is projected to be 11.1%, well above the recommended rate 
of 5.1% (deviation of 1.8% of GDP). The structural balance is set to deteriorate by 
0.8% of GDP against the recommended improvement of 0.75% of GDP (deviation of 
1.6% of GDP). Therefore, both pillars point to a risk of a deviation from the required 
adjustment of similar magnitude. The overall assessment confirms a deviation from 
the recommended adjustment in 2020. 

Moreover,  the  Commission  2019  autumn  forecast  projects  a  general  government 
deficit  of  3.6%  in  2019  and  4.4%  in  2020,  which  is  above  the  3%  of  GDP  Treaty 
reference value. 

The  above  findings  lead  to  the  conclusion  that  Romania's  response  to  the  Council 
Recommendation of 14 June 2019 has been insufficient, 

(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

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OJ C 210, 21.6.2019, p. 1. 

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HAS ADOPTED THIS DECISION:  

Article 1 

Romania  has  not  taken  effective  action  in  response  to  the  Council  Recommendation  of  14 
June 2019. 

This Decision is addressed to Romania. 

Done at Brussels, 

Article 2 

For the Council 
The President 

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