Proposal for a COUNCIL DECISION on the existence of an excessive deficit in Romania
Date: 2020-03-04
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: Romania, budget deficit, economic policy, economic reform, gross domestic product, public debt, public finance, stability pact

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   EUROPEAN COMMISSION  Brussels, 4.3.2020  COM(2020) 89 final 2020/0038 (NLE)  Proposal for a COUNCIL DECISION on the existence of an excessive deficit in Romania  
 
2020/0038 (NLE) 

Proposal for a 

COUNCIL DECISION 

on the existence of an excessive deficit in Romania 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union  (TFEU),  and  in 
particular Article 126(6) thereof, 

Having regard to the proposal from the Commission, 

Having regard to the observations made by Romania, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

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According  to  Article  126  TFEU  Member  States  shall  avoid  excessive  government 
deficits. 

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

The  excessive  deficit  procedure  (EDP)  under  Article  126  TFEU,  as  clarified  by 
Council  Regulation  (EC)  No  1467/97  on  speeding  up  and  clarifying 
the 
implementation  of  the  excessive  deficit  procedure1  (which  is  part  of  the  SGP), 
provides for a decision on the existence of an excessive deficit. Protocol No 12 on the 
EDP,  annexed  to  the  Treaty  on  the  European  Union  and  the  TFEU,  sets  out  further 
provisions  relating to  the implementation  of the  excessive deficit procedure. Council 
Regulation  (EC)  No  479/20092  lays  down  detailed  rules  and  definitions  for  the 
application of those provisions. 

According  to  Article  126(5)  TFEU,  if  the  Commission  considers  that  an  excessive 
deficit  in  a  Member  State  exists  or  may  occur,  it  shall  address  an  opinion  to  the 
Member State concerned and shall inform the Council accordingly. Having taken into 
account its report adopted pursuant to Article 126(3) TFEU and having regard to the 
opinion of the Economic and Financial Committee adopted pursuant to Article 126(4) 
TFEU, the Commission concluded that an excessive deficit exists in Romania. On [4 
March]  2020,  the  Commission  therefore  addressed  such  an  opinion  to  Romania  and 
informed the Council accordingly.3 

OJ L 209, 2.8.1997, p. 6. 
OJ L 145, 10.6.2009, p. 1. 
All EDP-related documents for Romania can be found at: https://ec.europa.eu/info/business-economy-
euro/economic-and-fiscal-policy-coordination/eu-economic-governance-monitoring-prevention-
correction/stability-and-growth-pact/corrective-arm-excessive-deficit-procedure/closed-excessive-
deficit-procedures/romania_en#ongoing-procedure 

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(5) 

(6) 

(7) 

(8) 

(9) 

Article 126(6) TFEU states that the Council is to consider any observations which the 
Member  State  concerned  may  wish  to  make  before  deciding,  after  an  overall 
assessment,  whether  an  excessive  deficit  exists.  In  the  case  of  Romania,  that  overall 
assessment leads to the following conclusions. 

According to the data notified by the Romanian authorities on 30 September 2019 and 
subsequently  validated  by  Eurostat,  the  general  government  deficit  in  Romania 
reached 3.0% of GDP in 2018, while general government debt stood at 35.0% of GDP. 
Taking into account  revised GDP figures announced by the national  statistical  office 
after the publication of Eurostat’s press release, those ratios changed slightly, with the 
deficit  standing  at  2.9%  of  GDP  and  debt  at  34.7%  of  GDP  in  2018.  For  2019,  the 
notification planned a general government deficit of 2.8% of GDP. 

On  10  December  2019,  the  government  adopted  the  Fiscal-Budgetary  Strategy  for 
2020-2022 (henceforth, the Fiscal Strategy), with a general  government deficit  target 
of 3.8% of GDP in 2019. This is above and not close to the Treaty reference value of 
3%  of  GDP.  The  excess  over  the  Treaty  reference  value  in  2019  is  also  not 
exceptional,  as  it  neither  results  from  an  unusual  event  nor  from  a  severe  economic 
downturn  in  the  sense  of  the  Treaty  and  the  Stability  and  Growth  Pact  (SGP).  The 
Commission 2020 winter forecast projects real GDP growth of 3.9% in 2019 and 3.8% 
in 2020 while the output gap is projected to be around zero. One-off items amounted 
to 0.1% of GDP in 2019 and were due to a refund of the environment stamp duty on 
cars. The planned excess over the 3%-of-GDP reference value is not temporary for the 
purposes  of  the  Treaty  and  the  SGP  either.  The  Commission  2020  winter  forecast, 
extended with fiscal variables, projects a general government deficit of 4.0% of GDP 
in  2019,  4.9%  in  2020  and  6.9%  in  2021.  The  projected  increase  in  the  deficit  is 
mostly driven by significant pension increases. In the Fiscal Strategy, the government 
also projects that the general government deficit will remain above the reference value 
in 2020 and 2021, with a forecast deficit of 3.6% of GDP in 2020 and 3.4% in 2021. 
The deficit criterion in the TFEU is therefore prima facie not fulfilled. 

Romania’s  general  government  debt  amounted  to  34.7%  of  GDP  in  2018.  Both  the 
Commission  2020  winter  forecast,  extended  with  fiscal  variables,  and  the  Fiscal 
Strategy project general government debt to increase until 2021, but to remain below 
the Treaty reference value. According to the  Fiscal Strategy, general government debt 
is  projected  to  increase  up  to  37.8%  of  GDP  in  2021.  The  Commission  projects  a 
sharper increase, to 41.9% of GDP in 2021. Hence the debt  criterion in the TFEU is 
fulfilled. 

In line with the requirements of Article 126(3) TFEU, the Commission also analysed 
all  the  relevant  factors  in  its  report  under  Article  126(3)  TFEU.  As  laid  down  in 
Article 2(4) of Regulation (EC) No 1467/97, whenever the government debt-to GDP 
ratio does not exceed the reference value, relevant factors will be taken into account in 
the steps leading to the decision on the existence of an excessive deficit. The relevant 
factors, 
to  Council 
lack  of  effective  action 
recommendations  under  the  significant  deviation  procedure  since  2017,  limited 
progress  made  by  Romania  with  respect  to  structural  reforms  and  the  high  fiscal 
sustainability risks facing Romania in the medium and long term, have been taken into 
account in the assessment of compliance with the deficit criterion. They do not modify 
the conclusion that the deficit criterion in the TFEU is not fulfilled, 

in  particular the 

response 

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HAS ADOPTED THIS DECISION: 

Article 1 

From an overall assessment it follows that an excessive deficit exists in Romania due to non-
compliance with the deficit criterion. 

This Decision is addressed to Romania. 

Done at Brussels, 

Article 2 

For the Council 
The President 

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