Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform Programme of Romania and delivering a Council opinion on the 2020 Convergence Programme of Romania
Date: 2020-05-20
Institutions: European Commission, Secretariat-General
Subjects: Romania, economic policy, economic recovery, economic reform, epidemic, fiscal policy, health policy, infectious disease, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 20.5.2020  COM(2020) 523 final  Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform Programme of  Romania and delivering a Council opinion on the 2020 Convergence Programme of Romania  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2020 National Reform Programme of Romania and delivering a Council opinion 
on the 2020 Convergence Programme of Romania 

THE COUNCIL OF THE EUROPEAN UNION, 

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

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular Article 9(2) thereof, 

Having  regard  to  Regulation  (EU)  No  1176/2011  of  the  European  Parliament  and  of  the 
Council  of  16  November  2011  on  the  prevention  and  correction  of  macroeconomic 
imbalances2, and in particular Article 6(1) thereof, 

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

(2) 

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On  17  December  2019,  the  Commission  adopted  the  Annual  Sustainable  Growth 
Strategy,  marking  the  start  of  the  2020  European  Semester  for  economic  policy 
coordination. It took due account of the European Pillar of Social Rights, proclaimed 
by the European Parliament, the Council and the Commission on 17 November 2017. 
On  17  December  2019,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the 
Commission also adopted the Alert Mechanism Report, in which it identified Romania 
as one of the Member States for which an in-depth review would be carried out.  
The 2020 country report for Romania3 was published on 26 February 2020. It assessed 
Romania’s  progress  in  addressing  the  country-specific  recommendations  adopted  by 
the Council on 9 July 20194, the follow-up given to the recommendations adopted in 
previous  years  and  Romania’s  progress  towards  its  national  Europe  2020  targets.  It 

OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 
SWD(2020) 522 final. 
OJ C 301, 5.9.2019, p. 117. 

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(3) 

(4) 

(5) 

(6) 

also  included  an  in-depth  review  under  Article 5  of  Regulation  (EU)  No  1176/2011, 
the  results  of  which  were  also  published  on  26  February  2020.  The  Commission’s 
analysis led it to conclude that Romania is experiencing macroeconomic imbalances. 
In particular, vulnerabilities are linked to cost-competitiveness and a widening current 
account  deficit  in  a  context  of  an  expansionary  fiscal  policy  and  an  unpredictable 
business environment. 

On 11 March 2020, the World Health Organization officially declared the COVID-19 
outbreak  a  global  pandemic.  It  is  a  severe  public  health  emergency  for  citizens, 
societies  and  economies.  It  is  putting  national  health  systems  under  severe  strain, 
disrupting  global  supply  chains,  causing  volatility  in  financial  markets,  triggering 
consumer  demand  shocks  and  having  negative  effects  across  various  sectors.  It  is 
threatening  people’s  jobs,  their  incomes  and  companies’  business.  It  has  delivered  a 
major  economic  shock  that  is  already  having  serious  repercussions  in  the  European 
Union. On 13 March 2020, the Commission adopted a Communication5 calling for a 
coordinated economic response to the crisis, involving all actors at national and Union 
level. 

Several Member States have declared a state of emergency or introduced emergency 
measures.  Any  emergency  measures  should  be  strictly  proportionate,  necessary, 
limited in time, and in line with European and international standards. They should be 
subject to democratic oversight and independent judicial review. 

On  20  March  2020,  the  Commission  adopted  a  Communication  on  the  activation  of 
the general escape clause of the Stability and Growth Pact6. The clause, as set out in 
Articles 5(1), 6(3), 9(1) and 10(3) of Regulation (EC) 1466/97 and Articles 3(5) and 
5(2) of Regulation (EC) 1467/97, facilitates the coordination of budgetary policies in 
times  of  severe  economic  downturn.  In  its  Communication,  the  Commission  shared 
with the Council its view that, given the expected severe economic downturn resulting 
from the COVID-19 outbreak, the current  conditions  permit activation of the clause. 
On  23  March  2020,  the  Ministers  of  Finance  of  the  Member  States  agreed  with  the 
assessment of the Commission. The activation of the general escape clause allows for 
a temporary departure from the adjustment path towards the medium-term budgetary 
objective,  provided  that  this  does  not  endanger  fiscal  sustainability  in  the  medium 
term. For the corrective arm, the Council may also decide, on a recommendation from 
the  Commission,  to  adopt  a  revised  fiscal trajectory.  The  general escape  clause  does 
not suspend the procedures of the Stability and Growth Pact. It allows Member States 
to depart from the budgetary requirements that would normally apply while enabling 
the  Commission  and  the  Council  to  undertake  the  necessary  policy  coordination 
measures within the framework of the Pact. 

Continued  action  is  required  to  limit  and  control  the  spread  of  the  pandemic, 
strengthen  the  resilience  of  the  national  health  systems,  mitigate  the  socio-economic 
consequences through supportive measures for business and households and to ensure 
adequate  health  and  safety  conditions  at  the  workplace  with  a  view  to  resuming 
economic  activity.  The  Union  should  fully  use  the  various  tools  at  its  disposal  to 
support  Member  States’  efforts  in  those  areas.  In  parallel,  Member  States  and  the 
Union should work together to prepare the measures necessary to get back to a normal 
functioning of our societies and economies and to sustainable growth, integrating inter 

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COM(2020) 112 final. 
COM(2020) 123 final. 

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(7) 

(8) 

(9) 

alia the  green  transition and  the  digital  transformation,  and  drawing  all  lessons  from 
the crisis. 

The  COVID-19  crisis  has  highlighted  the  flexibility  that  the  single  market  offers  to 
adapt  to  extraordinary  situations.  However,  in  order  to  ensure  a  swift  and  smooth 
transition to the recovery phase and the free movement of goods, services and workers, 
exceptional measures  that  prevent  the  single  market  from  functioning  normally  must 
be removed as soon as they are no longer indispensable. The current crisis has shown 
the need for crisis preparedness plans in the health sector, which include in particular 
improved  purchasing  strategies,  diversified  supply  chains  and  strategic  reserves  of 
essential  supplies.  They  are  key  elements  for  developing  broader  crisis  preparedness 
plans.  
The  Union  legislator  has  already  amended  the  relevant  legislative  frameworks7  to 
allow  Member  States  to  mobilise  all  unused  resources  from  the  European  Structural 
and  Investment  Funds  so  they  can  address  the  exceptional  effects  of  the  COVID-19 
pandemic. Those amendments will provide additional flexibility, as well as simplified 
and streamlined procedures. To alleviate cash flow pressures, Member States can also 
benefit  from  a  100%  co-financing  rate  from  the  Union  budget  in  the  2020-2021 
accounting year. Romania is encouraged to make full use of those possibilities to help 
the individuals and sectors most affected by the challenges. 

The  socio-economic  consequences  of  the  pandemic  are  likely  to  be  unevenly 
distributed  across  Romanian  regions  due  to  significant  investment  and  labour 
productivity gaps and different specialisation patterns. This entails a substantial risk of 
widening regional disparities within Romania reversing the already observed trend of 
slightly  reducing  disparities  between  the  capital  city  and  the  rest  of  the  regions  or 
between urban and rural areas. Combined with the risk of a temporary unravelling of 
the  convergence  process  between  Member  States,  the  current  situation  calls  for 
targeted policy responses. 

(10)  On 8 May 2020, Romania submitted its 2020 National Reform Programme and, on 14 
May  2020,  its  2020  Convergence  Programme.  In  order  to  take  account  of  their 
interlinkages, the two programmes have been assessed at the same time. 

(11)  Romania is currently in the corrective arm of the Stability and Growth Pact.  

(12)  On 3 April 2020, the Council decided that an excessive deficit existed in Romania due 
to  non-compliance  with  the  deficit  criterion  in  2019.  The  decision  was  based  on  the 
updated fiscal targets by the government, which reflected the budget execution data for 
the  year  to  date.  The  2019  general  government  deficit  outturn  of  4,3%  of  GDP 
confirmed  the  breach.  The  breach  was  the  result  of  a  continuous  build-up  of  fiscal 
imbalances  due  to  an  expansionary  fiscal  policy  since  2016,  in  a  period  of  strong 

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Regulation (EU) 2020/460 of the European Parliament and of the Council of 30 March 2020 amending 
Regulations  (EU)  No  1301/2013,  (EU)  No  1303/2013  and  (EU)  No  508/2014  as  regards  specific  measures  to 
mobilise  investments  in  the  healthcare  systems  of  Member  States  and  in  other  sectors  of  their  economies  in 
response to the COVID-19 outbreak (Coronavirus Response Investment Initiative) (OJ L 99, 31.3.2020, p. 5) and 
Regulation  (EU)  2020/558  of  the  European  Parliament  and  of  the  Council  of  23  April  2020  amending 
Regulations  (EU)  No  1301/2013  and  (EU)  No  1303/2013  as  regards  specific  measures  to  provide  exceptional 
flexibility for the use of the European Structural and Investments Funds in response to the COVID-19 outbreak 
(OJ L 130, 24.4.2020, p. 1). 

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economic  growth.  Systematic  and  repeated  derogations  from  national  fiscal  rules 
during  that  period  rendered  those  rules  largely  ineffective.  Moreover,  Romania  had 
repeatedly failed to take effective action in response to the Council’s recommendations 
made to it in the context of the significant deviation procedure. On 3 April 2020, the 
Council also issued a recommendation with a view to bringing an end to the situation 
of an excessive government deficit in Romania by 2022 at the latest. 

(13)  The long-term sustainability of Romania’s public finances was already at risk prior to 
the  COVID-19  outbreak,  as  a  result  of  high  budget  deficits  and  the  projected 
significant  rise  in  ageing  costs,  in  particular  pensions.  Old-age  pensions  were 
increased by 15% in September 2019 and, based on a pension law adopted in summer 
2019, are due to increase by 40% in September 2020 and be additionally recalculated 
upward in  September 2021. Pension spending would  thus increase substantially over 
the  period  2020  to  2022.  Fiscal  sustainability  risks  are  further  heightened  by  the 
impact of the COVID-19 pandemic on economic activity and the fiscal effort required 
to cushion it. Prior fiscal policy decisions have left Romania with small fiscal buffers 
to deal with the outcome of the COVID-19 outbreak. 

(14) 

(15) 

In  its 2020 Convergence Programme,  the government headline  balance is  planned to 
deteriorate from a deficit of 4,3% of GDP in 2019 to a deficit of 6,7% of GDP in 2020, 
while the general government debt-to-GDP ratio is expected to increase from 35,2% in 
2019  to  40,9%  in  2020.  The  macroeconomic  and  fiscal  outlook  is  affected  by  high 
uncertainty  due  to  the  COVID-19  pandemic.  In  addition,  there  are  country-specific 
risks underlying the budgetary projections, namely some revenue items do not seem to 
be  estimated  in  line  with  the  underlying  macroeconomic  projections,  while  the 
moderation of some current expenditure items seem to be based on fiscal consolidation 
measures that are not specified in the Programme. 

In response to the COVID-19 pandemic, and as part of a coordinated Union approach, 
Romania has adopted budgetary measures to increase the capacity of its health system, 
contain  the  pandemic,  and  provide  relief  to  those  individuals  and  sectors  that  have 
been  particularly  affected.  According  to  the  2020  Convergence  Programme,  those 
budgetary  measures  amount  to  1,2%  of  GDP.  The  measures  include  a  technical 
unemployment  benefit  to  employees  and  similar  benefits  to  other  categories  of 
workers,  medical  equipment  and  other  expenditures  to  help  fight  COVID-19  and 
bonuses  for  employees  in  the  health  sector  working  with  patients  infected  with 
COVID-19.  In  addition,  the  government  has  announced  measures  that,  while  not 
having  a  direct  budgetary  impact,  will  contribute  to  support  liquidity  to  businesses. 
Those  measures  include  tax  deferrals,  speeding  up  of  VAT  reimbursements,  loan 
guarantees for small and medium-sized enterprises (SMEs) a temporary moratorium of 
payment of bank loan instalments for households and SMEs and a deferral of rent and 
utility bills for SMEs. Overall, the measures taken by the government of Romania are 
in line with the guidelines set out in the Commission Communication on a coordinated 
economic response to the COVID-19 outbreak. 

(16)  Based on the Commission 2020 spring forecast under unchanged policies, Romania’s 
general  government  balance  is  forecast  to  be  -9,2%  of  GDP  in  2020  and  -11,4%  of 
GDP  in  2021.  The  general  government  debt-to-GDP  ratio  is  projected  by  the 
Commission to reach 46,2% in 2020. 

(17)  Romania declared a state of emergency on 16 March 2020. As of 25 March 2020 all 
schools and shops, except for those selling primary necessity products, were ordered to 
close and border-crossing restrictions came into force. Movement in public areas was 

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allowed  only  in  limited  cases,  with  stricter  measures  for  people  above  65.  Romania 
also introduced a ban on international travel to certain countries and put several cities 
into  strict  quarantine.  This  situation  has  taken  a  toll  on  the  production  sector  of  the 
economy, as the lockdown measures have had a severely negative impact on economic 
activity.  In  the  industrial  sector,  several  manufacturers  shut-down  production  in 
March, with strong spill-over effects in key sectors, such as the automotive industry. 
Similar developments are observed in the retail and hospitality sectors. The aggregated 
effect will push the economy into a recession in 2020. The state of emergency ended 
on  14  May  2020  and  Romania  announced  that  it  would  gradually  implement  de-
confinement  measures.  Starting  on  15  May  2020,  measures  were  introduced 
concerning the easing of movement inside cities, the partial reopening of commercial 
retailing and the mandatory use of protection masks in closed public and commercial 
spaces,  public  transport  and  workplaces.  Some  manufacturers  from  the  automotive 
industry  gradually resumed activity in early May 2020. The government is preparing 
further measures aimed at relaunching the economy. 

(18)  The pandemic has put the health system under unprecedented pressure. The crisis hit a 
system  characterised  by  structural  weaknesses,  such  as  low  spending  and  unequal 
access to healthcare. In this context, improving the resilience of the health system and 
its capacity to respond to shocks represents a key challenge. As part of the immediate 
response,  Romania  purchased  critical  medical  products  and  included  COVID-19 
related medical costs in the minimum benefit package for the uninsured. Considerable 
health  workforce  shortages,  including  of  family  physicians,  as  well  as  outdated 
medical  facilities,  lack  of  medical  products,  insufficient  training  for  health  workers 
and  limited  continuity  and  integration  between  different  levels  of  care  weaken  the 
resilience of the health system. Reported unmet medical needs were on the rise already 
before the COVID-19 crisis and access to healthcare is likely to have deteriorated. The 
pandemic further exposed regional disparities and the gap in healthcare coverage for 
low-income groups and the elderly. In the longer run, population ageing and migration 
are challenges that put increasing pressure on the sustainability of the health system. In 
light of COVID-19, it is equally important  to address  structural  issues, including  the 
development  of  preventive,  outpatient  and  community  based  care  with  well-targeted 
public  policy  measures.  Long-term  investment  will  be  needed  to  reinforce  the 
Romanian  health  system  by  securing  health  workers  and  equipment,  enhancing 
technological  and  applied  research  and  improving  the  coverage  and  accessibility  of 
health services to all citizens, also in non-urban areas, including through the use of e-
health services. 

(19)  Fast economic growth in recent years triggered an improvement in social conditions. 
Gross  disposable  household  income  increased  by  5,7%  in  2019.  The  risk  of  poverty 
and social exclusion, at 31,2% in 2019, was among the highest in the EU, though on a 
steadily declining path. However, the pandemic’s impact on the economy may lead to 
the  deterioration  of  social  conditions.  Poverty  and  social  exclusion,  including  child-
poverty,  in-work  poverty  and  income  inequalities  are  expected  to  increase,  with 
vulnerable  groups  such  as  non-standard  workers,  undeclared  workers,  the  self-
employed,  Roma,  people  with  disabilities,  the  elderly  and  the  homeless  among  the 
most  exposed.  Coverage  and  adequacy  of  social  protection  measures  and  the 
effectiveness  of  the  tax  and  benefit  system  in  redistributing  income  remain  limited. 
Children  in  rural  areas  and  informal  settlements  have  limited  access  to  good  quality 
early childhood education and care, adequate nutrition, health care and housing. Social 
transfers have a very limited impact on reducing poverty and the social reference index 
used as a basis for most social benefits has not been updated since 2008. Adequacy of 

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the minimum income support remains one of the lowest in the EU. Though adopted in 
2016,  the  minimum  inclusion  income  reform  has  been  further  postponed  to  2021. 
Social  and  essential  services  remain  largely  insufficient,  including  in  areas  such  as 
water and sanitation, energy and housing. Moreover, territorial distribution is uneven 
and  characterised  by  significant  rural-urban  and  regional  disparities.  This  may  limit 
the  capacity  to  counteract  the  impact  of  the  pandemic.  The  potential  of  the  social 
economy to improve social conditions is still untapped. 

likely 

to  deepen, 

(20)  Over  2019,  labour  market  developments  remained  positive,  but  disparities  between 
regions,  rural  and  urban  areas  and  socio-economic  groups  persist.  High  levels  of 
inactivity  are  registered,  in  particular  for  women,  young  people,  the  low-skilled, 
people  with  disabilities  and  older  people.  In  the  context  of  the  COVID-19  outbreak, 
increasing 
existing  challenges  are 
unemployment and inactivity. According to the Commission forecast, unemployment 
is  expected  to  rise  to  6,5%  in  2020  and  recover  to  5,4%  in  2021.  Undeclared  work 
remains  a  challenge  and  its  negative  impact  might  be  exacerbated  in  the  current 
context, underlining the need to support the transition into declared work. Therefore, 
timely  tailor-made  services  addressing  the  needs  of  vulnerable  groups  and  workers 
affected  by  the  crisis  are  essential.  In  addition  to  the  recently  initiated  technical 
unemployment scheme, developing the access to short-time work schemes, promoting 
income support measures and flexible working arrangements and teleworking for the 
affected workers, with the involvement of social partners, are crucial to strengthening 
the resilience of the labour market in the short and long term.  

together  with  rapidly 

(21)  Persisting  skills  mismatches  and  skills  shortages,  underpinned  by  demographic 
developments  and  the  limited  labour  market  relevance  of  education  and  training, 
limited Romania’s economic growth potential even before the pandemic. The share of 
adults participating in learning activities, at 1,3% in 2019, is one of the lowest in the 
EU.  Low  participation  in  early  childhood  education  and  care  widens  inequality  of 
opportunities  between  pupils.  The  equity,  inclusiveness  and  quality  of  education 
remain  important  challenges  and  strategic  reforms  in  this  area  are  needed.  Romania 
has  a  high  share  of  early  leavers  from  education  and  training  (15,3%  in  2019)  and 
young  people  neither  in  education,  employment  or  training  (14,7%,  a  slight  increase 
on  2018).  There  is  still  no  integrated,  nation-wide  mechanism  targeting  early  school 
leaving.  Educational  outcomes,  especially  in  rural  and  economically  deprived  areas, 
are not improving. Participation in higher education is low and remains insufficiently 
aligned  to  labour  market  needs.  The  number  of  graduates  in  science,  technology, 
engineering  and  mathematics  (STEM)  remains  particularly  low.  Romania  scores 
poorly  on  many  components  of  the  Digital  Economy  and  Social  Index,  including 
digital  public  services,  digital  skills  of  the  overall  population  and  digitalisation  of 
businesses.  Basic  digital  skills  and  basic  software  skills  are  among  the  lowest  in  the 
EU. Due to inadequate digital infrastructure, teaching materials and insufficient digital 
skills,  the  shift  to  distance  learning  caused  by  the  COVID-19  outbreak  poses 
challenges for education and training institutions, educators and students, in particular 
for disadvantaged students and Roma.  

(22)  Due to  the pandemic and the resulting  lockdown  measures, supply chains have  been 
interrupted throughout the country and businesses have had to reduce activities or even 
close,  and  people  have  been  unable  to  work.  Businesses  of  all  sizes  –  particularly 
SMEs  –  are  strongly  affected  by  the  disruption  of  trade  and  the  lockdown  and  are 
facing  liquidity  constraints  and  bankruptcy  risks.  The  government  adopted  a  set  of 
measures  combining  tailored  assistance  to  businesses  and  income  protection  for  all 

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workers  affected.  To  recover  from  the  crisis,  additional  resources  will  be  needed  to 
keep  supporting  businesses  and  households.  The  services  sector  will  need  particular 
attention as it is hardest hit and some sub-sectors are expected to contract for longer 
than  manufacturing.  Government  response  measures  include  the  creation  of  a  public 
guarantee  scheme  (‘IMM  Invest’)  with  an  envelope  of  RON  15  billion  to  offer  state 
guarantees to SMEs contracting interest-free loans to finance investment and provide 
working  capital.  These  guarantees  will  also  be  beneficial  for  banks,  which  need  to 
remain  well  capitalised  and  liquid  in  order  to  ensure  the  necessary  flow  of  credit  to 
households  and  companies.  Also,  due  to  the  so  far  rather  limited  role  of  banks  in 
providing  credit  to  businesses  –  in  particular  to  innovative  SMEs  –  loan  guarantees 
alone might not be enough. 

(23)  To  foster  the  economic  recovery,  it  will  be  important  to  front-load  mature  public 
investment  projects  and  promote  private  investment,  including  through  relevant 
reforms.  The  crisis  showed  even  more  clearly  that  Romania  has  a  critical  need  to 
relaunch  public  infrastructure  works  in  fields  such  as  sustainable  transport,  clean 
energy, environmental and digital service infrastructure. Urban transport suffers from 
poor sector organisation and the weak administrative capacity of local providers. The 
waste  management  system  continues  to  be  characterised  by  very  low  recycling  of 
municipal  waste  and  very  high  landfill  rates.  Implementing  the  National  Energy  and 
Climate Plan will require investment to clean production and use of energy, as well as 
the  reconversion  of  mono-industrial and  carbon intensive regions.  Efforts  need  to  be 
stepped  up  for  the  extension  and  modernisation  of  drinking  water  and  wastewater 
infrastructure. Investments in the air monitoring network is also indispensable due to 
serious  structural  shortcomings.  There  is  also  a  need  to  modernise  and  ensure 
interoperability  of  all  the  digital  public  services  that  generate  information  sharing, 
including in the social, education and health areas. Large regional disparities and the 
low  productivity  of  some  sectors  are  detrimental  to  long-term  sustainable  growth. 
Equally  important  are  investments  to  promote  the  economy’s  competitiveness  by 
supporting  research  and  development  (R&D)  activities,  innovative  SMEs,  and 
integration into the Union’s strategic value chains. R&D investment by firms remains 
subdued and limited to a small number of sub-sectors which are highly dependent on 
foreign  direct  investments.  Declining  public  R&D  funding  has  resulted  in  poor 
scientific  and 
links.  The 
programming  of  the  Just  Transition  Fund  for  the  period  2021-2027  could  help 
Romania to address some of the challenges posed by the transition to a climate neutral 
economy,  in  particular  in  the  territories  covered  by  Annex  D  to  the  country  report8. 
This would allow Romania to make the best use of that fund. 

technological  quality  and  weak  academia-business 

(24)  Reform  of  the  public  administration  is  stalling.  There  is  no  effective  framework  in 
place  for  strategic  and  budgetary  planning,  which  has  a  knock-on  effect  on  the 
strategic vision for long-term development of the country, the prioritisation of actions 
and policy coordination at the central and local level. The sectoral strategic framework 
is fragmented and sometimes overlapping while actions to be taken within sectors are 
not  prioritised.  The  strategic  management  role  of  the  General  Secretariat  of  the 
Government  is  still  not  consolidated.  High  fragmentation  of  competencies  and 
resources  continues  to  affect  the  delivery  of  public  services,  especially at  local  level 
and  in  poor  communities.  Red  tape  and  insufficient  capacity  to  deliver  quality 
services,  including  digital,  are  negatively  impacting  on  citizens  and  businesses, 
especially  during  thes  crisis.  Cumbersome  administrative  procedures  for  setting  up 

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businesses  as  well  as  regulatory  requirements  imposed  on  services  providers, 
including  regulated  professions,  further  impede  market  development.  Reinforced 
cooperation between Romanian market surveillance authorities and customs authorises 
can  help  reducing  the  volume  of  non-compliant  products  imported  from  outside  the 
Union.  Frequent  reorganisations  and  overuse  of  temporary  management  hamper  the 
independence of the administration. The implementation of corporate governance for 
state-owned enterprises remains a challenge. 

(25)  Predictability of decision-making remains a major issue. Before the crisis, only around 
a  third  of  the  annual  government  plan  was  respected.  The  number  of  emergency 
ordinances  passed  remained  very  high,  creating  uncertainty  and  likely  hampering 
investment. For instance, GEO 114/2018 had major socio-economic effects on several 
sectors, including the financial sector. While the provisions with adverse impact on the 
banking sector were reversed, some of the measures potentially affecting the long-term 
viability  of  second-pillar  pension  funds  still  remain  in  place.  The  predictability  and 
stability of public procurement legislation remain important challenges. The efficiency 
of  public  procurement  continues  to  be  an  issue,  as  does  the  irreversibility  of  certain 
measures,  notably  the  streamlining  of  ex  ante  control.  There  is  little  progress  in 
improving the governance, quality and effective use of regulatory impact assessments. 
There is no institutional framework for quality control at government level and options 
for  setting  up  a  regulatory  impact  assessement  board  are  still  being  assessed.  The 
functioning  of  social  dialogue  remains  limited,  in  particular  at  sector  level,  while  a 
meaningful and continuous involvement of social partners is key for the success of any 
exit and recovery strategy in the light of the current crisis. The established institutional 
framework  for  consultation  is  not  adequately  used  to  feed  into  the  decision-making 
process  and  does  not  engage  social  partners  sufficiently  in  the  design  and 
implementation of reforms. Discussions on changes to the social dialogue law and the 
revision  of economic  sectors  have  stalled.  The  follow-up to  the  International  Labour 
Organisation’s recommendations issued in April 2018 is still uncertain. The lack of a 
permanent  objective  mechanism  to  determine  the  minimum  wage  may  weigh  on  the 
business environment. 

to  address  medium- 

(26)  While the present recommendations focus on tackling the socio-economic impacts of 
the  pandemic  and  facilitating  the  economic  recovery,  the  2019  country-specific 
recommendations adopted by the Council on 9 July 2019 also covered reforms that are 
structural  challenges.  Those 
essential 
recommendations remain pertinent and will continue to be monitored throughout next 
year’s  European  Semester  annual  cycle.  That  also  applies  to  recommendations 
regarding investment-related economic policies. The latter recommendations should be 
taken  into  account  for  the  strategic  programming  of  cohesion  policy  funding  post-
2020, including for mitigating measures and exit strategies with regard to the current 
crisis. 

long-term 

to 

(27)  Following  several  headwinds  in  recent  years,  pressures  on  the  banking  sector  have 
subsided,  as  several  measures  which  caused  concern  in  the  past,  including  the  bank 
tax, were reverted at the beginning of 2020. The banking sector has entered the current 
COVID-19  crisis  well  capitalised  and  liquid,  while  the  non-performing  loans  ratio 
declined below 5%. The measures adopted by the government to support households 
and corporates, in particular SMEs, are also important for maintaining banking sector 
resilience  and  the  capacity  of  banks  to  absorb  shocks.  Commercial  banks  have  also 
taken  steps  to  support  clients,  such  as  the  postponement  of  principal  and  interest 
payments, the extension of credit repayment, ensuring ATM liquidity and reducing the 

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fees for online  services. On 20 March 2020, the National Bank of  Romania  lowered 
the monetary policy rate and announced it would start purchasing RON-denominated 
government securities in the secondary market to ensure the smooth financing of the 
real  economy  and  the  public  sector.  In  spite  of  the  adopted  measures  including  the 
prudential flexibility granted by supervisors, asset quality is likely to deteriorate in the 
coming months. In this respect, maintaining prudent lending standards and prioritising 
support to viable borrowers will contribute to safeguarding asset quality in the banking 
sector.  Furthermore,  ensuring  a  stable  and  predictable  regulatory  environment  for 
banks is an important pre-condition for preserving their active role in the provision of 
credit to the economy and in supporting economic recovery. 

(28)  Significant  legal  modifications  and  political  pressure  on  the  judiciary  in  2017,  2018 
and in the largest part of 2019 have affected the efficiency, quality and independence 
of the justice system and its capacity to investigate and sanction high-level corruption. 
While  the  government  currently  supports  actions  to  prevent  and  sanction  corruption, 
and  has  shown  willingness  to  reverse  some  of  the  most  controversial  measures, 
Romania  has  not  yet  made  the  necessary  legislative  changes.  These  issues  are  the 
subject  of  monitoring  under  the  cooperation  and  verification  mechanism.  Under  this 
mechanism, the Commission continues to monitor judicial reform and the fight against 
corruption in Romania. These  areas are therefore not  covered in  the country-specific 
recommendations  for  Romania,  but  are  relevant  for  developing  a  positive  socio-
economic environment in the country. 

(29)  The  European  Semester  provides  the  framework  for  continuous  economic  and 
employment  policy  coordination  in  the  Union,  which  can  contribute  to  a  sustainable 
economy.  Member  States  have  taken  stock  of  progress  regarding United  Nations’ 
Sustainable  Development  Goals  (SDGs)  implementation  in  their  2020  National 
Reform  Programmes.  By  ensuring  the  full  implementation  of  the  recommendations 
below, Romania will contribute to the progress towards the SDGs and to the common 
effort of ensuring competitive sustainability in the Union.  

(30) 

(31) 

(32) 

In  the  context  of  the  2020  European  Semester,  the  Commission  has  carried  out  a 
comprehensive  analysis  of  Romania’s  economic  policy  and  published  it  in  the  2020 
country  report.  It  has  also  assessed  the  2020  Convergence  Programme  and  the  2020 
National  Reform  Programme  and  the  follow-up  given  to  the  recommendations 
addressed  to  Romania  in  previous  years.  It  has  taken  into  account  not  only  their 
relevance  for  sustainable  fiscal  and  socioeconomic  policy  in  Romania,  but  also  their 
compliance with Union rules and guidance, given the need to strengthen the Union’s 
overall  economic  governance  by  providing  Union-level  input  into  future  national 
decisions. 

In  the  light  of  that  assessment,  the  Council  has  examined  the  2020  Convergence 
Programme and its opinion9 is reflected in particular in recommendation (1) below. 

In the light of the Commission’s in-depth review and this assessment, the Council has 
examined  the  2020  National  Reform  Programme  and  the  2020  Convergence 
Programme.  The  present  recommendations  take  into  account  the  need  to  tackle  the 
pandemic  and  facilitate  the  economic  recovery  as  a  first  necessary  step  to  permit  an 
adjustment  of  imbalances.  Recommendations  directly  addressing  the  macroeconomic 
imbalances  identified  by  the  Commission  under  Article  6  of  Regulation  (EU)  No 
1176/2011 are reflected in recommendation (4), 

9 

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

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HEREBY RECOMMENDS that Romania take action in 2020 and 2021 to: 

1. 

2. 

3. 

4. 

Pursue fiscal policies in line with the Council’s recommendation of 3 April 202010, 
while taking all necessary measures to effectively address the pandemic, sustain the 
economy and support the ensuing recovery. Avoid the implementation of permanent 
measures  that  would  endanger  fiscal  sustainability.  Strengthen  the  resilience  of  the 
health  system,  including  in  the  areas  of  health  workers  and  medical  products,  and 
improve access to health services.  

Provide  adequate  income  replacement  and  extend  social  protection  measures  and 
access to essential services for all. Mitigate the employment impact of the crisis by 
developing flexible working arrangements and activation measures. Strengthen skills 
and digital learning and ensure equal access to education.  

Ensure  liquidity  support  to  the  economy  benefitting  businesses  and  households, 
particularly  small  and  medium-sized  enterprises  and  the  self-employed.  Front-load 
mature  public  investment  projects  and  promote  private  investment  to  foster  the 
economic recovery. Focus investment on the green and digital transition, in particular 
on sustainable transport, digital service infrastructure, clean and efficient production 
and use of energy and environmental infrastructure, including in the coal regions. 

Improve the quality and effectiveness of public administration and the predictability 
of decision-making, including through an adequate involvement of social partners. 

Done at Brussels, 

For the Council 
The President 

10 

OJ C 116, 8.4.2020, p. 1–3.   

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