Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Romania and delivering a Council opinion on the 2023 Convergence Programme of Romania
Date: 2023-05-24
Institutions: European Commission, Secretariat-General
Subjects: Romania, economic policy, economic recovery, economic reform, energy policy, fiscal policy, green economy, renewable energy, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 24.5.2023  COM(2023) 623 final  Recommendation for a COUNCIL RECOMMENDATION on the 2023 National Reform Programme of Romania and delivering a Council opinion on the 2023 Convergence Programme of Romania {SWD(2023) 623 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2023 National Reform Programme of Romania and delivering a Council opinion 
on the 2023 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) 

Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council3,  which 
established  the  Recovery  and  Resilience  Facility,  entered  into  force  on  19  February 
2021. The Recovery and Resilience Facility provides financial support to the Member 
States  for  the  implementation  of  reforms  and  investments,  entailing  a  fiscal  impulse 
financed  by  the  EU.  In  line  with  the  European  Semester  priorities,  it  contributes  to 
economic  and  social  recovery  and  to  the  implementation  of  sustainable  reforms  and 
investments,  in  particular  to  promote  the  green  and  digital  transition  and  make  the 
Member States’ economies more resilient. It also helps strengthen public finances and 
boost  growth  and  job  creation  in  the  medium  and  long  term,  improve  territorial 
cohesion  within  the  EU  and  support  the  continued  implementation  of  the  European 
Pillar of Social Rights. The maximum financial contribution per Member State under 
the Recovery and Resilience Facility was updated on 30 June 2022, in accordance with 
Article 11(2) of Regulation (EU) 2021/241.  

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3 

OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 
establishing the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17). 

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(2) 

On 22 November 2022, the Commission adopted the 2023 Annual Sustainable Growth 
Survey4,  marking  the  start  of  the  2023  European  Semester  for  economic  policy 
coordination. The European Council endorsed the priorities of the  survey  around the 
four  dimensions  of  competitive  sustainability  on  23  March  2023.  On  22  November 
2022,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the  Commission  also  adopted 
the  2023  Alert  Mechanism  Report,  in  which  it  identified  Romania  as  one  of  the 
Member States that may be affected or may be at risk of being affected by imbalances, 
and for which an in-depth review would be needed. The Commission also adopted a 
recommendation  for  a  Council  recommendation  on  the  economic  policy  of  the  euro 
area, which the Council adopted on 16 May 2023, as well as the proposal for the 2023 
Joint  Employment  Report  analysing 
the  Employment 
the 
Guidelines  and  the  principles  of  the  European  Pillar  of  Social  Rights,  which  the 
Council adopted on 13 March 2023. 

implementation  of 

(3)  While the EU economies are showing remarkable resilience, the  geopolitical  context 
continues  to  have  a  negative  impact.  As  the  EU  stands  firmly  with  Ukraine,  the  EU 
economic  and  social  policy  agenda  is  focused  on  reducing  the  negative  impact  of 
energy shocks on both vulnerable households and companies in the short term, and on 
keeping  up  efforts  to  deliver  on  the  green  and  digital  transition,  support  sustainable 
and  inclusive  growth,  safeguard  macroeconomic  stability,  and  increase  resilience  in 
the medium term. It also focuses heavily on increasing the EU’s competitiveness and 
productivity. 

(4) 

On  1  February  2023,  the  Commission  issued  the  Communication  A  Green  Deal 
Industrial  Plan  for  the  Net-Zero  Age5  to  boost  the  competitiveness  of  the  EU’s  net-
zero  industry  and  support  the  fast  transition  to  climate  neutrality.  The  plan 
complements  ongoing  efforts  under  the  European  Green  Deal  and  REPowerEU.  It 
aims to provide a more supportive environment for scaling up the EU’s manufacturing 
capacity  for  the  net-zero  technologies  and  products  required  to  meet  the  EU’s 
ambitious climate targets as well as ensuring access to relevant critical raw materials, 
including  by  diversifying  sourcing,  properly  exploiting  geological  resources  in 
Member States and maximising the recycling  of raw materials. The plan  is  based on 
four pillars:  a predictable and simplified regulatory  environment,  speeding up access 
to finance, enhancing skills, and open trade for resilient supply chains.  On 16 March 
2023,  the  Commission  also  issued  the  Communication  Long-term  competitiveness  of 
the EU: looking beyond 20306, structured along nine mutually reinforcing drivers with 
the objective to work towards a growth enhancing regulatory framework. It sets policy 
priorities aimed at actively ensuring structural improvements, well focused investment 
and regulatory measures for the long-term competitiveness of the EU and its Member 
States. The recommendations below help address those priorities. 

(5) 

In 2023, the European Semester for economic policy coordination continues to evolve 
in  line  with  the  implementation  of  the  Recovery  and  Resilience  Facility.  Fully 
implementing  the  recovery  and  resilience  plans  remains  essential  for  delivering  the 
policy priorities under the European Semester, as the plans address all or a significant 
subset  of  the  relevant  country-specific  recommendations  issued  in  recent  years.  The 
2019, 2020 and 2022 country-specific recommendations remain equally relevant also 

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COM(2022) 780 final. 
COM(2023) 62 final.  
COM(2023) 168 final.  

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(6) 

(7) 

for  recovery  and  resilience  plans  revised,  updated  or  amended  in  accordance  with 
Articles 14, 18 and 21 of Regulation (EU) 2021/241.  
The REPowerEU Regulation7 adopted on 27 February 2023 aims to rapidly phase out 
the  EU’s  dependence  on  Russian  fossil  fuel  imports.  This  will  contribute  towards 
energy security and the diversification of the EU’s energy supply, while increasing the 
uptake of renewables, energy storage capacities and energy efficiency. The Regulation 
enables  Member  States  to  add  a  new  REPowerEU  chapter  to  their  national  recovery 
and  resilience  plans  in  order  to  finance  key  reforms  and  investments  that  will  help 
achieve the REPowerEU objectives. They will also help boost the competitiveness of 
the EU’s net-zero industry as outlined in the Green Deal  Industrial Plan for the Net-
Zero Age and address the energy-related country-specific recommendations issued to 
the  Member  States  in  2022  and,  where  applicable,  in  2023.  The  REPowerEU 
Regulation  introduces  a  new  category  of  non-repayable  financial  support,  made 
available  to  Member  States  to  finance  new  energy-related  reforms  and  investments 
under their recovery and resilience plans.  

On 8 March 2023, the Commission adopted a communication providing fiscal policy 
guidance for 2024. It aims to support the preparation of Member States’ stability and 
thereby  strengthen  policy  coordination8.  The 
convergence  programmes  and 
Commission recalled that the general escape clause of the Stability and Growth Pact 
will be deactivated at  the end of 2023.  It  called  for fiscal  policies in  2023-2024 that 
ensure  medium-term  debt  sustainability  as  well  as  raise  potential  growth  in  a 
sustainable manner. Member States were invited to set out in their 2023  stability and 
convergence programmes how their fiscal plans will ensure that the 3% of GDP deficit 
reference value is adhered to as well as plausible and continuous debt reduction, or for 
debt  to  be  kept  at  prudent  levels  in  the  medium  term.  The  Commission  invited 
Member States to phase out national fiscal measures introduced to protect households 
and  firms  from  the  energy  price  shock,  starting  with  the  least  targeted  ones.  It 
indicated that, if support measures needed to be extended because of renewed energy 
price  pressures,  Member  States  should  target  such  measures  much  better  than  in  the 
past  towards  vulnerable  households  and  firms.  The  Commission  proposed  that  the 
fiscal  recommendations would be  quantified and differentiated  and be  formulated on 
the basis of net primary expenditure, as proposed in its Communication on orientations 
for  a  reform  of  the  EU  economic  governance  framework9.  It  recommended  that  all 
Member States  should  continue to  protect  nationally  financed investment and ensure 
the  effective  use  of  the  Recovery  and  Resilience  Facility  and  other  EU  funds,  in 
particular  in  light  of  the  green  and  digital  transition  and  resilience  objectives.  The 
Commission  indicated  that  it  will  propose  to  the  Council  to  open  deficit-based 
excessive deficit procedures in spring 2024 on the basis of the outturn data for 2023, in 
line with existing legal provisions. 

(8) 

On  26  April  2023,  the  Commission  presented  legislative  proposals  to  implement  a 
comprehensive reform of the EU’s economic governance rules. The central objective 
of the proposals is to strengthen public debt sustainability and promote sustainable and 

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Regulation  (EU)  2023/435  of  the  European  Parliament  and  of  the  Council  of  27  February  2023 
amending Regulation (EU) 2021/241 as regards REPowerEU chapters in recovery and resilience plans 
and  amending  Regulations  (EU)  No  1303/2013,  (EU)  2021/1060  and  (EU)  2021/1755,  and  Directive 
2003/87/EC (OJ L 63, 28.2.2023, p. 1). 
COM(2023) 141 final. 
COM(2022) 583 final. 

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(9) 

inclusive growth in all Member States through reforms and investments. The proposals 
aim at providing Member States with more control over the design of their medium-
term plans, while putting in place a more stringent enforcement regime to ensure that 
Member  States  deliver  on  the  commitments  undertaken  in  their  medium-term  fiscal-
structural plans. The objective is to conclude the legislative work in 2023. 

On 31 May 2021, Romania submitted its national recovery and resilience plan to the 
Commission, in accordance with Article 18(1) of Regulation (EU) 2021/241. Pursuant 
to  Article  19  of  Regulation  (EU)  2021/241,  the  Commission  assessed  the  relevance, 
effectiveness,  efficiency  and  coherence  of  the  recovery  and  resilience  plan,  in 
accordance  with  the  assessment  guidelines  of  Annex  V  to  that  Regulation.  On 
3 November 2021, the Council adopted its Decision on the approval of the assessment 
of  the  recovery  and  resilience  plan  for  Romania10.  The  release  of  instalments  is 
conditional on a decision by the Commission, taken in accordance with Article 24(5) 
of  Regulation  (EU)  2021/241,  that  Romania  has  satisfactorily  reached  the  relevant 
milestones  and  targets  set  out  in  the  Council  Implementing  Decision.  Satisfactory 
fulfilment  presupposes  that  the  achievement  of  preceding  milestones  and  targets  has 
not been reversed. 

(10)  On 11 May  2023, Romania submitted its  2023 National  Reform  Programme and, on 
10  May  2023,  its  2023  Convergence  Programme,  in  line  with  Article  4(1)  of 
Regulation  (EC)  No  1466/97.  To  take  account  of  their  interlinkages,  the  two 
programmes have been assessed together. In accordance with Article 27 of Regulation 
(EU)  2021/241,  the  2023  National  Reform  Programme  also  reflects  Romania’s 
biannual reporting on the progress made in achieving its recovery and resilience plan.  
(11)  The Commission published the 2023 country report for Romania11 on 24 May 2023. It 
assessed  Romania’s  progress 
relevant  country-specific 
in  addressing 
recommendations adopted by the Council between 2019 and 2022, and took stock of 
Romania’s implementation of the recovery and resilience plan. Based on this analysis, 
the  country  report  identified  gaps  with  respect  to  those  challenges  that  are  not 
addressed  or  only  partially  addressed  by  the  recovery  and  resilience  plan,  as  well  as 
new  and  emerging  challenges.  It  also  assessed  Romania’s  progress  on  implementing 
the  European  Pillar  of  Social  Rights  and  on  achieving  the  EU  headline  targets  on 
employment, skills and poverty reduction, as well as progress in  achieving the UN’s 
Sustainable Development Goals.  

the 

(12)  The  Commission  carried  out  an  in-depth  review  under  Article  5  of  Regulation  (EU) 
No 1176/2011 for Romania and published its results on 24 May 202312. It concluded 
that Romania is experiencing macroeconomic imbalances. In particular, vulnerabilities 
relate  to  external  accounts,  linked  to  large  government  deficits,  while  overheating 
pressures  have  increased.  The  large  current  account  deficit  worsened  considerably 
after  the  pandemic-induced  recession  and  makes  the  economy  vulnerable  to  external 
funding  shocks.  The  continuation  of  large  current  account  deficit  risks  driving  the 
NIIP further into negative territory. Signs of overheating are clearly visible, with core 
inflation  uncomfortably  high,  wage  growth  well  in  double  digit  territory  and  a 
relatively  low  unemployment  rate.  Cost  competitiveness  indicators  are  expected  to 

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Council Implementing Decision of 3 November 2021 on the approval of the assessment of the recovery 
and resilience plan for Romania (ST 12319/2021; ST 12319/2021 ADD 1). 
SWD(2023) 623 final. 
SWD(2023) 642 final. 

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stabilise, but structural issues persist. The exchange rate appears to be above the level 
suggested by fundamentals and remains heavily managed. The government deficit has 
been large for several years and has accounted for much of the excess of demand and 
of  the  subsequent  external  deficits;  even  if  improving,  the  government  deficit  is 
forecast  to  remain  significant  this  year  and  next.  The  narrowing  of  the  government 
deficit in 2022 was mainly driven by marked nominal GDP growth, which in turn rests 
much  on  overheating  domestic  demand.  Risk  premia  and  sovereign  borrowing  costs 
are significantly higher than in the pre-pandemic years. Given the ongoing tightening 
in  global  liquidity  conditions,  it  will  be  important  to  reverse  ongoing  trends.  Going 
forward, fiscal adjustment should be the preferred way to bring demand more in line 
with supply and to contain domestic and external deficits. Full implementation of tax 
and pension reforms included in the RRP as well as adherence to fiscal targets under 
the excessive deficit procedure would go a long way in containing current dynamics. 

(13)  On 3 April 2020, the Council adopted Decision (EU) 2020/50913 on the existence of 
an  excessive  deficit  situation  in  Romania  due  to  non-compliance  with  the  deficit 
criterion in 2019. On 3 April 2020, the Council also issued a Recommendation14 with 
a  view  to  bringing  an  end  to  the  situation  of  an  excessive  government  deficit  in 
Romania by 2022 at the latest. Considering the deep contraction in economic activity 
linked to the COVID-19 pandemic and the related need for fiscal policies to support 
the  recovery,  on  18  June  2021  the  Council  issued  a  new  Recommendation  to 
Romania15 to put an end to the excessive deficit situation by 2024 at the latest. In its 
Recommendation  of  18 June  2021,  the  Council recommended  Romania  to  reduce  its 
general government deficit to 8.0% of GDP in 2021, 6.2% of GDP in 2022, 4.4% of 
GDP in 2023 and 2.9% of GDP in 2024. This was consistent with a nominal growth 
rate of net primary government expenditure of 3.4% in 2021, 1.3% in 2022, 0.9% in 
2023 and 0.0% in 2024. It corresponded to an annual structural adjustment of 0.7% of 
GDP in 2021, 1.8% of GDP in 2022, 1.7% of GDP in 2023 and 1.5% of GDP in 2024. 
The Recommendation also specified that any windfall gains should be used to reduce 
the general government deficit, and that Romania should ensure the full and effective 
application  of  its  national  fiscal  framework.  Finally,  the  Council  also  stated  that  to 
ensure the success of the medium-term fiscal strategy, it will be important to support 
the fiscal consolidation with comprehensive reforms.  

(14)  Based  on  data  validated  by  Eurostat,16  Romania’s  general  government  deficit 
decreased  from  7.1%  of  GDP  in  2021  to  6.2%  of  GDP  in  2022,  while  general 
government debt fell from 48.6% of GDP at the end of 2021 to 47.3% at the end of 
2022.  This  is  in  line  with  the  2022  headline  deficit  target  recommended  by  the 
Council. The adjustment in the structural balance for 2022 was 0.4 percentage points 
of  GDP,  well  below  the  recommended  1.8  percentage  points  of  GDP.  This  calls  for 
careful analysis based on the expenditure benchmark. In 2022, net primary expenditure 
growth (adjusted for one-offs and for the fiscal policy measures on the revenue side) 
was 14.1%, above the recommended 1.3%. The improvement in the structural balance 

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Council Decision (EU) 2020/509 of 3 April 2020 on the existence of an excessive deficit in Romania 
(OJ L 110, 8.4.2020, p. 58). 
Council  Recommendation  of  3  April  2020  with  a  view  to  bringing  an  end  to  the  situation  of  an 
excessive government deficit in Romania (OJ C 116, 8.4.2020, p. 1). 
Council  Recommendation  of  18  June  2021  with  a  view  to  bringing  an  end  to  the  situation  of  an 
excessive government deficit in Romania, COM (2021) 304, 29.7.2021 
Eurostat-Euro Indicators, 47/2023, 21.4.2023. 

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almost stalled in 2022, even though government revenues were materially higher than 
expected,  boosted  by  strong  real  GDP  growth,  high  inflation,  and  a  favourable 
composition  of  economic  growth.  On  the  expenditure  side,  public  wages  and 
purchases  of  goods  and  services  fell  as  a  share  of  nominal  GDP  due  to  partial 
indexation and a self-imposed ceiling on purchases. However, most other expenditure 
items grew much faster than planned, in part due to large inflation surprises, implying 
that part of revenue windfall gains was used to finance additional expenditure relative 
to plans.  

(15)  The general government balance has been impacted by fiscal policy measures adopted 
to mitigate the economic and social impact of the increase in energy prices. In 2022, 
such  measures  included  price  caps  for  electricity  and  natural  gas  tariffs  for  both 
household  and  non-household  consumers.  It  also  included  special  payments  to  low-
income  pensioners,  food  vouchers  for  low-income  households  (including  pensioners 
and  students)  and  fuel  subsidies.  The  cost  of  these  measures  was  partially  offset  by 
new  taxes  on  the  windfall  profits  of  domestic  energy-producing  companies.  The 
Commission  estimates  the  net  budgetary  cost  of  these  measures  at  0.4%  of  GDP  in 
2022.  The  general  government  balance  has  also  been  marginally  impacted  by  the 
budgetary  cost  of  temporary  protection  to  displaced  persons  from  Ukraine,  which  is 
estimated at 0.0-0.1% of GDP in 2022. 

(16)  The  macroeconomic  scenario  underpinning 

the  budgetary  projections 

the 
Convergence Programme is relatively cautious in 2023 and optimistic thereafter. The 
government  projects  real  GDP  to  grow  by  2.8%  in  2023  and  4.8%  in  2024.  By 
comparison, the Commission 2023 spring forecast projects real GDP growth of 3.2% 
in 2023 and 3.5% in 2024. The Commission’s significantly lower growth forecast for 
2024 reflects the Commission’s view on the delayed impact of monetary tightening on 
the  economy.  It  also  reflects  the  Commission’s  view  that  the  Romanian  economy  is 
currently operating close to or above its potential level, which seems reasonable given 
high and sticky core inflation rates and relatively low unemployment rate. This limits 
the potential for non-inflationary growth.  

in 

(17) 

In  its  2023  Convergence  Programme,  the  Romanian  government  expects  that  the 
general government deficit will decrease from 6.2% of GDP in 2022 to 4.4% in 2023, 
as  recommended  by  the  Council.  The  large  decrease  reflects  planned  expenditure 
restraint, including significant declines in the real wages of public workers, and some 
revenue-enhancing  measures,  including  an  increase  in  the  dividend  tax  rate,  a 
reduction in the threshold to benefit from the low tax rate under the micro-enterprise 
regime,  and  increases  in  VAT  rates  on  selected  products.  According  to  the 
Convergence  Programme,  the  general  government  debt-to-GDP  ratio  is  expected  to 
decrease from 47.3% at the end of 2022 to 47.1% at the end of 2023.  

(18)  The  government  balance  in  2023  is  expected  to  continue  to  be  impacted  by  the 
measures adopted to mitigate the economic and social impact of the increase in energy 
prices.  These consist  of  measures  extended from 2022 (price caps for electricity  and 
natural  gas  tariffs,  subsidies  for  low-income  groups  of  the  population,  special 
payments  to  low-income  pensioners).  The  cost  of  these  measures  continues  to  be 
largely  offset  by  taxes  on  the  windfall  profits  of  domestic  energy  suppliers  and  on 
trading  margins.  Taking  these  revenues  into  account,  the  net  budgetary  cost  of  the 
support measures in 2023 is estimated at 0.3% of GDP. Most of the measures in 2023 
are targeted at the most vulnerable households, although they do not fully preserve the 
price signal to reduce energy demand and increase energy efficiency. 

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(19)  The Commission 2023 spring forecast projects a government deficit of 4.7% of GDP 
for 2023. This is 0.3 pps of GDP higher than the deficit projected in the Convergence 
Programme,  mainly  due  to  higher  projected  expenditure  particularly  in  goods  and 
services,  social  transfers  and  other  current  expenditure,  which  are  all  expected  to 
increase well slower than inflation in the Convergence Programme. The Commission 
also  projects  slightly  higher  tax  revenue  growth  than  the  Convergence  Programme, 
mostly reflecting higher GDP growth. The Commission 2023 spring forecast projects a 
slightly lower general government debt-to-GDP ratio (45.6% at the end of 2023) than 
in the Convergence Programme.  

(20)  The projected 2023 headline deficit in the Commission 2023 spring forecast is 0.3 pps 
of GDP above the headline deficit target recommended by the Council. The structural 
adjustment  is  estimated at  around  1.5%  of  GDP,  reflecting  declines  in  real  wages  in 
the  public  sector  and  a  freeze  in  new  hirings  of  public  employees,  as  well  as  the 
revenue measures described above. However, the adjustment is slightly lower than the 
recommended  1.7  pps  of  GDP.  This  calls  for  a  careful  analysis  based  on  the 
expenditure  benchmark.  In  2023,  net  primary  expenditure  growth  (adjusted  for  one-
offs and for the fiscal policy measures on the revenue side) is projected at 8.3% in the 
Commission’s  2023  spring  forecast,  above  the  recommended  0.9%.  Thus,  all  three 
indicators point to a risk of deviation from the recommended adjustment. In a context 
of  high  inflation,  government  expenditure  will  continue  to  increase  faster  than 
recommended by the Council on 18 June 2021. Based on a careful analysis, Romania 
is at risk of non-compliance with the fiscal targets for 2023 established in the Council 
Recommendation of 18 June 2021. 

(21)  According to the Convergence Programme, the general government deficit is expected 
to decline to 2.9% of GDP in 2024, in line with the Council  Recommendation under 
the  excessive  deficit  procedure.  The  decrease  planned  in  2024  mainly  reflects 
continued  expenditure  restraint,  with  a  projected  decline  in  government  expenditure 
from  38.4%  of  GDP  to  36.9%  of  GDP.  The  Convergence  Programme  expects  the 
general government debt-to-GDP ratio to decrease to 46.1% at the end of 2024. Based 
on  policy  measures  known  at  the  cut-off  date  of  the  forecast,  the  Commission  2023 
spring forecast projects a government deficit of 4.4% of GDP in 2024. This is higher 
than the deficit projected in the Convergence Programme, since announced measures 
do  not  seem  sufficient  to  reach  the  fiscal  effort  recommended  by  the  Council  in  the 
excessive  deficit  procedure.  The  Commission  2023  spring  forecast  projects  a  higher 
general government debt-to-GDP ratio (46.1%) at the end of 2024. 

(22)  The  projected  2024  headline  deficit  in  the  Commission  2023  spring  forecast  is 
1.5 percentage  points  of  GDP  above  the  headline  deficit  target  recommended  by  the 
Council, while the adjustment in the structural balance is forecast to be only 0.3 pps of 
GDP in 2024, compared to the recommended 1.5 pps of GDP. This calls for a careful 
analysis  based  on  the  expenditure  benchmark.  In  2024,  net  primary  expenditure 
growth (adjusted for one-offs and for the fiscal policy measures on the revenue side) is 
projected  at  9.5%  in  the  Commission  2023  spring  forecast,  above  the  recommended 
0.0%.  Thus,  all  three  indicators  point  to  a  risk  of  deviation  from  the  recommended 
adjustment. The absence of significant fiscal effort projected for 2024 partly  reflects 
the impact of indexation rules in Romania (the 2024 indexation round for pensions and 
the minimum wage will reflect the high inflation rates recorded in 2022). It should be 
noted, however, that the RRP includes several measures and reforms that, if adopted 
and implemented in time, could deliver a significant increase in government revenue 
as  soon  as  2024  and  help  in  achieving  the  deficit  target.  Overall,  based  on  a  careful 

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analysis,  Romania  is  at  risk  of  non-compliance  with  the  fiscal  targets  for  2024 
established in the Council Recommendation of 18 June 2021. Considering the risks of 
not  meeting  the  recommended  fiscal  targets  in  2023  and  2024,  additional  budgetary 
measures  appear  to  be  needed  to  comply  with  the  adjustment  path  and  achieve  the 
correction of the excessive deficit by 2024, and to strengthen the external position. 

(23)  The  Convergence  Programme  refers  to  reforms  and  investments  planned  under  the 
RRP,  that  are  expected  to  contribute  to  fiscal  sustainability  and  sustainable  and 
inclusive  growth.  These  include  significant  reforms  of  the  pension  system  (both 
special pensions and general  systems), an ambitious  tax reform,  efforts to  strengthen 
tax  administration,  and  reforms  of  State-owned  enterprises.  Full  implementation  of 
these  reforms  would  help  achieving  the  deficit  targets  set  by  the  Council  under  the 
excessive deficit procedure.  

(24)  The Convergence Programme envisages the phasing out of most of the energy support 
measures in 2025. The Commission also assumes the phasing out of almost all energy 
support  measures  (net  revenue  of  0.1%  of  GDP  in  2024).  This  hinges  upon  the 
assumption of no renewed energy price increases. 

(25)  The  Convergence  Programme  outlines  a  medium-term  fiscal  path  until  2026. 
According to the Programme, the general  government deficit is targeted to remain at 
2.9%  of  GDP  in  2025  and  2026,  based  on  real  GDP  growing  by  5.0%  in  2025  and 
4.6% in 2026, well above potential. Following a large reduction from 39.8% in 2021 
to 36.9% in 2024, the expenditure-to-GDP ratio would remain roughly unchanged in 
2025  and  2026.  According  to  the  Programme,  the  general  government  debt-to-GDP 
ratio is  expected to  decrease  from  46.1%  at  the  end of 2024 to  45.4% by  the  end of 
2026. 

(26) 

In accordance with Article 19(3), point (b) and Annex V, criterion 2.2 of Regulation 
(EU) 2021/241, the recovery and resilience plan includes an extensive set of mutually 
reinforcing reforms and investments to be implemented by 2026. The implementation 
of  Romania’s  plan  is  underway,  however  with  increasing  risk  of  delays.  Romania 
submitted  two  payment  requests,  corresponding  to  72  milestones  and  targets  in  the 
plan  and  resulting  in  a  disbursement  of  EUR  2.6  billion  net  of  pre-financing  for  the 
first payment request, while the assessment of the second one is ongoing. Increasing 
risks  of  delays  with  the  implementation  of  the  plan  are  due  to  the  weak  governance 
and  limited  capacity  of  the  public  administration.  Tackling  these  issues,  including 
through  securing  adequate  human  resources,  is  key  for  a  better  coordination  of  the 
plan  and  a  timely  implementation  of  investments.  Moreover,  the  completion  of 
important structural reforms will need continued political commitment and ownership. 
Given the considerable macroeconomic and fiscal relevance of the plan, a timely and 
full  implementation  of  the  measures  would  be  crucial  to  contain  external  and  fiscal 
vulnerabilities. The plan is expected to be revised in 2023, to include among others a 
REPowerEU chapter, while taking into account the reduced of non-repayable support 
due to Romania’s strong economic recovery. Discussions to this end are ongoing. The 
swift inclusion of the new REPowerEU chapter in the recovery and resilience plan will 
allow  additional  reforms  and  investments  to  be  financed  in  support  of  Romania’s 
strategic objectives in the field of energy and the green transition. The systematic and 
effective  involvement  of  local  and  regional  authorities,  social  partners  and  other 
relevant  stakeholders  remains  important  for  the  successful  implementation  of  the 
recovery  and  resilience  plan,  as  well  as  other  economic  and  employment  policies 
going beyond the plan, to ensure broad ownership of the overall policy agenda.  

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(27)  The Commission approved all of Romania’s cohesion policy programming documents 
in 2022. Proceeding with the swift implementation of the cohesion policy programmes 
in  complementarity  and  synergy  with  the  recovery  and  resilience  plan,  including  the 
REPowerEU  chapter,  is  key  to  achieving  the  green  and  digital  transition,  increasing 
economic and social resilience as well as achieving balanced territorial development in 
Romania. 

(28)  Beyond the economic and social challenges addressed by the recovery and resilience 
plan, Romania faces a number of additional challenges related to energy policy and the 
green transition. 

(29)  Romania faces decarbonisation-related challenges as the country still relies heavily on 
fossil  fuels.  The  share  of  fossil  fuels  (coal,  oil  and  gas)  slightly  increased  in  2021 
compared to 2020. It stood at 72% in 2021, while renewable sources represented only 
about 20%. Romania is the second largest gas producer in the EU, serving mostly the 
domestic market. A focus on the effective roll-out of renewables, a significantly more 
energy-efficient residential  sector  and the use of new technologies in  industry  would 
help Romania meet the EU and national energy and climate targets for 2030 set out in 
the  ‘Fit  for  55’  package. Romania’s  consumption  of  natural  gas  dropped  by  20% 
between August 2022 and March 2023, compared with the average gas consumption 
over  the  same  period  in  the  preceding  5  years,  beyond  the  15%  reduction  target. 
Romania  could  pursue  temporary  gas  demand  reduction  measures  until  31  March 
202417. 

(30) 

(31) 

Increasing grid capacity is essential to reduce the use of fossil fuels and accelerate the 
clean  energy  transition.  Decommissioned  coal  and  lignite-fired  power  capacity, 
expected to be completed by 2032 as laid down in Romania’s recovery and resilience 
plan,  should  be  replaced  by  renewable  energy  sources.  However,  the  existing 
transmission and distribution electricity grids limit the absorption of new renewables’ 
capacity.  Bottlenecks  in  the  grid  hinder  the  deployment  of  renewable  energy. 
Investment is needed to upgrade and digitalise the existing grids in order to integrate 
new production from renewable sources and increase the interconnection capacity with 
neighbouring  Member  States,  consistent  with  the  climate  objectives.  Sufficient  and 
advanced  integrated  system  planning  would  be  needed  for  grid  upgrades  and 
expansion  (both  at  transmission  and  distribution  level)  to  respond  to  demand  and 
flexibility needs.  Additionally,  simplifying the designation of go-to  areas and further 
streamlining  related  procedures,  including  simplifying  the  deployment  of  small-
capacity renewables installations (such as PV panels) in buildings would improve the 
current  situation,  where  obtaining  permits  for  installing  renewable  power  plants  is 
relatively easy, but obtaining the necessary permits to connect them to the grid is more 
challenging. 

In  the  building  sector,  higher  national  targets  for  2030  would  require  additional 
financing for the country’s building stock. The Romanian recovery and resilience plan 
envisages the renovation of 2.4 million m2 of public buildings and 4.4 million m2 of 
residential  ones,  while  cohesion  policy  has  earmarked  funds  for  1.6  million  m2  of 
renovation  in  both  sectors.  However,  poor  access  to  finance  and  information  for 
energy  renovations  and  renewable  energy  installations  seriously  hampers  further 
improvements.  In  particular,  better  access  to  finance  for  households  and  small 
businesses  to  increase  energy  efficiency  would  significantly  help  reduce  Romania’s 

17 

Council Regulation (EU) 2022/1369 and Council Regulation (EU) 2023/706 

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dependence  on  fossil  fuels,  while  also  addressing  energy  poverty.  Additionally, 
regional and local authorities could provide more information on how to access energy 
renovation  funds  and  what  type  of  small  renewable  energy  installations  could  be 
deployed in buildings and households.   

(32)  Labour  and  skills  shortages  in  sectors  and  occupations  key  for  the  green  transition, 
including  manufacturing,  deployment  and  maintenance  of  net-zero  technologies,  are 
creating  bottlenecks  in  the  transition  to  a  net-zero  economy.  High-quality  education 
and  training  systems  that  respond  to  changing  labour  market  needs  and  targeted 
upskilling and reskilling measures, with the support of effective active labour market 
policies,  are  key  to  reducing  skills  shortages  and  promoting  labour  inclusion  and 
reallocation. To unlock untapped labour supply, these measures need to be accessible, 
in  particular  for  individuals  and  in  sectors  and  regions  most  affected  by  the  green 
transition. In 2022, labour shortages were reported in Romania for several occupations 
that required specific skills or knowledge for the green transition, including insulation 
workers, civil engineers and construction managers. 

(33) 

(34) 

In  light  of  the  Commission’s  assessment,  the  Council  has  examined  the  2023 
Convergence Programme and its opinion18 is reflected in recommendation (1) below. 

In  light  of  the  Commission’s  in-depth  review  and  this  assessment,  the  Council  has 
examined  the  2023  National  Reform  Programme  and  the  2023  Convergence 
Programme.  Its  recommendations  under  Article  6  of  Regulation  (EU)  No  1176/2011 
are reflected in recommendation (1) below. Policies referred to in recommendation (1) 
help address vulnerabilities linked to external accounts, fuelled by large fiscal deficits 
and to re-emerging competitiveness issues. Recommendations (2) and (3) contribute to 
addressing recommendation (1).  

HEREBY RECOMMENDS that Romania takes action in 2023 and 2024 to:  

1. 

Pursue fiscal policies in line with the Council Recommendation of 18 June 2021 with 
a  view  to  bringing  an  end  to  the  situation  of  an  excessive  government  deficit  in 
Romania by 2024, and to strengthen Romania’s external position. 

Wind  down  the  energy  support  measures  in  force  by  the  end  of  2023,  using  the 
related  savings  to  reduce  the  government  deficit.  Should  renewed  energy  price 
increases  necessitate  support  measures,  ensure  that  these  are  targeted  at  protecting 
vulnerable  households  and  firms,  fiscally  affordable,  and  preserve  incentives  for 
energy savings. 

Preserve nationally financed public investment and ensure the effective absorption of 
RRF  grants  and  other  EU  funds,  in  particular  to  foster  the  green  and  digital 
transitions.  

For  the  period  beyond  2024,  continue  to  pursue  a  medium-term  fiscal  strategy  of 
gradual  and  sustainable  consolidation,  combined  with  investments  and  reforms 
conducive  to  higher  sustainable  growth,  to  achieve  a  prudent  medium-term  fiscal 
position. 

2. 

Ensure  an  effective  governance  and  strengthen  the  administrative  capacity  to  allow 
for a continued swift and steady implementation of the recovery and resilience plan. 
Swiftly  finalise  the  REPowerEU  chapter  with  a  view  to  rapidly  starting  its 
implementation.  Proceed  with  the  speedy  implementation  of  cohesion  policy 

18 

Under Articles 5(2) and 9(2) of Council Regulation (EC) No 1466/97. 

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3. 

programmes, in close complementarity and synergy with the recovery and resilience 
plan. 

Reduce  reliance  on  fossil  fuels  and  accelerate  the  clean  energy  transition,  in 
particular by deploying renewable energy faster and improving grid capacity to allow 
new capacity to operate in the market. Increase energy efficiency and the ambition of 
building renovation efforts, including by providing better access to information and 
sustainable  finance  options.  Step  up  policy  efforts  aimed  at  the  provision  and 
acquisition of the skills needed for the green transition. 

Done at Brussels, 

For the Council 
The President 

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