Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Romania
Date: 2024-06-19
Institutions: European Commission, Secretariat-General
Subjects: Romania, budget policy, economic policy, economic recovery, economic reform, employment policy, fiscal policy, social policy, stability pact, subsidised housing

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   EUROPEAN COMMISSION  Brussels, 19.6.2024  COM(2024) 623 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Romania {SWD(2024) 600 final} - {SWD(2024) 623 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the economic, social, employment, structural and budgetary policies 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 Regulation (EU) 2024/1263 of the European Parliament and of the Council 
of  29  April  2024  on  the  effective  coordination  of  economic  policies  and  on  multilateral 
budgetary surveillance and repealing Council Regulation (EC) No 1466/971, and in particular 
Article 3(3) 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  investment,  entailing  a  fiscal  impulse 
financed by the EU. In line with the European Semester priorities, it helps achieve the 
economic  and  social  recovery  and  implement  sustainable  reforms  and  investment,  in 
particular  to  promote  the  green  and  digital  transitions  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.  

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OJ L 2024/1263, 30.4.2024. ELI: http://data.europa.eu/eli/reg/2024/1263/oj. 
OJ L 306, 23.11.2011, p. 25. ELI: http://data.europa.eu/eli/reg/2011/1176/oj. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 
(OJ  L  57,  18.2.2021,  p.  17).  ELI: 
establishing 
http://data.europa.eu/eli/reg/2021/241/oj 

the  Recovery  and  Resilience  Facility 

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(2) 

(3) 

(4) 

(5) 

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The  REPowerEU  Regulation4,  adopted  on  27  February  2023,  aims  to  phase  out  the 
EU’s  dependency  on  Russian  fossil  fuel  imports.  This  would  help  achieve  energy 
security  and  diversify  the  EU’s  energy  supply,  while  increasing  the  uptake  of 
renewables,  energy  storage  capacities  and  energy  efficiency.  Romania  added  a  new 
REPowerEU chapter to its national recovery and resilience plan in order to finance key 
reforms and investments that will help achieve the REPowerEU objectives. 

On  16  March  2023,  the  Commission  issued  a  Communication  on  the  ‘Long-term 
competitiveness of the EU: looking beyond 2030’5, in order to inform policy decisions 
and  create  the  framework  conditions  for  increasing  growth.  The  Communication 
frames competitiveness along nine mutually reinforcing drivers. Among these drivers, 
access to private capital, research and innovation, education and skills, and the single 
market  emerge  as  paramount  policy  priorities  for  reform  and  investment  to  address 
current productivity challenges as well as to build up the long-term competitiveness of 
the EU and its Member States.  On 14 February  2024, the Commission  followed this 
Communication  with  the  Annual  Single  Market  and  Competitiveness  Report6.  The 
report  details  the  competitive  strengths  and  challenges  of  Europe's  Single  Market, 
tracking yearly developments according to the nine competitiveness drivers identified.   

On 21 November 2023, the Commission adopted the 2024 Annual Sustainable Growth 
Survey7, marking the start of the 2024 cycle of the European Semester for economic 
policy  coordination.  The  European  Council  endorsed  the  priorities  of  the  survey 
around  the  four  dimensions  of  competitive  sustainability  on  22  March  2024.  On  21 
November 2023, on the basis of Regulation (EU) No 1176/2011, the Commission also 
adopted the 2024 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 12 April 2024, as well as the proposal for 
the 2024 Joint Employment Report analysing the implementation of the Employment 
Guidelines  and  the  principles  of  the  European  Pillar  of  Social  Rights,  which  the 
Council adopted on 11 March 2024. 

On  30  April  2024,  the  EU’s  new  economic  governance  framework  came  into  force. 
The  framework  includes  the  new  Regulation  of  the  European  Parliament  and  of  the 
Council  (EU)  2024/1263  on  the  effective  coordination  of  economic  policies  and 
multilateral  budgetary  surveillance  and  repealing  Council  Regulation  (EC)  No 
1466/97.  It  also  includes  the  amended  Regulation  (EC)  No  1467/97  on  the 
implementation  of  the  excessive  deficit  procedure  and  the  amended  Directive 
2011/85/EU  on  the  budgetary  frameworks  of  Member  States8.  The  objectives  of  the 

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). ELI: http://data.europa.eu/eli/reg/2023/435/oj. 
COM(2023) 168 final. 
COM(2024) 77 final. 
COM(2023) 901 final. 
Council  Regulation  (EU)  2024/1264  of  29  April  2024  amending  Regulation  (EC)  No  1467/97  on 
speeding  up  and  clarifying  the  implementation  of  the  excessive  deficit  procedure  (OJ  L,  2024/1264, 
30.4.2024,  ELI:  http://data.europa.eu/eli/reg/2024/1264/oj)  and  Council  Directive  (EU)  2024/1265  of 
29  April  2024  amending  Directive  2011/85/EU  on  requirements  for  budgetary  frameworks  of  the 
Member States (OJ L, 2024/1265, 30.4.2024, ELI: http://data.europa.eu/eli/dir/2024/1265/oj). 

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new  framework  are  public  debt  sustainability  and  sustainable  and  inclusive  growth 
through gradual  fiscal consolidation  as  well as reforms  and investments.  It  promotes 
national  ownership  and  has  a  greater  medium-term  focus,  combined  with  more 
effective and coherent enforcement. Each Member State should submit to the Council 
and  to  the  Commission  a  national  medium-term  fiscal-structural  plan.  National 
medium-term  fiscal-structural  plans  contain  the  fiscal,  reform  and  investment 
commitments  of  a  Member  State,  covering  a  planning  horizon  of  4  years  or  5  years 
depending on the regular length of the national legislature. The net expenditure9 path 
in  the  national  medium-term  fiscal-structural  plans  should  comply  with  the 
requirements of Regulation (EU) 2024/1263, including the requirements to put or keep 
general government debt on a plausibly downward path by the end of the adjustment 
period  at  the  latest,  or  for  it  to  remain  at  prudent  levels  below  60%  of  GDP,  and  to 
bring  and/or  maintain  the  government  deficit  below  the  3%  of  GDP  reference  value 
over  the  medium  term.  Where  a  Member  State  commits  to  a  relevant  set  of  reforms 
and investments in accordance with the criteria set out in Regulation (EU) 2024/1263, 
the  adjustment  period  may  be  extended  by  3  years  at  most.  For  the  purpose  of 
supporting the preparation of those plans, on [21 June] 2024, the Commission   is set 
to  provide  Member  States  with  guidance  on  the  content  of  the  plans  and  the 
subsequent  annual  progress  reports  that  they  will  need  to  submit  and,  in  accordance 
with Article 5 of Regulation (EU) 2024/1263, will transmit to them technical guidance 
on  the  fiscal  adjustments  (reference  trajectories  and  technical  information,  where 
applicable). Member States should submit their medium-term fiscal-structural plans by 
20 September 2024, unless the Member State and the Commission agree to extend the 
deadline by a reasonable period of time. Member States should ensure the involvement 
of their national parliaments, and the consultation of independent fiscal institutions, of 
social partners and other national stakeholders, as appropriate. 

In 2024, the European Semester for economic policy coordination continues to evolve 
in  line  with  the  implementation  of  the  Recovery  and  Resilience  Facility.  The  full 
implementation  of  the  recovery  and  resilience  plans  remains  essential  for  delivering 
the policy priorities under the European Semester, as the plans help effectively address 
all  or  a  significant  subset  of  challenges  identified  in  the  relevant  country-specific 
recommendations  issued  in  recent  years.  The  2019,  2020,  2022  and  2023  country-
specific  recommendations  remain  equally  relevant  also  for  recovery  and  resilience 
plans  revised,  updated  or  amended  in  accordance  with  Articles  14,  18  and  21  of 
Regulation (EU) 2021/241.  

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  29 
October 2021, the Council adopted its Decision on the approval of the assessment of 

Net expenditure as defined in Article 2 of Council Regulation (EU) 2024/1263 of 29 April 2024 (OJ L 
2024/1263,  30.4.2024.  ELI:  http://data.europa.eu/eli/reg/2024/1263/oj).  Net  expenditure  means 
government  expenditure  net  of  (i)  interest  expenditure,  (ii)  discretionary  revenue  measures,  (iii) 
expenditure  on  programmes  of  the  Union  fully  matched  by  Union  funds  revenue,  (iv)  national 
expenditure  on  co-financing  of  programmes  funded  by  the  Union,  (v)  cyclical  elements  of 
unemployment benefit expenditure, and (vi) one-offs and other temporary measures. 

(6) 

(7) 

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(8) 

(9) 

the recovery  and resilience plan  for  Romania10, which was  amended on  8  December 
2023  following  Article  18(2)  of  Regulation  (EU)  2021/241  to  update  the  maximum 
financial  contribution  for  non-repayable  financial  support,  as  well  as  to  include  the 
REPowerEU chapter11. 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 fulfilled 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. 

On  13  May  2024,  Romania  submitted  its  2024  National  Reform  Programme.  In 
accordance with  Article  27 of Regulation  (EU) 2021/241,  the 2024 National  Reform 
Programme  also  reflects  Romania’s  biannual  reporting  on  the  progress  made  in 
achieving its recovery and resilience plan. 
The Commission published the 2024 country report for Romania12 on 19 June 2024. It 
assessed  Romania’s  progress 
relevant  country-specific 
in  addressing 
recommendations  adopted by the Council  between 2019  and  2023 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 

(10)  The  Commission  carried  out  an  in-depth  review  under  Article  5  of  Regulation  (EU) 
No 1176/2011 for Romania. The main findings of the Commission staff’s assessment 
of  macroeconomic  vulnerabilities  for  Romania  for  the  purposes  of  that  Regulation 
were  published  in  March  202413.  On  19  June  2024,  the  Commission  concluded  that 
Romania  is  experiencing  excessive  macroeconomic  imbalances.  In  particular, 
Romania faces vulnerabilities related to external accounts, mainly linked to large and 
increasing  government  deficits,  which  remain,  while  significant  price  and  cost 
pressures have increased and policy action has been weak. The current account deficit 
improved somewhat in 2023, mostly due to weaker private consumption and gains in 
terms of trade, but it remains clearly large and is not forecast to improve this year and 
next. As a result, the net international investment position is no longer improving as a 
share  of  GDP  despite  the  high  nominal  GDP  growth  and  the  continuation  of  large 
current  account  deficits  risks  driving  it  further  into  negative  territory.  Headline 
inflation  has  declined  but  core  inflation  remains  very  high,  just  marginally  off  its 
recent peak and higher than a year ago. Wages and labour cost dynamics accelerated in 
2023 and continued to be strong in 2024, partly reflecting large minimum and public 
wage increases, against the backdrop of a tight labour market. This has resulted in cost 
competitiveness concerns, while non-cost competitiveness continues to be impaired by 
structural  bottlenecks.  All  these  factors  add  to  concerns  about  the  entrenchment  of 

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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). 
Council  Implementing  Decision  of  8  December  2023  amending  the  Implementing  Decision  of  29 
October 2021 on the approval of the assessment of the recovery and resilience plan for Romania (ST 
15833/23; ST 15833/23 ADD 1). 
SWD(2024) 623 final. 
SWD(2024) 83 final. 

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competitiveness  losses  and  delays  in  the  necessary  trade  balance  improvement.  The 
fiscal  situation,  which  is  a  main  driver  of  the  high  current  account  deficit,  has 
deteriorated over the past year. The large fiscal deficit is forecast to worsen somewhat 
further  in  2024  and  2025.  The  government  debt-to-GDP  ratio  edged  up  despite  the 
high  nominal  GDP  growth,  remains  moderate  at  53%,  but  with  a  large  share  of  it 
denominated  in  foreign  currency.  The  persistence  of  high  government  deficits  may 
push up external indebtedness and make Romania more reliant on external financing 
sources, leaving the country vulnerable to changes in investor sentiment and external 
shocks. The policy response to address the identified vulnerabilities has been weak. A 
credible  fiscal  consolidation  path  is  key  to  dampen  risks  to  the  stability  of  the 
economy.  This  requires  compliance  with  recommendations  under  the  Excessive 
Deficit Procedure and full implementation of the fiscal-structural reforms included in 
the RRP, in particular those aiming at structurally increasing government revenue, and 
much stricter spending control than in the past years. Implementation of RRP reforms 
and investment beyond the fiscal-structural ones would also enhance competitiveness.  
(11)  Based  on  data  validated  by  Eurostat14,  Romania’s  general  government  deficit 
increased  from  6.3%  of  GDP  in  2022  to  6.6%  of  GDP  in  2023,  while  the  general 
government debt rose from 47.5% of GDP at the end of 2022 to 48.8% of GDP at the 
end of 2023.  

(12)  Romania  has  been  subject  to  an  excessive  deficit  procedure  since  2020.  On  3  April 
2020, the Council adopted Decision (EU) 2020/509 under Article 126(6) TFEU on the 
existence  of  an  excessive  deficit  situation  in  Romania  due  to  a  planned  non-
compliance  in  2019  with  the  deficit  criterion  of  the  TFEU  and  issued  a 
Recommendation  under  Article  126(7)  TFEU  with  a  view  to  bringing  an  end  to  the 
excessive  government  deficit  situation  by  2022,  at  the  latest.  In  light  of  the  deep 
contraction in economic activity linked to the COVID-19 pandemic, on 18 June 2021 
the  Council  adopted  a  revised  Recommendation  under  Article  126(7)  TFEU  to 
Romania with a view to bringing an end to the excessive deficit situation by 2024, at 
the latest.  

(13) 

In  its  June  2021  Recommendation  under  Article  126(7)  TFEU,  the  Council 
recommended Romania to reduce its headline 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  nominal  growth  rates  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  annual  structural 
adjustments 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 
revenue gains should be used to reduce the general government deficit. Romania was 
also  asked  to  report  every  six  months  on  action  taken  to  implement  the 
recommendation, until the excessive deficit has been corrected. 

(14)  The  headline  deficit  reached  6.6%  of  GDP  in  2023  and  missed  the  EDP  headline 
deficit target  of 4.4% of GDP by  a wide margin. The main reason  for this  deviation 
was  a  continued  high  growth  of  government  spending,  mostly  driven  by  social 
transfers, expenditure in goods and services, and capital spending. The 2023 headline 
deficit was also impacted by the recording of payments of public sector wages (worth 
0.5% of GDP) following court decisions. Importantly, the macroeconomic context was 
favourable  for  fiscal  consolidation.  Romania’s  economic  performance  since  the 

14 

Eurostat-Euro Indicators, 22.4.2024. 

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adoption of the June 2021 recommendation has been broadly in line with expectations, 
despite  economic  shocks  that  have  occurred  since  then.  The  increase  in  government 
revenue was much faster than projected, reflecting a tax-rich composition of economic 
growth and high inflation. 

(15)  The  fiscal  effort  in  2023  was  lower  than  recommended  by  the  Council.  Romania’s 
structural fiscal balance remained broadly unchanged in 2023, against an improvement 
of  1.7%  of  GDP  recommended  by  the  Council.  Net  primary  expenditure  growth 
(adjusted for one-offs and fiscal policy measures on the revenue side) was higher than 
recommended in 2023, at 11.8% of GDP versus a target of 0.9% recommended by the 
Council.  As  in  the  previous  years  covered  by  the  current  Recommendation  under 
Article  126(7)  TFEU,  most  windfall  gains  on  the  revenue  side  were  used  to  finance 
additional spending. Based on the above, the Commission is of the view that Romania 
did  not  take  effective  action  in  response  to  the  June  2021  Council  Recommendation 
under Article 126(7) TFEU.  

(16)  On 10 May 2024, the Romanian authorities reported on “actions taken to correct the 
excessive deficit”. This report confirmed the 2024 government deficit target of 4.9% 
of GDP included in the budget but also stressed that budgetary execution in the first 
three months of the year resulted in a government budget deficit of 2.06% of GDP, 0.6 
pps of GDP above the deficit recorded in the same period last year, when the full-year 
deficit was 6.6% of GDP. The higher deficit in the first three months of 2024 relative 
to  the  same  period  last  year  is  mainly  explained  by  a  fast  increase  in  government 
spending, mainly on account of higher investment expenditure. 

(17)  The  Commission  Spring  2024  Forecast  projects  real  GDP  to  grow  by  3.3%  in  2024 
and 3.1% in 2025, and HICP inflation to stand at 9.7% in 2024 and 5.9% in 2025. The 
Commission  Spring  2024  Forecast  projects  a  government  deficit  of  6.9%  of  GDP  in 
2024, while the general government debt-to-GDP ratio is set to increase to 50.9% by 
the  end  of  2024.  The  projected  increase  of  the  deficit  in  2024  mainly  reflects  rapid 
growth  in  current  government  expenditure.  Public  wages  are  expected  to  accelerate 
strongly, reflecting recent discretionary increases in wages in education, health as well 
as defence sectors. The recalculation of pensions in the context of the pension reform 
will have a short-term cost in 2024 and 2025 – the reform will subsequently generate 
large savings over the medium and long run. In 2024, public investment as a share of 
GDP is expected to remain broadly stable at the high level reached in 2023, due to fast 
growing  capital  spending  by  local  authorities  and  the  deployment  of  funds  from  the 
Recovery and Resilience Funds.  

(18) 

In  2024,  government  revenue  growth  is  expected  to  outpace  nominal  GDP  growth, 
reflecting  a  “tax  rich”  composition  of  economic  growth,  efforts  to  improve  tax 
collection  through  digitalisation  of  the  tax  system,  and  the  impact  of  a  package  of 
revenue  increasing  measures  adopted  in  autumn  2023,  which  are  expected  to  boost 
government  revenue  by  around  1%  of  GDP.  The  package  mostly  consists  of  an 
increase  in  corporate  taxation,  in  particular  for  micro-enterprises,  an  increase  in 
taxation of individuals, coming from a partial removal of preferential tax facilities in 
the  construction  and  agriculture  sectors,  the  elimination  of  reduced  VAT  rates  for 
selected  goods  and  services,  an  increase  in  excise  duties,  and  a  special  tax  on  the 
turnover  of  banks  and  multinationals.  The  package  also  includes  measures  on  the 
expenditure  side,  including  the  rationalisation  of  public  administration  and  tighter 
conditions  for the eligibility  of public servants  to receive holiday vouchers and food 
allowances. Based on the Commission’s estimates, the fiscal stance is projected to be 
broadly neutral in 2024, at 0.1% of GDP. 

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(19)  Expenditure  amounting  to  1.0%  of  GDP  will  be  financed  by  non-repayable  support 
(“grants”)  from  the  Recovery  and  Resilience  Facility  in  2024,  compared  to  0.1%  of 
GDP  in  2023,  according  to  the  Commission  Spring  2024  Forecast.  Expenditure 
financed  by  Recovery  and  Resilience  Facility  grants  will  enable  high-quality 
investment and productivity-enhancing reforms without a direct impact on the general 
government  balance  and  public  debt  of  Romania.  Romania  assumes  expenditure 
backed  by  loans  from  the  Recovery  and  Resilience  Facility,  amounting  to  0.2%  of 
GDP in 2024 and 1.2% of GDP in 2025, compared with 0.3% of GDP in 2023. 
(20)  On 14 July 202315, the Council recommended that Romania take action to wind down 
the emergency energy support  measures in  force, using the related savings to  reduce 
the  government  deficit,  as  soon  as  possible  in  2023  and  2024.  The  Council  further 
specified  that,  should  renewed  energy  price  increases  necessitate  new  or  continued 
support  measures,  Romania  should  ensure  that  these  were  targeted  at  protecting 
vulnerable  households  and  firms,  fiscally  affordable,  and  preserve  incentives  for 
energy savings. According to the Commission Spring 2024 Forecast, the net budgetary 
cost16 of emergency energy support measures is estimated at 0.3% of GDP in 2023 and 
projected at -0.1% of GDP in 2024 and 2025. Support schemes of an overall impact of 
0.5% of GDP in 2024 and 0.4% of GDP in 2025 are set to remain in force, but their 
impact  is  projected  to  be  offset  by  the  windfall  taxes  from  energy  producing  and 
distributing companies. The budgetary cost of support measures targeted at protecting 
vulnerable households and firms is estimated at  0.2% of GDP in 2024, of which less 
than  0.1%  of  GDP  preserve  the  price  signal  to  reduce  energy  demand  and  increase 
energy efficiency. If the related savings from the decrease of the net budgetary cost of 
the emergency energy support measures  were used to reduce the government deficit, 
as recommended by the Council, these projections would imply a fiscal adjustment of 
0.4% of GDP in 2024, whereas net nationally financed primary expenditure is forecast 
to  provide  an  expansionary  contribution  to  the  fiscal  stance  of  1.2%  of  GDP  in  that 
year. The emergency energy support measures are not projected to be wound down as 
soon as possible in 2023 and 2024. This is not in line with what was recommended by 
the Council. Moreover, the related savings are not projected to be fully used to reduce 
the government deficit. These risks are not in line with the Council recommendation. 

(21) 

In addition, the Council also recommended that Romania preserve nationally financed 
public  investment  and  ensure  the  effective  absorption  of  Recovery  and  Resilience 
Facility  grants  and  other  EU  funds,  in  particular  to  foster  the  green  and  digital 
transitions.  According  to  the  Commission  Spring  2024  Forecast,  nationally  financed 
public investment is projected to increase to 3.3% of GDP in 2024 from 2.3% of GDP 
in  2023.  This  is  in  line with  what  was  recommended  by  the  Council.  In  turn,  public 
expenditure  financed  from  revenues  from  EU  funds,  including  Recovery  and 
Resilience Facility grants, is expected to decrease to 2.3% of GDP in 2024 (from 3.3% 
of GDP in 2023). This decrease is driven by the end of the 2014-2 020 programming 
period of EU structural funds, for which funds are available until 2023. 

(22)  Based on policy measures known at the cut-off date of the forecast and on a no-policy-
change  assumption,  the  Commission  Spring  2024  Forecast  projects  a  government 
deficit of 7.0% of GDP in 2025. The general government debt-to-GDP ratio is set to 

15 

16 

Council  Recommendation  on  the  2023  National  Reform  Programme  of  Romania  and  delivering  a 
Council opinion on the 2023 Convergence Programme of Romania, OJ C 312, 1.9.2023, p. 216. 
The figure represents the level of the annual budgetary cost of those measures, including revenue and 
expenditure and, where applicable, net of the revenue from taxes on windfall profits of energy suppliers. 

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(23) 

increase  to  53.9%  by  the  end  of  2025.  The  increase  of  the  deficit  in  2025  mainly 
reflects  the  short-term  cost  of  the  pension  reform,  which  is  expected  to  add  another 
0.5% of GDP to the deficit in 2025 relative to a baseline without a reform. However, 
some moderation in capital spending is likely after the local elections, and growth in 
current expenditure excluding pensions is expected to slow down somewhat. The 2025 
deficit  forecast  does  not  include  the  potential  additional  revenue  stemming  from  the 
reform of the tax regime of microenterprises and the broad tax reform, which are part 
of  the  RRP  and  are  currently  being  designed.  These  reforms  have  the  potential  to 
generate  substantial  revenue  for  the  government  and,  if  properly  designed  and 
implemented,  to  lower  the  2025  deficit  significantly  relative  to  the  forecast.  Prudent 
fiscal policy should contribute to reducing core inflation, which is well above the EU 
average  and  could  lead  to  competitiveness  losses  if  persistent,  and  strengthening  the 
external position too. 

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. These are expected 
to  help  effectively  address  all  or  a  significant  subset  of  challenges  identified  in  the 
relevant  country-specific  recommendations.  Within  this  tight  timeframe,  proceeding 
swiftly  with  the  effective  implementation  of  the  plan,  including  the  REPowerEU 
chapter, is essential to boost Romania’s long-term competitiveness through the green 
and digital transition, while ensuring social fairness. To deliver on the commitments of 
the  plan  by  August  2026,  it  is  essential  for  Romania  to  significantly  accelerate  the 
implementation  of  reforms  and  investments  by  ensuring  effective  governance  and 
strengthening  administrative  capacity.  The  systematic  involvement  of  local  and 
regional  authorities,  social  partners,  civil  society  and  other  relevant  stakeholders 
remains essential to ensure broad ownership for the successful implementation of the 
recovery and resilience plan.  

(24)  As  part  of  the  mid-term  review  of  the  cohesion  policy  funds,  in  accordance  with 
Article  18  of  Regulation  (EU)  2021/1060,  Romania  is  required  to  review  each 
programme  by  March  2025,  taking  into  account,  among  other  things,  the  challenges 
identified in the 2024 country-specific recommendations, as well as its national energy 
and climate plan. This  review  forms  the basis for the definitive allocation of the EU 
funding  included  in  each  programme.  Romania  has  made  progress  in  implementing 
cohesion  policy and the  European Pillar of Social  Rights,  but  challenges  remain and 
significant  territorial  disparities  in  investment  and  employment  persist  between  the 
capital region and the other regions, as well as between urban and non-urban areas. It 
is  crucial  to  accelerate  the  implementation  of  cohesion  policy  programmes  and 
strengthen administrative capacity at national and regional level. The priorities agreed 
in the programmes are still relevant. Particular attention should be paid to improving 
the  management  and  sustainability  of  the  water,  wastewater  and  waste  sectors.  It  is 
equally  important  to  improve  labour  productivity  and  the  capacity  of  businesses  to 
innovate,  by  focusing  on 
including  public-private 
collaboration  and  participation  in  European  research  and  innovation  initiatives. 
Investment in the railway network and sustainable urban transport should continue to 
be prioritised, alongside biodiversity protection. In addition, developing administrative 
capacity  at  national  and  subnational  levels  is  key,  with  a  focus  on  strengthening 
regional  and  local  authorities.  Implementation  of  the  territorial  just  transition  plans 
should  be  ensured,  including  phasing  out  coal  by  2032.  Public  employment  services 
should  continue  to  be  improved.  In  this  regard,  it  is  particularly  relevant  to  improve 
the effectiveness of labour market activation measures for women, young people not in 

targeted  business  support, 

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employment,  education  or  training,  people  with  disabilities  and  marginalised 
communities,  such  as  Roma.  Investment  in  education  and  training  as  well  as  in  the 
upskilling and reskilling of the population is needed. The accessibility and quality of 
social and long-term care as well as health services across the country for vulnerable 
groups  need  improving,  while  deinstitutionalisation  measures  need  accelerating. 
Energy poverty also remains a significant challenge. When carrying out the mid-term 
review,  it  is  worth  paying  further  attention  to  the  provision  of  social  housing  and 
related social services, as well as the sustainable development of smaller urban areas, 
which  face  persistent  administrative  capacity  deficits.  Addressing  these  challenges 
would  also  contribute  to  supporting  upward  social  convergence,  in  line  with  the 
Commission  services’  second-stage  country  analysis  based  on  the  features  of  the 
Social  Convergence  Framework17.  Romania  could  also  make  use  of  the  Strategic 
Technologies  for  Europe  Platform  initiative  to  support  investments  in  biotechnology 
(such  as  investments  in  the  use  of  artificial  intelligence  in  the  medical  sector  and  in 
research and productive investments in critical medicines), in digital technologies and 
deep-tech  innovation  and  in  clean  technologies;  as  well  as  to  invest  in  capacities  to 
address  skills  shortages  such  as  the  skills  necessary  to  the  development  of  these 
critical technologies. 

(25)  Despite recent improvements, poverty risk and inequality remain high with significant 
disparities  across  population  groups  and  regions,  while  access  to  employment  and 
education is still uneven in Romania. The social protection system still shows limited 
effectiveness  in  alleviating  poverty  risks  and  inequalities,  due  to  insufficient  access 
and low adequacy. In addition, the employment rate, remains one of the lowest in the 
EU, for under-represented groups in  particular.  Finally,  difficulties  in  ensuring equal 
access  to  high-quality  education  and  training  have  a  negative  impact  on  inclusive 
growth. 

(26)  The recovery and resilience plan includes measures related to the challenges referred 
to  in  recital  25.  Such  measures  include  a  reform  of  the  protection  system  for  adults 
with  disabilities,  a  reform  to  introduce  work  cards  and  formalisation  of  work  of 
domestic workers, an investment  for schemes to upskill/reskill employees in firms, a 
reform of the compulsory education system to prevent and reduce early school leaving 
and an investment for the development of a framework programme for the continuous 
training  of  professionals  in  early-childhood  education  services.  The  cohesion 
programmes  also  include  related  measures  such  as  dedicated  interventions  targeting 
youth employment, activation and employment of disadvantaged groups in the labour 
market  as  well  as  the  social  inclusion  of  persons  belonging  to  vulnerable  groups. 
Proceeding  with  their  swift  implementation  would  contribute  to  addressing  the 
challenges referred to in recital 25 and would support upward social convergence. 

(27) 

In  light  of  the  Commission’s  in-depth  review  and  its  conclusion  on  the  existence  of 
excessive  imbalances,  recommendations  under  Article  6  of  Regulation  (EU)  No 
1176/2011 are reflected in recommendations (1) and (2) below. Policies referred to in 
recommendation (1) help to address vulnerabilities linked to the large current account 
and  government  deficits,  which  make  the  economy  potentially  vulnerable  to  shocks 
and  contribute  to  high  inflation.  Policies  referred  to  in  recommendation  (2)  help  to 
address vulnerabilities linked to cost competitiveness due to wage increases in excess 

17 

SWD(2024)132 final 

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of  labour  productivity  growth  and  non-cost  competitiveness  due  to  structural 
bottlenecks.   

HEREBY RECOMMENDS that Romania take action in 2024 and 2025 to:  

1. 

2. 

Submit  the  medium-term  fiscal-structural  plan  in  a  timely  manner.  Tighten  fiscal 
policy in  order to  achieve a  fiscal  adjustment for 2024 as  a whole. In 2025,  in line 
with the requirements of the reformed Stability and Growth Pact, limit the growth in 
net  expenditure18  to  a  rate  consistent  with  reducing  the  general  government  deficit 
towards the 3% of GDP Treaty reference value and keeping the general government 
debt at a prudent level over the medium term.  

including 

Significantly accelerate the implementation  of cohesion policy programmes and the 
recovery  and  resilience  plan, 
the  REPowerEU  chapter,  ensuring 
completion  of  reforms  and  investments  by  August  2026,  by  guaranteeing  effective 
governance and strengthening administrative capacity. In the context of the mid-term 
review, continue focusing on the agreed priorities, taking action to better address the 
needs  regarding  social  housing,  the  related  social  services  and  the  development  of 
smaller  urban  areas,  while  considering  the  opportunities  provided  by  the  Strategic 
Technologies for Europe Platform initiative to improve competitiveness. 

Done at Brussels, 

For the Council 
The President 

18 

According  to  Article  2(2)  of  Regulation  (EU)  2024/1263,  ‘net  expenditure’  means  government 
expenditure net of interest expenditure, discretionary revenue measures, expenditure on programmes of 
the  Union  fully  matched  by  revenue  from  Union  funds,  national  expenditure  on  co-financing  of 
programmes funded by the Union, cyclical elements of unemployment benefit expenditure, and one-offs 
and other temporary measures. 

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