March 4, 2020 / 1:15 PM / a month ago

EU executive starts disciplinary steps over Romania's budget gap

BRUSSELS, March 4 (Reuters) - The European Commission on Wednesday recommended that European Union finance ministers start a disciplinary procedure against Romania over the country’s excessive budget deficit that last year exceeded the EU limit of 3% of gross domestic product.

The Commission wants the ministers to ask Romania to reduce the budget gap below 3% by 2022 at the latest and take effective action towards that goal by Sept. 15.

The recommendation sets out a path for the reduction of the headline deficit to 3.6% of GDP in 2020 from 3.8% last year, then 3.4% in 2021 and 2.8% in 2022.

Should Romania fail to comply with the deficit reduction goal without a good reason the Commission can move to freeze EU structural funds for the country aimed at equalising living standards across Europe - a sanction that has already been used against Hungary in the past, but which is unlikely anytime soon.

Romania’s government, which is facing local and parliamentary elections this year, plans to enforce an already approved 40% hike in all state pensions from September. The Commission has warned the hike will take the country’s deficit to 6.1% in 2021.

“We have been negotiating with the European Commission for the last three months,” interim Finance Minister and designated Prime Minister Florin Citu said.

“Romania has a sustainable and credible deficit reduction plan fully accepted by the European Commission,” he said. (Additional reporting by Luiza Ilie in Bucharest; Reporting by Jan Strupczewski; editing by Jonathan Oatis)

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