EC recommends lifting excessive government deficit procedures for Romania, suggests next action plan items

The European Commission has recently recommended the European Council to lift the excessive government deficit procedures for Romania, and has made the same recommendation for Italy, Latvia, Lithuania and Hungary. Romania managed to decrease its Government deficit from 9 percent in 2009, when the larger-than-expected recession resulted in a significant shortfall in government revenue, to 6.8 percent in 2010, 5.6 percent of GDP in 2011 and to 2.9 percent of GDP in 2012, which is below the 3 percent of GDP threshold. Moreover, the country's gross debt was 13.6 percent of GDP, well below the 60 percent of GDP Treaty reference value. “The correction of the deficit has been driven mainly by strict control of expenditure growth, including through control of the public sector wage bill, a freeze in pensions and a reduction in all social benefits except pensions. It was also supported by revenue measures such as an increase in the VAT rates by 5 percentage points and a broadening of the personal income tax base,” according to the European Commission report. The Commission also issued a set of other recommendations for Romania, which include finalizing the financing agreement with the EU and the International Monetary Fund IMF, an increase in tax collection, higher environment taxes, leveling the retirement age and continuing structural reforms. In its recommendation for the 2013 reform program for Romania, the Commission mentions Romania ranks among last in the EU on labor productivity and poverty reduction. The full report is here in pdf. editor@romania-insider.com