Olli Rehn: Romania's public finances under control, country on track to exit EC's Excessive Deficit Procedure

Romania appears ready to leave the European Commission's (EC) Excessive Deficit Procedure (EDP) soon, according to Olli Rehn (in picture), European Commissioner for Economic and Monetary Affairs and the Euro and vice president of the European Commission. Speaking in a press conference on the EC's economic policy over the next year, Commissioner Rehn gave Romania as an example of a country that had brought its public finances under control and met its commitments to the EC on deficit reduction. He included Romania, along with Latvia, among the countries for which an exit from the EDP is “probable and/or possible.” According to Rehn, both countries reduced their deficits below 3 percent of GDP in 2012, and stayed below the reference value for the forecast period 2013 – 2014. As a result both Romania and Latvia “seem to be firmly on track for a sustainable correction of their excessive deficits and thus for an exit from the EDP,” said Olli Rehn during the press conference on May 3. Overall, Commissioner Rehn said that the EC expects gradual economic recovery in Europe over 2013 and 2014. The EU's economy will “stabilize” in the first half 2013, before “turning positive” in the second half of the year. Growth will then “gain momentum” in 2014, according to Rehn. However, overall in the EU, GDP is forecast to contract by 0.1 percent in 2013 and by 0.4 percent in the eurozone. The EC predicts growth of 1.4 percent for 2014 across the EU and of 1.2 percent in the eurozone. The main driver for growth will be external demand, as domestic demand is still constrained, according to the Commissioner, who said that the US economy remains on track despite fiscal tightening and that increasing growth is creating demand in the emerging economies. Labor markets are however likely to lag behind, and Olli Rehn said the EC does not expect an improvement in the disastrous unemployment situations in countries such as Greece and Spain until next year. Romania's government predicts 1.6 percent GDP growth in 2013 and the International Monetary Fund (IMF) backs the government's figure with its own 1.6 percent forecast. Others have predicted lower growth, such as Fitch ratings agency, which gives a 1.2 percent GDP growth estimate for 2013. Romania's deficit has reduced dramatically since the global financial crisis. From a peak of 9 percent of GDP in 2009 to a six year 2.9 percent low in 2012. Liam Lever, liam@romania-romania.com photo source: europa.eu