Executive Summary:
This Council Decision (EU) 2020/509, issued on April 3, 2020, concludes that an excessive deficit exists in Romania due to non-compliance with the deficit criterion outlined in Article 126 of the Treaty on the Functioning of the European Union (TFEU). The decision is based on data reported by Romanian authorities and assessed against Stability and Growth Pact (SGP) guidelines. The Commission addressed an opinion to Romania on March 4, 2020, informing the Council accordingly.
Key Points / Main Content:
* **Excessive Deficit Procedure (EDP):**
* The decision is made under the EDP as defined in Article 126 TFEU and clarified by Council Regulation (EC) No 1467/97.
* The EDP is initiated due to Romania's breach of the deficit reference value of 3% of GDP.
* **Deficit and Debt Levels:**
* In 2018, Romania's general government deficit was 2.9% of GDP, and debt was 34.7% of GDP.
* Romania's planned general government deficit of 3.8% of GDP in 2019 exceeded the TFEU reference value.
* Commission forecasts project the deficit to increase to 4.9% in 2020 and 6.9% in 2021, driven by pension increases.
* Romania's debt is projected to remain below the TFEU reference value but is expected to increase.
* **Assessment of Relevant Factors:**
* The Commission analyzed relevant factors, including a lack of effective action since 2017, limited structural reform progress, and high fiscal sustainability risks.
* These factors do not alter the conclusion that the deficit criterion is not fulfilled.
Impact Analysis:
* **Romania:**
* *Impact:* Romania is the subject of this decision, which officially recognizes the existence of an excessive deficit.
* *Action Required:* Romania must address the excessive deficit and take corrective measures to comply with the TFEU and SGP guidelines.
* **European Commission:**
* *Impact:* The Commission's assessment and proposal form the basis of this decision.
* *Action Required:* The Commission will monitor Romania's progress in addressing the excessive deficit and may issue further recommendations or decisions.
* **Council of the European Union:**
* *Impact:* The Council is the decision-making body in this matter.
* *Action Required:* The Council will oversee the implementation of this decision and may take further action as necessary.
Key Entities Referenced
Romania: Member State of the European Union subject to an excessive deficit procedure.
European Union: The political and economic union of European countries.
Treaty on the Functioning of the European Union: The Treaty that establishes the framework for the European Union's policies and actions (TFEU).
European Commission: The executive branch of the European Union responsible for proposing legislation, implementing decisions, and managing the EU budget.
Stability and Growth Pact: A set of rules designed to ensure that countries in the European Union maintain sound public finances and coordinate their fiscal policies (SGP).
Council Regulation EC No 1467/97: Council Regulation on speeding up and clarifying the implementation of the excessive deficit procedure.
Council Regulation EC No 479/2009: Council Regulation on the application of the Protocol on the excessive deficit procedure annexed to the Treaty establishing the European Community.
Fiscal-Budgetary Strategy for 2020-2022: The Romanian government's fiscal strategy document outlining deficit targets.
L 110/58 E N O f f i c i a l J o u r n a l o f t h e E u r o p e a n Union 8.4.2020
DECISIONS
COUNCIL DECISION (EU) 2020/509
of 3 April 2020
on the existence of an excessive deficit in Romania
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty on the Functioning of the European Union and in particular Article 126(6) thereof,
Having regard to the proposal from the European Commission,
Having regard to the observations made by Romania,
Whereas:
(1) According to Article 126 of the Treaty on the Functioning of the European Union (TFEU), Member States are to
avoid excessive government deficits.
(2) The Stability and Growth Pact (SGP) is based on the objective of using sound government finances as a means of
strengthening the conditions for price stability and for strong sustainable growth that is conducive to the creation
of employment.
(3) The excessive deficit procedure (EDP) under Article 126 TFEU, as clarified by Council Regulation (EC)
No 1467/97(1) (which is part of the SGP), provides for the taking of a decision finding the existence of an excessive
deficit. Protocol No 12 on the excessive deficit procedure, annexed to the Treaty on European Union and the TFEU,
sets out further provisions relating to the implementation of the excessive deficit procedure. Council Regulation
(EC) No 479/2009(2) lays down detailed rules and definitions for the application of those provisions.
(4) Article 126(5) TFEU requires the Commission, if it considers that an excessive deficit in a Member State exists or may
occur, to address an opinion to the Member State concerned and to inform the Council accordingly. Having taken
into account its report adopted pursuant to Article 126(3) TFEU and having had regard to the opinion of the
Economic and Financial Committee adopted pursuant to Article 126(4) TFEU, the Commission concluded that an
excessive deficit exists in Romania. On 4 March 2020, the Commission therefore addressed an opinion to that effect
to Romania and informed the Council accordingly(3).
(5) Article 126(6) TFEU states that the Council is to consider any observations which the Member State concerned may
wish to make before deciding after an overall assessment whether an excessive deficit exists. In the case of Romania,
that overall assessment leads to the following conclusions.
(6) According to the data notified by the Romanian authorities on 30 September 2019 that were subsequently validated
by Eurostat, the general government deficit in Romania reached 3 % of gross domestic product (GDP) in 2018, while
general government debt stood at 35 % of GDP. Taking into account the revised GDP figures announced by the
Romanian national statistical office after the publication of Eurostat’s press release, those ratios changed slightly,
with the deficit standing at 2,9 % of GDP and debt at 34,7 % of GDP in 2018. For 2019, the notification indicated a
planned general government deficit of 2,8 % of GDP.
(1) Council Regulation (EC) No 1467/97 of 7 July 1997 on speeding up and clarifying the implementation of the excessive deficit
procedure (OJ L 209, 2.8.1997, p. 6).
(2) Council Regulation (EC) No 479/2009 of 25 May 2009 on the application of the Protocol on the excessive deficit procedure annexed
to the Treaty establishing the European Community (OJ L 145, 10.6.2009, p. 1).
(3) All EDP-related documents for Romania can be found at: https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-
policy-coordination/eu-economic-governance-monitoring-prevention-correction/stability-and-growth-pact/corrective-arm-excessive-
deficit-procedure/ongoing-excessive-deficit-procedures/romania_en8.4.2020 E N O f f i c i a l J o u r n a l o f t h e E u r o p e a n Union L 110/59
(7) On 10 December 2019, the government adopted the Fiscal-Budgetary Strategy for 2020–2022 (the ‘Fiscal Strategy’),
with a general government deficit target of 3,8 % of GDP in 2019. This is above and not close to the TFEU reference
value of 3 % of GDP. The excess over the TFEU reference value in 2019 is also not exceptional, as it results neither
from an unusual event nor from a severe economic downturn in the sense of the TFEU and the SGP. The
Commission 2020 winter forecast projects real GDP growth of 3,9 % in 2019 and 3,8 % in 2020, while the output
gap is projected to be around zero. One-off items amounted to 0,1 % of GDP in 2019 and were due to a refund of
the environmental stamp duty on cars. The planned excess over the TFEU reference value is not temporary for the
purposes of the TFEU or the SGP. The Commission 2020 winter forecast, extended with fiscal variables, projects a
general government deficit of 4 % of GDP in 2019, 4,9 % in 2020 and 6,9 % in 2021. The projected increase in the
deficit is mostly driven by significant pension increases. In the Fiscal Strategy, the government also projects that the
general government deficit will remain above the TFEU reference value in 2020 and 2021, with a forecast deficit of
3,6 % of GDP in 2020 and 3,4 % in 2021. The deficit criterion in the TFEU is therefore prima facie not fulfilled.
(8) Romania’s general government debt amounted to 34,7 % of GDP in 2018. Both the the Fiscal Strategy and the
Commission’s 2020 winter forecast, extended with fiscal variables, project the general government debt to increase
until 2021, but to remain below the TFEU reference value. According to the Fiscal Strategy, general government
debt is projected to increase to 37,8 % of GDP in 2021. The Commission projects a steeper increase, to 41,9 % of
GDP in 2021. Therefore, the debt criterion in the TFEU is fulfilled.
(9) In accordance with the requirements of Article 126(3) TFEU, the Commission also analysed all the relevant factors in
its report under Article 126(3) TFEU. As laid down in Article 2(4) of Regulation (EC) No 1467/97, whenever the
government debt-to-GDP ratio does not exceed the reference value, relevant factors are to be taken into account in
the steps leading to the decision on the existence of an excessive deficit. The relevant factors, in particular the lack
of effective action since 2017 in response to Council recommendations under the significant deviation procedure,
the limited progress made by Romania with respect to structural reforms and the high fiscal sustainability risks
facing Romania in the medium and long term, have been taken into account in the assessment of Romania’s
compliance with the deficit criterion. Those factors do not modify the conclusion that the deficit criterion in the
TFEU is not fulfilled,
HAS ADOPTED THIS DECISION:
Article 1
From an overall assessment it follows that an excessive deficit exists in Romania due to non-compliance with the deficit
criterion.
Article 2
This Decision is addressed to Romania.
Done at Brussels, 3 April 2020.
For the Council
The President
G. GRLIĆ RADMAN