The European Commission advised the Romanian Government to consolidate its public finance and to continue the economic reforms, in order to reduce the increasing imbalances in the economy. One year ago, in 2007, the European Commission made similar recommendations, referring to solid budget planning and firm assuming of the budget targets established in the stability and convergence programs.
""Romania needs a comprehensive strategy to accelerate structural reforms and fiscal consolidation. In particular, a credible medium-term expenditure planning and a multi-annual budget are urgently needed. Coupled with structural reforms, budgetary consolidation will help address the overheating of the economy and promote a more balanced catching up process with the rest of the EU" said Joaquín Almunia, Economic and Monetary Affairs Commissioner, according to the EC press release.
"The Commission today adopted a recommendation providing advice on economic and budgetary policy in Romania. This is in accordance with the revised Stability and Growth Pact (SGP) which foresees that “the Commission will issue policy advice to encourage Member States to stick to their adjustment path towards the 'medium-term budgetary objective'”. Romania's medium-term objective (MTO) is a general government deficit of 0.9% of GDP in structural terms (i.e. cyclically adjusted and net of one-off and other temporary measures) to be achieved by 2011.
Romania recorded a nominal budget deficit of 2.5% of GDP in 2007, double that in 2005 and, according to the Commission's spring forecast, this is projected to increase to 2.9% in 2008 and 3.7% in 2009, under the customary no-policy-change assumption. The structural deficit is much higher and increasing from 3.4% of GDP in 2007 to a forecast 3.7% in 2008 and 4.1% in 2009.
This reflects an expansionary fiscal p
