Despite the opposite statement of government officials, the authorities in Bucharest seek to defer the delivery of the fiscal consolidation plan, expected by the European Commission in principle by September 20, until after elections in January 2025, according to Ziarul Financiar quoting sources familiar with the negotiations.

Romania's government recently revised 2024 budget planning to be consistent with a 6.9%-of-GDP cash deficit. The Fiscal Council expects the gap to be around 8%-of-GDP, however – more than 2 percentage points more compared to the gap in 2023.

The fiscal consolidation plan is broadly expected to tighten the taxation regime and this will not come as a surprise. A moderate rise in taxation can be absorbed and probably accepted, as corporate taxation in Romania is among the lowest in Europe.

However, the investors complain about the lack of visibility and public debates on specific steps that might be enforced on short notice and in the absence of a broader perspective that may generate a sentiment of fairness and predictability.

Furthermore, key elements such as the transition period to under-3% of GDP target, with an impact on the magnitude of the taxation tightening, remain unclear: while the government insists on a seven-year period, former finance minister Florin Citu claims that the EC is arguing for four years.

The European Commission's representatives contacted by the daily confirmed that deferring the deadline for the fiscal consolidation plan over "a reasonable period of time" is, in principle, possible. Until after the elections seems a reasonable-enough extension.

"We can discuss and agree with member states on an extension for a reasonable period of time. The Commission will agree with the Member States on a new deadline that will allow a timely evaluation of the plan, taking into account all the relevant factors presented by each Member State requesting an extension."

iulian@romania-insider.com

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