The European Commission on June 30 sent Romania a notification requesting the country to curb its budget deficit, or else part of the cohesion funds would be suspended, Minister of Finance Marcel Bolos told the leadership of the National Liberal Party (PNL) on July 3 according to the transcript of the talks published by Digi24.

Romania has been under the Excessive Deficit Procedure since before the COVID-19 crisis, when the budgetary regulations were temporarily suspended, and it is unlikely to meet the 4.4% of GDP deficit this year after the gap exceeded 2.3% of GDP in January-May.

“We received a document from the Commission on Friday [June 30] recommending us to cut the [budget] deficit, otherwise [the Commission] suspends the European funds,” Bolos reportedly said.

Liberal Finance Minister Bolos is an advocate of eliminating all exceptions and loopholes in the fiscal system – a step recommended by all international financial institutions (IFIs) to help achieve fiscal consolidation. 

“The deficit is wide, we can’t keep it under control without eliminating the loopholes,” Bolos reportedly told the PNL leadership on July 3. He previously expressed concerns about the wide January-May deficit. 

Among the first exceptions envisaged by Bolos for elimination were the allowances extended to employees in IT, construction, food processing and agriculture.

Neither the PNL nor its coalition partner the Social Democratic Party (PSD) agree, however, with this scenario proposed by Bolos as a first step for balancing the budget.

The 2023 budget was drafted by Bolos’ predecessor, PSD minister Adrian Caciu and the planned revenues proved to be overly optimistic, which complicates the fiscal consolidation that the Liberals want to achieve.