EU steps up disciplinary action against Romania over excessive deficit

By Jan Strupczewski

BRUSSELS (Reuters) -The European Commission stepped up on Wednesday the EU's disciplinary action against Romania over the country's large budget deficit, opening the possibility of freezing some EU funds for the country next year if there is no improvement.

Romania had a budget deficit of 9.3% of GDP last year, more than three times the EU ceiling of 3% of GDP and the shortfall is likely to ease only to 8.6% this year and 8.4% in 2026, according to Commission forecasts.

This puts the country on a collision course with the Commission, which his the guardian of EU laws and obliged to enforce EU limits set by the treaty. Romania has been flouting the EU's 3% deficit limit since 2021.

"Romania's net expenditure growth is significantly above the ceiling set by its corrective path, posing clear risks to correcting its excessive deficit by 2030," the Commission said in a statement.

"The Commission is therefore recommending that the Council (of EU finance ministers) adopt a decision that establishes Romania has not taken effective action (to correct the excessive deficit)," it said.

Once EU finance ministers agree with the Commission's view at their next meeting on June 20, the EU will start a complex process of setting a new fiscal adjustment path for Romania.

"The message is clear and indeed there is also the potential eventually for the Commission to propose the suspension of EU funds for Romania. This is not going to happen in the next couple of weeks," one senior EU official said.

The stepping up of the EU's disciplinary budget procedure, designed to keep public finances of EU countries in good order, gives the government in Bucharest time to address the budget deficit issue over the next few months.

If Romania ignores the notice from the Commission, the EU would first freeze next year the possibility of the country getting new commitments to pay for projects in Romania from the EU coffers. Already promised payments would still be disbursed.

But if Bucharest continues to ignore EU rules on reducing the deficit, the freezing of the funds could be extended also to payments of funds that have already been promised.

The Commission also said Romania's large current account deficit of 8.5% of GDP last year showed its economy was experiencing excessive imbalances -- putting it under another EU monitoring scheme.

(Reporting by Jan Strupczewski)