Cutting the budget deficit, Romania's major challenge on its way to the euro

The resumption of economic growth this year will create the conditions for an accelerated fiscal consolidation, according to the updated convergence programme, which features the strategy to exit the excessive deficit procedure and to reduce the budget deficit to under 3% of the GDP by 2012.

“In the long run, the Government intends to continue efforts for fiscal consolidation in order to reach a balanced budget over the duration of the economic cycle, which would entail a sufficiently high safety margin in order for deficit not to exceed 3% of GDP in case of a potential renewed slowdown of the economic growth,” reads the convergence programme for 2009-2012.

The Government is firm in its commitment to continue until 2013 the austerity measures initiated in 2009. The major challenge at a time when the Romanian economy is in recession is the application of urgent austerity measures, including cuts on personnel spending by means of pay freezes and by cutting state benefits.

The firm targets committed to by the Government are set to result in a reduction of the budget deficit by 1.7% of the GDP in 2010, 1.9% in 2011, and 1.4% in 2012, which means an overall five percent cut between 2009 and 2012.