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Romania 2019 budget deficit breaches EU limit

Romania's liberal government, installed in November of last year, said it had encountered 'unexpected' expenses.

Published: 28th January 2020 06:55 PM  |   Last Updated: 28th January 2020 06:55 PM   |  A+A-

Budget

For representational purposes.

By PTI

BUCHAREST: Romania's budget deficit ballooned to 4.6 per cent of gross domestic product in 2019, Finance Minister Florin Citu said on Tuesday, breaking the three per cent ceiling laid down by the European Union.

Romania's liberal government, installed in November of last year, said it had encountered "unexpected" expenses.

It may now run the risk of disciplinary action from Brussels. At a press conference, Citu indicated that the previous left-wing government's spending plans had been to blame for the deficit increase.

"Last year funds allocated to investment ended up being directed towards salaries and welfare payments," Citu said. The previous leftist government had projected a deficit of 2.76 per cent for 2019, which experts described as unrealistic even at the time.

The new liberal government was initially expecting the figure to reach 4.4 per cent. Spending on public sector salaries was up 19 per cent compared with 2018 whereas public revenue only increased by 10.7 per cent.

Citu said the government should be able to bring the deficit down to 3.6 per cent over 2020. "It's not just a promise of mine that I want to keep, but if we don't respect this (3.6 per cent) target we will lose what I see as the most important thing right now, and that is investors' trust," Citu said in a TV interview on Monday evening.

He predicted "a hard fight" ahead to keep to this threshold given upcoming local and national elections this year.

The International Monetary Fund (IMF) and credit rating agencies have urged the government to abandon a 40 per cent hike in pensions voted through by the previous government and due to take effect in September.

According to the independent Fiscal Council watchdog, the pension hike could mean the deficit going beyond 4.6 per cent in 2020.

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