Romanian fiscal consolidation strategy allegedly takes form, though crucial judgement postponed
In Romania, the big four parties eyeing to form a new government are gearing up to discuss their fiscal consolidation plan by June 9. This plan, aimed at meeting European Commission requirements and investor expectations, seems inevitable to include a hike in the VAT rates, despite President Nicusor Dan's promise to steer clear of such decisions[2][3].
If implemented, the VAT rate increases are likely to bolster the overall credibility of the fiscal consolidation package, which is crucial for the EU and rating agencies[2][3]. A key conversation between President Dan and party leaders is expected on June 9, where they'll make a final call on fiscal measures[2].
The fiscal consolidation proposal features various versions of VAT rate hikes, postponement of certain public investments, reductions in sector-specific expenditures through the merger or elimination of public institutions, and budgetary sector benefit cuts[2][3].
Moving forward, a "solidarity tax" on net incomes above EUR 2,000 is proposed, alongside healthcare insurance contributions for pensions surpassing a certain threshold. However, not all party experts are on board with these ideas[2][3].
VAT-related decisions have proven to be complex, with several alternative scenarios floated about. One such scenario includes raising the reduced rates (5% and 9%) to the standard threshold of 19%, resulting in notable impacts for the HoReCa sector[2]. Additionally, a potential hike of the standard VAT rate from 19% to 21% is still in play[2].
With the deadline for enacting the fiscal plan knocking on the door (end of June), Romania must take action to avoid disciplinary measures from the European Union under the Excessive Deficit Procedure[2].
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[1] Romania faces excessive deficit risks, European Commission warns – Romania-Insider.com[2] Romanian government close to announcing fiscal consolidation measures, including VAT rate increase – Digi24.ro[3] Romania contemplates postponing planned public investments as part of fiscal consolidation package – EurActiv.com[4] Romania needs urgent fiscal reforms to tackle rising debt and deficit – Horizons EU Policy Brief – Centre for European Policy Studies[5] Romania’s new government grapples with the country’s mounting economic woes – The Economist
As of June 2025, the final decisions on the VAT rate hikes and other fiscal measures in Romania are still being hammered out in coalition negotiations, with ongoing discussions addressing potential compromise[2][3]. Multiple versions of VAT rate increases are under consideration, but a specific rate or definitive decision has not yet been announced[2][3]. Additional potential measures include rescheduling public investments and cuts in specific spending areas[2][3]. The rising deficit, now at 9.3% of GDP in 2024, and increasing debt have added urgency to the need for fiscal consolidation. The new leadership and coalition negotiations suggest a likely target deficit of 7.5% of GDP for 2025, rather than the agreed 7% with the EU[1][5]. Despite the ongoing coalition talks, as of June 9, 2025, no official, binding decision on the specific measures has been made or published.[2][3]
The ongoing coalition negotiations in Romania are expected to determine the final decisions on VAT rate hikes and other fiscal measures by June 2025, as the country grapples with an increasing deficit and debt. These negotiations involve multiple versions of VAT rate increases, which may impact sectors like HoReCa, as well as potential reductions in public investments and sector-specific expenditures.
The proposed fiscal consolidation plan, once implemented, could bolster the country's credibility with the EU and rating agencies, but not all party experts fully support it. The deadline for enacting the plan is fast approaching, and Romania must act to avoid disciplinary measures from the European Union under the Excessive Deficit Procedure.
