Romania's Fiscal Reform Regarding The Adjustment Of The Budget Deficit Through The Convergence Program And The Importance Of Absorbing Investments From European Funds

Abstract

This paper aims to highlight the importance of the convergence program for the period 2023-2026, to coordinate economic and budgetary policies, unlike other EU member states. Romania has been subject to the Excessive Deficit Procedure (EDP) since 2020, receiving a recommendation from the European Commission to increase the budget deficit by more than 3% of GDP. According to this recommendation, Romania must rigorously implement fiscal measures to correct the excessive budget deficit by the end of 2024 to maintain macroeconomic stability. The scientific purpose of our approach is to emphasize the importance of creating a budgetary space to allocate funds for supporting public investments and implementing projects financed from European funds in an efficient, professional, and transparent manner, with a multiplier effect and a direct contribution to gross fixed capital formation. The main objectives of the long-term fiscal-budgetary policy aim to reduce the budget deficit from 8% of GDP in 2021 to 6.2% of GDP for 2022 and 4.4% of GDP for 2023, achieving a decrease of 2.9% of GDP in 2024, through a sustainable and balanced consolidation effort that does not affect the economy's capacity to sustain and promote investments, targeting a more limited increase in current expenditures and continued efforts to improve revenue collection. Failure to adopt measures to limit budget expenditures would result in additional financing needs in 2024, leading to an unsustainable consolidated general government deficit of over 7% of GDP, increasing public debt with the risk of tightening its financing conditions. Considering the issues mentioned earlier, which concern Romania's public and strategic interest in ensuring the sustainability of public finances, fiscal consolidation, and the management of European funds, an extraordinary situation arises whose regulation cannot be postponed, requiring the adoption of immediate measures through an emergency ordinance.