Romanian Government Approves €2.1 Billion Fiscal Package to Cut 2024 Deficit

Romania's government, led by Prime Minister Ilie Bolojan, has adopted a first fiscal corrective package aimed at reducing the country's budget deficit, which reached 9.3% of GDP in 2024, the widest in the European Union. The package, worth 0.56% of GDP, includes tax increases such as raising the standard VAT rate from 19% to 21%, higher dividend taxes, excise duty hikes, and increased health insurance contributions, alongside spending caps and reforms targeting public administration and state-owned companies. This first package is intended to signal fiscal discipline to the European Commission and credit rating agencies, helping avoid further EU sanctions under the Excessive Deficit Procedure. However, employers' organizations and trade unions have strongly criticized the measures, arguing they unfairly burden the private sector, reduce purchasing power, and risk deepening social inequalities. To complement these measures, a second fiscal package is planned by the end of July, focusing on reforms such as special pension adjustments, restructuring autonomous authorities, and improving tax collection to promote equity and efficiency. The government is fast-tracking these austerity measures despite resistance from far-right parties and potential political challenges, with the ruling coalition holding a strong parliamentary majority.