Romania needs fiscal and budgetary consolidation measures, Finance Minister Marcel Boloș announced on Wednesday, the day after Fitch Ratings downgraded its long-term debt outlook from stable to negative.

Although Romania’s next scheduled rating review is in February 2025, Fitch stated that current developments – such as political instability in the country – warrant an earlier review. Though Romania maintains its long-term currency rating at ‘BBB minus’, its debt outlook was downgraded to negative, with Fitch indicating the potential for further downgrades.

“For now, the alarm signal has only been raised,” Boloș said, commenting on Fitch’s report.

He also stressed the need for fiscal and budgetary consolidation measures to preserve the stable outlook that existed before the “political crisis.”

In its report, the rating agency cited heightened political uncertainties, which it said could significantly hamper fiscal consolidation efforts.

Fitch expects Romania’s general government deficit to widen to 8.2% of GDP in 2024, up from its August estimate of 7.2%. This is higher than the government’s previous target of 5% and the 6.5% recorded in the fiscal year of 2023.

Fitch also expressed concern about the stability of a potential new pro-European coalition government, suggesting that its durability is “uncertain”.

In addition, the upcoming presidential elections are expected to maintain a high level of political uncertainty and are likely to delay the implementation of fiscal consolidation measures.

Prime Minister Marcel Ciolacu did not comment directly on Fitch’s decision.

Instead, he noted that Romania was experiencing “turbulence caused by political instability and the cancellation of the presidential elections.” Following the latest government meeting, Ciolacu expressed pride in Romania’s current state, declaring that “this government has done its job”, although he did not ask journalists questions.

Ciprian Ciucu, interim first vice-president of the National Liberal Party (PNL), expressed concern.

“If we fail to create a new stable, serious, and pro-European government, Romania will truly be considered an unsafe country,” Ciucu said.

Ciucu also called for the indexation of salaries and pensions to be halted until the end of the year and proposed cutting state spending in the coming months.

Cristina Prună, spokeswoman for the Union for the Salvation of Romania (USR), called for reducing state spending to ensure that “deficit and loans no longer suffocate” the economy and citizens’ living standards.

Dan Șucu, president of Concordia – one of Romania’s main employers’ associations – addressed an open letter to pro-European politicians and parties on Wednesday.

He urged the urgent formation of a “credible government” to restore confidence and organise presidential elections without delay so that Romania can leave its current “grey zone of instability and uncertainty.”

Coalition talks also appear to be hampered by the ongoing budget crisis, with the USR likely to stay out of the government due to its dissatisfaction with the Finance Minister’s tax increase proposals.

(Catalina Mihai | Euractiv.ro)

Source: Euractiv.com