The suspended funds are tied to three major reforms that remain incomplete:

• Leadership Appointments at AMEPIP: The Agency for Monitoring and Evaluating the Performance of State-Owned Enterprises (AMEPIP) has yet to finalise the appointment of its president and vice-presidents. Two previous attempts to fill these key positions have failed, and a new selection process is currently underway.
• Board Appointments at State Energy Companies: The government has not completed the appointment of administrators for several state-owned energy companies. While the process has resumed at some entities, others—including major companies like SAPE and Electrocentrale Craiova—have seen little progress.
• Special Pension Reform: The long-debated reform of special pensions, particularly for magistrates, is still pending in the Romanian Senate. The proposed changes include raising the retirement age and adjusting the calculation base for these pensions, but the legislation has yet to be finalised.

Financial and Political Implications

If Romania fails to meet these milestones by November 28, 2025, the suspended €869 million could be lost permanently. Additionally, the country faces a minimum penalty of €660 million if it does not present a comprehensive fiscal reform as part of its fourth payment request under the PNRR. This subsequent request is particularly demanding, with the number of required milestones nearly doubling and a total value of €5.7 billion at stake.

The suspension of these funds places significant pressure on Romanian authorities to accelerate reforms in state-owned enterprise governance and the pension system. The European Commission’s decision underscores the importance of the timely and effective implementation of agreed-upon reforms to ensure continued access to vital EU recovery funds.

Romania’s ability to unlock the suspended funds and avoid further financial penalties depends on its prompt action to address the outstanding reforms. The coming months will be crucial as the government works to meet the European Commission’s requirements and safeguard the country’s access to essential EU support for its post-pandemic recovery.

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While Hungary was recently the EU’s black sheep because Prime Minister Viktor Orban opposed the EU’s policies regarding Ukraine, Romania is taking its place economically.

Rating institutions degrade Romania’s outlook, while the US has paused the country’s entrance into the Visa Waiver Program. Now, the EU is hitting the country again, making it less attractive for investments. Also, Romania’s democracy was labelled flawed in The Economist’s most recent assessment, which speaks for itself about the Romanian authorities’ interference in the democratic process.

The recent scandal with the annulment of the presidential elections in November and the lack of evidence to support this decision made Romania lose points of international trust. And, while the country’s “bold” decision to cancel the election is praised publicly, investors and institutions know that this drags the country back by at least a decade.

The coming Presidential elections in May could ease the pressure on the markets and get the country back on track; until then, though, Romania will be seen as Europe’s black sheep.

Background of the Decision

Romania’s third payment request, valued at 2 billion euros, includes 74 milestones and targets. Six have not been fulfilled, prompting the Commission to initiate the payment suspension procedure. The uncompleted milestones include:

• Milestone 215: The entry into force of the legislative framework for reducing special pension expenditures.
• Investments in Rail Infrastructure: Modernization of rail infrastructure.
• Development of the Subway Network: In Bucharest and Cluj-Napoca.
• Performance-Based Management Reforms: In the transportation sector.
• Corporate Governance Improvements: For state-owned energy companies and operationalising corporate governance policies for state enterprises.

Implications and Next Steps

This procedure allows Romania to receive partial payments for completed milestones while providing additional time to finalize the remaining ones. The Commission has forwarded its preliminary positive assessment of the completed milestones to the Economic and Financial Committee (EFC), which has four weeks to provide its opinion. Romania has one month to submit comments to the Commission.

The Commission will adopt a payment decision after receiving the EFC’s opinion and reviewing Romania’s comments. If the milestones are unmet, part of the payment will be temporarily suspended. Romania will have six months to correct the identified deficiencies, after which the Commission will reassess the fulfillment of the milestones.

National Recovery and Resilience Plan

With a total budget of 28.5 billion euros, the PNRR represents a significant opportunity for Romania to implement strategic reforms and investments. The plan focuses on green and digital transition, sustainable transport, energy renovation, and other key areas. Successfully implementing these measures is crucial for Romania’s economic and social development.

The European Commission’s decision highlights the importance of fulfilling all milestones and targets to fully benefit from the available funds and ensure a sustainable and equitable recovery of the Romanian economy.

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Despite the ambitious targets, the Romanian government intends to maintain high levels of state investment without implementing significant tax increases. This approach reflects a commitment to fostering economic growth while adhering to fiscal consolidation. However, the government faces challenges in balancing these objectives, especially given warnings from financial analysts about potential risks to economic stability.

Successful implementation of the deficit reduction plan is crucial for Romania to continue receiving over €70 billion in EU recovery and development funds allocated through 2027. These funds are essential for supporting infrastructure projects and promoting sustainable economic growth. Failure to meet the deficit targets could jeopardize this financial assistance, hindering the country’s development prospects.

The approval of the deficit reduction plan comes amid political turmoil in Romania. Allegations of Russian interference in the November presidential elections, yet to be proved, led to the annulment of the results, creating uncertainty in the political landscape. This situation underscores the importance of economic stability as a foundation for addressing broader governance challenges.

The EU’s endorsement of Romania’s fiscal consolidation plan represents a pivotal opportunity for the country to restore economic stability and investor confidence. The government’s ability to balance investment with fiscal discipline will be critical in achieving these goals and ensuring continued access to vital EU funds. As Romania navigates its political challenges, steadfast commitment to economic reform remains essential for its future prosperity.

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The EPP includes 84 parties and partners from 44 countries, the presidents of the European Commission (Ursula von der Leyen) and the European Parliament (Roberta Metsola), heads of state or government from 12 EU member countries, ten members of the European Commission and the most significant political group (178 members) in the European Parliament.

Among the presidents and prime ministers, we mention:

• The President of Romania, Klaus Iohannis
• The Prime Minister of Finland, Petteri Orpo
• The Prime Minister of Luxembourg, Luc Frieden
• The President of Cyprus, Nikos CHRISTODOULIDES
• Chancellor of Austria, Karl Nehammer
• The Prime Minister of Ireland, Leo Varadkar
• The Prime Minister of Croatia, Andrej Plenkovic
• The Prime Minister of Poland, Donald Tusk
• The Prime Minister of Greece, Kyriakos Mitsotakis
• The Prime Minister of Lithuania, Ingrida Simonyte

Approximately 2000 participants from 44 countries have been invited to take part.

The forthcoming 2024 EPP Congress in Bucharest, jointly hosted by the Romanian party PNL, will center on the election of our lead candidate and the unveiling of our electoral manifesto for the European Parliament elections scheduled for June 6-9, 2024. The Congress represents a moment of unity, reflection, and inspiration, allowing us to celebrate achievements and address challenges such as Russia’s war in Ukraine, the increasing cost of living, and the threats posed by populism and extremism. As the EPP stays true to its values, we emphasize empowering the people of Europe, preserving our deep-rooted values, and protecting the Union against internal and external threats.

EPP official communication

EPP CONGRESS IN BUCHAREST PROGRAMME

WEDNESDAY, 6 MARCH 2024

08:00-09:30
EPP Ethics Committee

08:30-12:30
EPP Group Study Days 1st session (including a session with EPP Group CoR)

10:00-12:00
Resolution Committee

14:00
Congress: 1st Plenary Session
Welcome speeches

14:30
Debate focusing on the voice of villages, cities and regions

15:15
Debates and exchanges with Presidents of the Parliamentary Assemblies Council of Europe, NATO, OSCE, Chairpersons of Groups, EPP Associations, WMCES President
• Discussion on defence and security
• Discussion on intergenerational solidarity
• Discussion on the economy and jobs

16:15
Interventions by non-EU Heads of State and Government, non-EU Opposition and Party Leaders

17:15
Presentation and vote on ordinary and emergency Resolutions and Statutory changes

18:15
EPP Electoral Manifesto: Presentation and Vote

19:15
Closing Remarks

EPP reception and family dinner co-hosted by PNL

THURSDAY, 7 MARCH 2024

8:00-09:00
Women Empowering Perspectives for Peace

8:00-09:00
EPP-CoR Group Local Dialogue on Enlargement

8:00-09:00
EPP Group Study Days 2nd session

9:00
Congress: 2nd Plenary Session
Interventions by EU Opposition and Party Leaders

9:45
Address by EPP President

10:00
Speech(es) by nominee(s) for EPP Lead Candidate

10:15–11:45
Election of the EPP Lead Candidate for President of the European Commission (Secret Ballot)

10:15- 11:45
Interventions by Deputy Prime Ministers and EU Heads of State and Government

11:45-12:10
Address by EU institutions Presidents and President of Romania

12:15-12:30
Announcement of the result of the election of the EPP Lead Candidate
Acceptance Speech of the EPP Lead Candidate
Closing of the Congress

For more details on the Congress, please visit the dedicated website https://www.epp2024.eu/.

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Via Transilvanica wins in Citizens’ Engagement & Awareness-raising category, while Pathfinders of the Waters, Danube Delta wins in Education, Training & Skills.

The annual EU prize for cultural heritage rewards 28 excellent initiatives and outstanding personalities from 20 European countries representing the latest developments and priorities related to European heritage policy and practice.

Winners in each category of European Heritage Awards 2023

Conservation & Adaptive Reuse

Steam Engine Brewery, Lobeč, CZECHIA

Friluftsskolen Open-Air School, Copenhagen, DENMARK

Hôtel de la Marine, Paris, FRANCE

Royal Gardens of Venice, ITALY

Museum of Urban Wooden Architecture, Vilnius, LITHUANIA

Wit Stwosz Altarpiece in St. Mary’s Basilica, Kraków, POLAND

Mudéjar Ceilings of the Cathedral of Funchal, Madeira, PORTUGAL

Deba Bridge, Gipuzkoa, SPAIN

Ruins of the Monastery of San Pedro de Eslonza, Gradefes, SPAIN

Research

Scientific-Archaeological Studies for the Preservation of Ererouyk, ARMENIA/FRANCE

Proto-Industrial Architecture of the Veneto in the Age of Palladio, ITALY

Safeguarding of the Artisanal Fishing Technique “Arte-Xávega”, PORTUGAL

Education, Training & Skills

MADE IN: Crafts and Design Narratives, AUSTRIA/CROATIA/SLOVENIA/SERBIA

ACTA VISTA, Marseille, FRANCE

Carpenters without Borders, Paris, FRANCE

National Centres for Restoration of Historic Vessels, NORWAY

Pathfinders of the Waters, Danube Delta, ROMANIA

Citizens’ Engagement & Awareness-raising

Village Square Meer, Antwerp, BELGIUM

Budapest100, HUNGARY

Museum of Literature Ireland (MoLI), Dublin, IRELAND

Open for You, ITALY

ALMADA Project, Lisbon, PORTUGAL

Via Transilvanica, ROMANIA

Un-archiving Post-industry, UKRAINE

Heritage Champions

Hambis Tsangaris, CYPRUS

Sergio Ragni, ITALY

Cláudio Torres, PORTUGAL

Saving Ukrainian Cultural Heritage Online (SUCHO), UKRAINE/INTERNATIONAL PROJECT.

Each winning achievement of this year’s European Heritage Awards/Europa Nostra Awards results from extraordinary skills and commitment, collective and individual, spanning European heritage places and traditions. By honouring these achievements, we also reiterate our firm commitment to protecting our shared cultural heritage, which is vital for our sense of togetherness as citizens and communities of Europe.

Margaritis Schinas, European Commission Vice-President for Promoting our European Way of Life

The award ceremony will take place on 28 September in Venice at the European Cultural Heritage Summit 2023. The summit that Europa Nostra organizes with the support of the European Commission takes place from 27 to 30 September.

About Via Transilvanica

Via Transilvanica is a long-distance trail of 1,400 kilometers that crosses Romania diagonally, from Putna to Drobeta Turnu Severin and is suitable for hiking, cycling or horseback riding.

About Pathfinders of the Waters

Pathfinders of the Waters represents a group of children who have built life-size wooden boats with their own hands, with which they explore the waters of the localities they belong to learn as much as possible about these natural spaces. In years to come, with their passion for nature and accumulated knowledge, they will be able to become capable guides for visitors. The guides come from Mila 23, Drobeta Turnu Severin, Eșelnita, Sfântu Gheorghe, Sulina, Piscu, Chilia Veche, and Comana. They built their canoes and paddles in “meaningful learning” workshops, in 4-week sessions, under the guidance of the carpenter Viorel Gheorghe of the Ivan Patzaichin – Mila 23 Association.

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Core inflation is expected to peak in 2023, and headline inflation to remain above the inflation target over the forecast horizon. Unemployment is projected to only marginally decline, keeping the labour market relatively tight and wage increases high. The general government deficit is set to fall to 4.4% in 2024 due to strong revenue growth, helped by tax code changes and robust nominal GDP, and to a decline in current expenditure as a share of GDP. The debt-to-GDP ratio is forecast to reach 46.1% in 2024.

Growth resilience despite headwinds

In 2022 growth reached 4.7%, driven by strong private consumption and robust investment. High-frequency indicators indicate a relatively resilient economy in 2023-Q1, with sentiment and retail sales turnover increasing and industrial production improving. Employment expectations remained at a relatively high level.  

In the future, high inflation, tight financing conditions and more muted growth in trading partners will slow real growth. Despite these headwinds, private consumption growth is expected to stay positive because of higher wages and pensions and the extension of the energy price cap until 2025. Government support schemes and a resilient labour market will also support economic activity. 

Monetary policy is set to remain tight, with the policy rate at 7%, affecting the flow of credit to the economy and investments. However, planned investments under the Recovery and Resilience Plan (RRP) and other EU funds inflows are set to more than offset the impact of tight credit conditions. Investments are expected to support natural growth in 2023 and 2024 strongly.

Net exports are not projected to contribute to GDP growth. Despite subsiding energy prices and improving terms of trade, strong domestic demand is set to keep the trade balance negative. The current account deficit is expected to stay around [8%] of GDP over the forecast horizon, posing external sustainability risks over the medium term.

Real GDP is projected to grow by 3.2% in 2023 and 3.5% in 2024. Risks to the forecast are tilted to the downside as delays in implementing the RRP could reduce investments. 

Sticky unemployment and wage pressures

Despite solid GDP growth, employment prospects remain subdued as an ageing population and mass migration pose serious headwinds to job creation. However, labour market integration of people fleeing the war in Ukraine and visas for non-EU workers could act as mitigating factors. The unemployment rate is expected to decline slightly to 5.4% in 2023 and 5.1% in 2024. Wage increases have been substantial, especially in the private sector, but they remain below headline CPI inflation for the total economy. The tight labour market, the need to make up for losses in purchasing power, and high inflation should contribute to solid wage increases in 2023 and 2024.

Core inflation to remain high

Headline HICP inflation peaked in November then decreased to 12.2% in March, thanks to lower energy prices. Due to the energy price capping scheme, hardly any change is expected in this component, determined mainly by fuel and energy distribution price movements. Core inflation, however, continued to increase on the back of hikes in processed food and services. It is projected to stay above headline inflation this year after peaking in the first quarter. Overall, average HICP inflation is set to fall to 9.7% in 2023 and 4.6% in 2024, but risks are tilted to the upside as wage increase pressures are high.

The government deficit is projected to decline

Romania’s government deficit is forecast to decrease to 4.7% of GDP in 2023 from 6.2% in 2022. Robust nominal GDP growth and energy-related solid taxes are set to boost government revenues in 2023. Current expenditure is forecast to grow less than nominal GDP, driven by moderation in public wages. Public investment as a share of GDP is expected to rise, reflecting ambitious domestic budget targets and large inflows of EU funds. Additional payments to pensioners, an amendment of the fiscal code, the compensation scheme to deal with the surge in energy prices, and a credibly announced legislation to limit government expenditure in 2023 are all considered in the forecast. The net budgetary cost of the energy support measures is projected in the Commission 2023 spring forecast at 0.3% of GDP in 2023, compared with  0.4% in 2022.

The deficit is forecast to fall to around 4.4% of GDP in 2024, as current expenditure decrease as a share of GDP due to the discontinuation of some measures implemented in 2022/2023 amounting to about 0.3 pps. of GDP and to the effect of automatic stabilizers as nominal economic growth is expected to be still substantial. Capital expenditure growth is projected to slow due to the base effect created by the sizeable residual amount from the 2014-2020 EU budget cycle expected in 2023. The Commission currently assumes a complete phasing out of energy support measures in 2024

General government debt is projected to decrease to 45.6% of GDP in 2023, due to deficit reduction and stock-flow adjustment, before increasing to 46.1% in 2024. Risks to the fiscal outlook are tilted to the downside. Lower GDP growth, the upcoming electoral cycle, possible upside pressures on public wages following negative, accurate growth rates since 2021, and indexation of pensions that in 2024 will incorporate the 2022 high inflation could result in higher budget deficits.

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This question appeared after Kosovo passport holders were granted free access to the European space. Following this week, the EU adopted visa-free travel for Kosovo, as announced by the European Neighbourhood and Enlargement Negotiations.

Namely, Visa-free travel for Kosovar passport holders will become a reality on 1 January 2024 at the latest. Following an agreement between the European Parliament and the Council on a proposal by the Commission, passport holders from Kosovo will be allowed to travel to the EU without a visa for a maximum of 90 days in any 180 days.

Currently, five European states do not recognize Kosovo’s independence: Romania, Spain, Greece, Cyprus and Slovakia, despite insane pressures from the European Commission. Will these five countries allow Kosovo passport holders to travel freely within their territory? It seems there will be another round or many more rounds of collision (to be read negotiations) between the European Commission and these five rebel countries.

The outcome of these negotiations depends on many variables – the internal political configuration of each respective country, the concessions within the negotiations, and any other external pressures.

At the beginning of the year, the Kosovo Prime Minister demanded the five to recognize its ‘country’, but with no success.

Will this decision hurry things up toward a unanimous recognition of the Serbian province as a state? Or, on the contrary, Kosovo passport holders will be forbidden to enter Romania and all the other states? Only eight months are remaining, and things will definitely sort out by then.

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According to the forecast, EU Economy is set to avoid recession, but headwinds persist. In short,  GDP is projected to expand by 0.8% in 2023 and 1.6% in 2024 (0.9% and 1.5% in the euro area). Headline inflation is forecast to fall from 9.2% in 2022 to 6.4% in 2023 and 2.8% in 2024 in the EU. The euro area is projected to decelerate from 8.4% in 2022 to 5.6% in 2023 and to 2.5% in 2024.

Winter 2023 forecast for Romania: one of the most significant economic growth in 2023

Regarding Romania, the European Commission has positive news: Romania is one of the top countries in the EU to avoid recession but also has steady economic growth.

According to the economic projection and based on short-term indicators, Romania’s economy is expected to have been resilient in the fourth quarter, on the back of favourable developments in the services sector and economic sentiment, despite the further fall of production in manufacturing.

For 2023, the negative impact of still high inflation, tight financing conditions and the slowdown of the other EU economies are all set to lower real GDP growth in Romania to 2.5%.

Implementing the RRP – the Recovery and Resilience Plan should contribute to solid investment, which is expected to be the main growth driver. Other EU funds are set to support investment as well. Although negatively affected by high inflation, private consumption is projected to grow due to increases in the minimum wage, pensions, and public sector wages, as well as the extension of the energy price cap until 2025. Net exports are expected to remain negative because of a strong currency and low demand in export markets.

A rebound of 3% in economic growth is projected for 2024 on the back of receding inflationary pressures, lower interest rates, and an improved external outlook.

The annual HICP inflation slowed down in December because of lower energy and food commodity prices, bringing the 12-month average in 2022 to 12%. HICP inflation is expected to ease further over the forecast horizon, but only modestly as inflationary pressures remain very high in core components such as services, non-energy industrial goods and processed food. Average annual HICP inflation is projected at 9.7% for 2023 before slowing down to 5.5% in 2024 due to the extension of the energy price cap, lower commodity prices and base effects kicking in.

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These differences have been well-known for a long time, though. Everything seems to have a different quality in Western countries, from shampoo to beverages and from cars to clothing apparel. Yet, when asked, the Western producers reply that they adapt their quality to the market.

In other words, an Eastern European consumer, compared to an Austrian, doesn’t like his meat can to contain more meat, he likes it with less, apparently. Also, the orange juice – Eastern Europeans prefer it with no orange juice, as we are to listen to the Western companies.

In 2017, Slovakian authorities aimed at this sort of practice of Western companies. As cited by Reuters, half of 22 products bought in Bratislava, the Slovak capital, and two Austrian towns across the border, less than 20 km (13 miles) away, differed in taste, looks and composition, the Slovak ministry said, according to laboratory tests by the national food quality watchdog.

In 2017, the Romanian authorities, inspired by Slovakia, did similar tests and found the same results – the quality of the products is inferior in Romania compared to Western Europe, even if the same brands delivered the products.

In 2019 it appeared that Eastern European consumers had their voices heard. The almighty European Commission decreed that from then on, there wouldn’t be double standards any longer. Or the guilty company would pay up to 4% of its annual income. It appears the situation is quite the same, if not even worse.

Such investigations should definitely continue, and Fanta is just one of the way too many Western companies to have their products checked for double standards.

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The President of Azerbaijan, Ilham Aliyev, the Prime Minister of Georgia, Irakli Garibashvili and the Prime Minister of Romania, Nicolae Ciuca, signed the Agreement. The event took place at the Cotroceni Presidential Palace in Bucharest.

The Agreement will provide the technical and financial framework necessary for constructing the submarine cable to transport electricity from renewable sources from Azerbaidjan to Romania under the Black Sea. This cable can then transport this energy to Hungary and other European countries via the European transport system.

One of the remarkable statements that define what this Agreement means for the European Union is the one offered by the Hungarian PM, Viktor Orban:

The history of the European economy when we imported cheap energy and raw materials from Russia is over. We want to have economic growth and security. We, the leaders, must ensure that we provide our peoples with energy security. We are here together because we have agreed to identify new sources of renewable energy for Europe.

Hungarian PM, Viktor Orban, in Bucharest

The Black Sea Submarine Cable Project forms part of the energy field agreements between the EU (represented by the European Commission) and Azerbaijan.

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