Romania may face EU action over its budget

BRUSSELS (Reuters) – Romania may face disciplinary action by the European Union as its budget deficit is forecast to exceed the bloc’s ceiling, EU Monetary Affairs Commissioner Joaquin Almunia said yesterday. The European Commission forecast that the EU newcomer, hit by a political crisis, would breach the EU’s deficit cap of 3 percent of gross domestic product this year and next. Bucharest, however, targets a 2.8 percent gap in 2007. «Romania, starting with a deficit of 1.9 percent in 2006, in 2007 and 2008 will have an excessive deficit, according to our forecasts. The consequences of these forecasts are pretty clear,» Almunia told a news conference. The EU may freeze part of Romania’s regional aid funds if the country persistently breaches the deficit limit. The Commission will assess Romania’s public finances in June, Almunia added. Analysts have warned that Romania, which joined the EU this year, may find it difficult to control the deficit due to a split in the ruling coalition that has led to an impeachment procedure against the country’s president. A deficit below 3 percent of GDP is also a criterion for joining the eurozone, but Romania has said it may seek to adopt the currency in 2013 at the earliest. Almunia also said fellow EU newcomer Hungary, which is undergoing the bloc’s budget discipline procedure, was so far on track to meet an agreed target of cutting its huge budget deficit to around 3 percent of GDP in 2009. «Hungary has embarked on a very ambitious and difficult consolidation path, but so far they are fulfilling the recommendations,» Almunia said. Yet the Commission forecast Hungary’s deficit would come to 4.9 percent of GDP next year, higher than 4.3 percent expected by the government.