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Fiscal Council: There is no alternative to a severe correction; budget correction package can avoid Romania's downgrading

August 6, 2025

  The 2025-2026 budget correction package can avoid the downgrading of Romania's sovereign risk and there is no alternative to a severe correction, says the Fiscal Council, which published an Opinion on the package of fiscal measures for which the Government assumed responsibility."The 2025-2026 budget correction package can avoid the downgrading of Romania's sovereign risk. There is no alternative to a severe correction. The optimality of the package of correction measures examined is difficult to assess, especially since distributional aspects (including equity) and second-round effects come into play. The budget correction, which means a reduction in internal absorption (affecting personal income, corporate revenues), is the price we must pay to ensure the sustainability of public debt and avoid an even more severe correction," argues the Fiscal Council.According to the same document, the substantial fiscal adjustment package will have an important effect in terms of narrowing the external imbalance.In the context, the Fiscal Council showed that the analysis of the budget execution for the first 5 months of 2025 is likely to worsen the Fiscal Council's adoption of the draft budget, which saw a cash deficit of around 7.7% of the GDP. Thus, in the absence of the adoption of measures to correct the budget deficit, the dynamics of the main categories of income and expenditure in the first part of 2025 appear compatible with a cash budget deficit of more than 8.5% of the GDP, the same source estimates."The Fiscal Council estimates that the adoption of a consistent package of measures to correct the budget imbalance represents an absolute emergency. In the absence of a credible, firm package of measures, the risk of blocking access to financing and refinancing becomes imminent," the Opinion also states.The Government assumed responsibility, in Parliament, on Monday, for the first package of fiscal measures to reduce the budget deficit.

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