As public debt exceeds 60pct of GDP, Romania has to freeze public pay, social security spending

  Romania's public debt, calculated according to the European Union's methodology, has exceeded the threshold of 60% of its Gross Domestic Product (GDP), and under such circumstances the legal framework provides for keeping the measures related to the previous thresholds, including those related to the programme to reduce the public debt-to-GDP ratio, and freezing public pay and social security spending, reads an information released by the government on Wednesday.The information was presented by the Ministry of Finance at an extraordinary meeting of the government, and had it touches on the implications of the Law on Fiscal-Budgetary Responsibility 69/2010, as a result of the threshold of 60% for the public debt to GDP indicator having been passed.The Ministry of Finance specifies that, according to Eurostat data published on July 21, Romania's public debt, calculated according to the European methodology, was 60.1% of GDP at the end of Q1 2026."Given that Romania has been in the excessive deficit procedure since 2020, the public debt has gradually increased both to cover the high budget deficits and to refinance the overdue public debt. The Law on Fiscal-Budgetary Responsibility 69/2010 establishes a gradual intervention mechanism when the public debt ratio exceeds the thresholds of 45%, 50%, 55% and 60% of GDP, respectively."The EU regulation establishes that for member states with a public debt of more than 60% of GDP or a deficit of more than 3% of GDP, the European Commission sends a reference trajectory on the evolution of net expenditure. It must ensure that, by the end of the adjustment period, public debt is placed on a plausible downward trajectory, including in adverse scenarios, and the budget deficit is reduced and kept below 3% of GDP.In the case of Romania, the measures to reduce the deficit and stabilise public debt are provided for in a national medium-term fiscal structural Plan. The document establishes the trajectory of net expenditures, fiscal-budgetary measures, reforms and investments for a seven-year adjustment period.Romania's plan was evaluated by the European Commission and approved by recommendation by the Council of the European Union on January 21, 2025. The national medium-term structural budgetary plan aims to reduce the budget deficit below 3% over the period 2025-2031, thus creating the premises for sustainable public finances and for the public debt to be on a downward trajectory starting with the 2030-2031 horizon.Romania has received recommendations (Council recommendation of 8 July 2025) to keep expenditure within the prescribed limits (the annual ceiling on the annual growth of net expenditure being 2.6% in 2026, 4.6% in 2027, 4.4% in 2028, 4.2% in 2029, 4.0% in 2030.Thus, the observance of the ceilings for the growth of net expenditures and the implementation of the fiscal adjustment provided for by the plan must gradually lead to the reduction of the budget deficit below 3% of GDP and to the inclusion of the public debt share on a downward trajectory."Therefore, the measures provided by the national legislation for exceeding the threshold of 60% of GDP must be implemented through the normative acts and the fiscal-budgetary measures adopted for the implementation of the National Medium-Term Fiscal-Structural Plan and the recommendations of the Council of the European Union," the Executive also shows.According to the Ministry of Finance's estimates, public debt calculated according to the European methodology is expected to reach 61.8% of GDP in 2026, 63.3% in 2027 and 63.9% in 2028, before gradually entering a downward trajectory."This evolution is not automatic, but is conditioned by the consistent implementation of the fiscal-budgetary adjustment program and by the materialisation of the deficit reduction in line with the trajectory pledged under the National Medium-Term Fiscal Structural Plan. Romania is still in the excessive deficit procedure, and the European fiscal governance framework sets annual ceilings for the increase of net expenses. Compliance with them must gradually lead to the national government deficit falling below 3% of GDP and to the public debt starting on a downward trajectory," reads the information.According to the government, given that the public debt remains above this level, the Law on Fiscal and Budgetary Responsibility does not allow the Government to approve measures that determine the increase of the total staff expenses or the total social security expenses .