Brussels, 21/09/2010 (Agence Europe) - On Tuesday 21 September, the European Commission assessed the action taken by Lithuania and Romania in response to the Council recommendations of 16 February 2010 relating to the correction of their respective excessive government deficits. The Commission concluded that the authorities have acted in accordance with the recommendations. As foreseen in the 2010 budget, the Lithuanian authorities have applied significant fiscal measures that should generate savings estimated at over 3% of GDP. The Lithuanian authorities have already adopted several measures for 2011 and have outlined in some detail the consolidation strategy that is necessary to progress towards the correction of the excessive deficit by 2012, the deadline recommended by the Council, but substantial adjustment is still needed in the coming years, the Commission notes. It goes on to specify that the 2011 budget should include further significant measures, also replacing temporary measures with more lasting and structural measures, which would contribute to strengthening the quality of the consolidation, thus supporting long-term sustainability of public finances. Furthermore, the Commission adds, it is important for the government to accelerate consolidation and go beyond the targets to the extent that economic and budgetary conditions turn out better than previously expected.
The Romanian authorities should bring the general government deficit below 3% of GDP in a credible and sustainable manner by 2012 by taking action in a medium-term framework. The implementation of additional fiscal consolidation measures of around 5% of GDP on an annual basis (including a 25% cut in public wages, a 15% cut in social benefits excluding pensions and an increase in the VAT rate from 19% to 24%) has put Romania on track to achieve the 2010 government deficit target of 7.3% of GDP agreed in the context of the multilateral financial assistance programme. In addition, large carry-overs from the 2010 fiscal consolidation measures and the planned additional savings on the expenditure side should allow a further reduction of the deficit to below 5% of GDP in 2011, the Commission states. It adds that Romania remains determined to bring its deficit down below 3% of GDP in 2012, an objective that appears feasible. Measures taken by Romania following the Council's recommendation are a decisive step towards restoring a sustainable fiscal position and macro-economic stability, the Commission states. (O.L./transl.jl)