European Commission recommends Romania and 12 other states should be subject to “in depth balance sheet” in 2020

The European Commission released on Tuesday a “Report on alert mechanism”, a device detecting macroeconomic imbalances, recommending that 13 member states , Romania included, should be subject to a “ in depth balance sheet” in 2020, in order to identify and evaluate possible serious macroeconomic imbalances, the Commission informs.

The 13 member states are: Bulgaria, Croatia, Cyprus, France, Germany, Greece, Ireland, Italy, Holland, Portugal, Romania, Spain and Sweden.

In Romania's case, the Commission reached the conclusion, in February 2019, that the country was recording macroeconomic imbalances, that lead to the risk of losing competitiveness for the cost chapter, a continuous deterioration of the foreign position and risks concerning financial stability. Two indicators are over the level: the net international investment position -NIIP and the increase of unitary labour force cost.

According to the community Executive, the increase of the unitary labor force cost significantly accelerated in 2018 as a result of strong salary increases in the public sector. “The past suggests that a salary increase in the public sector might affect the private sector, which could trigger competitiveness losses in the cost chapter,” the EC report shows. 

The business environment is affected by frequent and unpredictable legislative changes, often adopted without impact studies or consultations with parties involved. The government debt as GDP percentage is relatively low but no longer follows a descending tendency. Risks addressed to financial stability which come from previous laws seem to be dropping, even if political and legislative instability remain a source of anxiety, the Commission points out.

On the overall, the EC report brings out aspects concerning the strong increase of the unitary labor force cost and the deterioration of the foreign position. Consequently,  the Commission considers opportune, taking into account the identification of imbalances in February, to examine the persistence of imbalances or their reduction, the Commission points out. 

Member states should continue to repair macroeconomic imbalances they are faced with, to prepare for long term challenges and possible future shocks. 

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