EU Rejects Romania's Wage Law Draft, Risking 770 Million Euros

Romania faces a significant financial risk after the European Commission rejected its proposed public sector wage law, according to political sources. The rejection jeopardizes a 770 million euro payment linked to the reform under the National Recovery and Resilience Plan (PNRR).

The core issue for the EC is the law's substantial budgetary impact. Initial discussions had projected a wage bill increase of around 8 billion lei for 2027. However, the Romanian government presented scenarios suggesting increases of 12 or even 16 billion lei. Sources indicate that the EC found both higher scenarios unacceptable without compensatory measures to mitigate the budget strain.

Even phasing in the salary increases over time was not agreeable to European officials. They argued that such a staggered approach would still lead to significant additional expenses in subsequent years, amplifying the law's overall fiscal burden. This has led the Ministry of Finance to favor sticking to the original plan of an approximately 8 billion lei increase in 2027 compared to 2026.

The negotiations occur against a backdrop of deteriorating fiscal indicators in Romania. Interim Finance Minister Alexandru Nazare highlighted that public debt has exceeded the 60% of GDP threshold, triggering fiscal responsibility law restrictions. "With public debt over 60% of GDP, fiscal-budgetary discipline is an obligation, not an option," Nazare stated, emphasizing the need for adherence to budgetary rules.

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With public debt over 60% of GDP, fiscal-budgetary discipline is an obligation, not an option.