Why is Romania delaying the renegotiation of the National Recovery and Resilience Plan with the European Commission and what are the risks?

The Romanian government has missed the 30 April target it had set itself for submitting a formal request for renegotiation of the NRRP with the European Commission. Renegotiations can take place until no later than August 31. Why is this delay important? The longer the renegotiation with the European Commission is prolonged, the greater the chances of missing out on investments or changes to the NRRP, a program with a deadline of 2026.

According to G4Media, the delay is caused by disagreements in the coalition over cuts to investments in the NRRP and a lack of clear data on which to base part of the renegotiation request.

Why does Romania want to renegotiate the NRRP? There are three main reasons.

1. It needs to tell the European Commission what investments it is giving up after the total amount of non-reimbursable grants in the NRRP decreased by €2.1 billion. The decrease in the amount is due to the fact that Romania had higher economic growth in 2021 than forecast in 2020, when the NRRP was approved. This higher-than-expected economic growth leads to a decrease in non-reimbursable funds from the NRRP for all countries in this situation, not just Romania.

2. They need to include another EU program called RepowerEU – a plan to save energy, produce clean energy and diversify energy sources – in the NRDP. Romania is responsible for around €1.4 billion and must include the objectives of RepowerEU in the NRRP.

3. Romania wants to renegotiate some provisions/targets/benchmarks in the NRRP either for objective reasons (impact of rising prices of construction materials on some investments) or for political reasons (removal of the 9.4% of GDP ceiling on pension expenditure).

Where do the two deadlines, 30 April and 31 August, come from? They appear in the EU regulation that governs how Member States can renegotiate the NRRP with the European Commission. April 30th is the recommended date for submitting the request for renegotiation, August 31st is the deadline by which the request can be sent. Some countries, such as France, have already asked before 30 April to renegotiate their own recovery plan. Others, such as Romania, have already missed this deadline, but are still within the period in which they can formally submit their request.

In fact, on 22 March, Minister Marcel Boloș himself had set April 30th as the deadline for sending the formal request to the European Commission: „April 30th is the deadline for submitting the final documents (…) What I mean is that this is our first and last chance to amend the NRRP in order to meet, let’s say, the implementation requirements by August 2026. If, let’s say, we forget a milestone or a target that we would like to change later, it will be almost impossible”, explained Boloș at a press conference at the government headquarters.

On Saturday (29 April), however, the Ministry of Investment and European Projects announced that the date of 30 April is only „indicative” and said in a press release that „the two parties (the government and the European Commission – editor’s note) are in a permanent constructive dialogue, and the final proposal put forward by Romania will also be based on the recommendations received from the EC. So far a final list in this regard has not been finalized”.

Where does Romania’s request for renegotiation stand now? „The informal dialogue with the European Commission is currently ongoing. Proposals have been sent informally, and the informal dialogue is taking place precisely so that Romania does not waste time by requesting reclarification through official channels. Once we agree with the European Commission through this informal dialogue, the formal request for renegotiation will be submitted and processed quickly,” government sources told G4Media.

On the other hand, Minister Marcel Bolos announced on Sunday evening on B1 TV that a new round of talks with European Commission experts will take place in Brussels on 15-19 May, which means that the official request for renegotiation will be submitted after this date.

Marcel Bolos also explained that the government has not yet finished the „simulations” it needs to demonstrate to the European Commission that the provision in the PNRR capping the total amount of pension payments at 9.4% of GDP is too restrictive.

„In the negotiations, we are not just going with our desire to change the ceiling of 9.4% of GDP, we are going with the simulations that are being done by the World Bank experts and we need to show the European Commission that either on the expected evolution of inflation or on GDP growth in the next period of time, to show that the ceiling of 9.4% of GDP blocks the adjustment measures that the Government should take in a future period of time. These simulations are nearing completion. Let’s not forget that between 15 and 19 May we have a delegation in Brussels to discuss both the issue of pensions, the continuation of the reform of special pensions, and the issue of the 9.4% ceiling,” Bollos told B1 TV.

Another reason why the government has delayed the request for renegotiation is due to disagreements in the PSD-PNL-UDMR coalition over cuts. Because Romania has to give up €2.1 billion from the NRDP (see explanation above), this money has to be taken from certain investment projects. However, no party and no minister wants to be the one to give up any project, coalition sources told G4Media.

Moreover, according to G4Media information, an important hurdle is precisely the 9.4% of GDP ceiling for pensions. The government has so far failed to convince the European Commission that the ceiling is too restrictive, as it has not yet put forward a solution to lower special pensions. However, without this minimal reform, the European Commission experts have no reason to abandon the ceiling already accepted by Romania in the initial NRRP.

What are the next steps. Once Romania sends a formal request for renegotiation of the NRRP, the European Commission will have up to two months to assess whether the amended plan still meets all the assessment criteria.

If the European Commission’s assessment is positive, it will submit the proposal for amendment to the EU governments (meeting in the EU Council). Member States will then have up to four weeks to approve the Commission’s assessment.

What the Ministry of European Projects (MIPE) announced on 29 April that it wants to change in the NRP:

• Replacing Metro line 4 (M4 Bucharest: Gara de Nord – Filaret section (6 stops), length 5.2 km) with Metro line 6 (M6 Bucharest: 1 Mai – Tokyo section (6 stops), length 6.6 km).
• Eliminate the 9.4% of GDP for pensions and replace it with the inclusion of an indexation rule in line with the financial stability objectives for pension expenditure as a percentage of GDP.
• Providing vouchers to stimulate the installation of solar panels and related energy storage systems for residential buildings owned by individuals.