Romania's Excessive Deficit 2025: What Risks Do Companies Operating There Face

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If your company operates in Romania, has subsidiaries there or invests in European financial markets, this EU Council decision is a warning signal you should not ignore. The Decision (EU) 2026/1413, adopted on 20 June 2025, officially confirms that Romania has failed to comply with the recommendation issued on 21 January 2025 to correct its excessive deficit situation.

The direct result: the Excessive Deficit Procedure (EDP) advances to a more serious phase, with consequences ranging from the suspension of European structural funds to additional financial sanctions on the Romanian state. For companies, this translates into greater fiscal and budgetary uncertainty in Romania.

What does this regulation establish?

The Excessive Deficit Procedure (EDP) is the mechanism that the EU activates when a Member State exceeds the public deficit limits established in the Stability and Growth Pact. The process has several phases: first a recommendation is issued for the country to correct the situation; if the country does not act, the Council formally establishes this and escalates the consequences.

In the case of Romania, the sequence has been as follows:

• 21 January 2025: The EU Council issues a formal Recommendation to Romania to adopt effective measures to correct the excessive deficit.
• 20 June 2025: The Council adopts Decision (EU) 2026/1413, establishing that Romania has not taken effective measures in response to that recommendation.
• Immediate consequence: The EDP enters a more advanced phase, enabling sanction mechanisms that include the suspension of European structural funds and other financial penalties.

This decision is framed within the reformed economic governance framework in 2024, which has strengthened the application of EU fiscal rules and grants greater rigor to the European Commission to monitor and sanction breaches.

Economic and operational impact

The decision has cascading effects that go beyond Romanian public finances. For companies with a presence in the country, the concrete risks are:

• Romanian budget adjustments: To avoid additional sanctions, the Romanian Government will be pressured to apply fiscal consolidation measures: public spending cuts, tax increases or both. This may directly affect public contracts, local subsidies and tax conditions for foreign companies.
• Suspension of European structural funds: If sanctions are activated, Romania could lose access to European funds. Companies participating in EU co-financed projects in the country should review the status of their programs.
• Business environment instability: Fiscal uncertainty increases country risk for investments and operations in Romania.
• Signal for European financial markets: The decision reinforces the European Commission's fiscal surveillance across the eurozone, which may affect the perception of sovereign risk in debt markets.

At the European level, this decision also sends a clear message: the new 2024 economic governance framework is not just empty words. The European Commission will apply the rules with greater rigor, affecting the planning of any company operating in Member States with fiscal tensions.

Who does it affect?

• Spanish companies with subsidiaries, suppliers or customers in Romania: Must assess the risk of fiscal and budgetary changes that alter their operating conditions.
• Investors and funds with exposure to Romanian debt or assets: Greater sovereign risk and possible volatility in financial markets.
• Companies participating in EU co-financed projects in Romania: Risk of suspension or delay in the availability of European structural funds.
• CFOs and financial directors with operations in Eastern Europe: Need to review exposure to country risk in Romania and update risk analysis.
• Tax and legal advisors with clients in Romania: Must anticipate possible changes in local regulations resulting from fiscal adjustment pressures imposed by the EU.
• European financial markets in general: The decision reinforces the European Commission's fiscal surveillance across all Member States.

Practical example

Imagine a Spanish manufacturing company that has a production plant in Romania and participates in an industrial modernization project co-financed by European structural funds. Faced with Decision (EU) 2026/1413, this is the scenario it should consider:

• Risk of fund suspension: If the EDP advances and sanctions are activated, structural funds allocated to Romania could be blocked or delayed, directly affecting project financing.
• Possible local tax increases: The Romanian Government, pressured to reduce the deficit, could increase corporate taxes or reduce tax incentives currently applicable to the plant.
• Recommended action: Review co-financing contracts, evaluate fiscal adjustment scenarios in Romania with the local advisor and update country risk analysis in the financial plan for 2025-2026.

What should companies do now?

1. Review operational exposure in Romania: Identify which contracts, projects or tax structures may be affected by adjustments to the Romanian Government's budget.
2. Audit projects co-financed by European funds: If you participate in programs with structural funds in Romania, consult with your fund manager about the current status and possible impacts of a suspension.
3. Update country risk analysis: Incorporate the advancement of the EDP in Romania as a risk factor in your financial planning and in risk reports for investors or board of directors.
4. Consult with local tax advisors in Romania: Anticipate possible changes in Romanian tax regulations resulting from fiscal adjustment pressures imposed by the EU.
5. Monitor EDP evolution: The procedure may escalate or be resolved. Keep track of Council and European Commission decisions on Romania in the coming months.

Official source

Consult full regulation at official source (EUR-Lex)

Disclaimer: This article is for informational purposes only and does not constitute legal advice. For specific decisions, consult a qualified professional. Source: https://eur-lex.europa.eu/./legal-content/AUTO/?uri=OJ:L_202601413