Romania is told to rearm inside its deficit ceiling, with no escape clause and no cabinet

Romania has been told to rearm and to correct an excessive deficit at the same time, inside the same expenditure ceiling, without the relief fifteen other governments were given. The European Commission's country recommendation of 3 June 2026, COM(2026) 223 final, instructs Bucharest to keep to the net expenditure growth rates the Council set on 8 July 2025 and, in the same paragraph, to "[r]einforce defence spending and readiness while ensuring spending efficiency and gradually adapting the budget to sustain structurally higher defence spending". The 2027 budget that has to reconcile those two instructions now has no government to write it: parliament rejected the cabinet proposed by prime minister-designate Siegfried Mureșan on 30 September, according to bne IntelliNews.

The ceiling does not bend for defence

The Council's revised recommendation of 8 July 2025 sets maximum growth rates for Romania's net expenditure of 2.8% in 2025, 2.6% in 2026, 4.6% in 2027, 4.4% in 2028, 4.2% in 2029 and 4.0% in 2030, as COM(2026) 223 records. Cumulatively against the 2024 base year, that is 10.4% by 2027. Net expenditure excludes interest and cyclical unemployment spending but includes defence, and nothing in the corrective path carves it out.

On 8 July 2025 the Council also activated the national escape clause of the Stability and Growth Pact for fifteen member states, allowing them to run additional defence spending of up to 1.5% of GDP a year for four years without a new excessive deficit procedure. Euronews reported the same day that Belgium, Croatia, Czechia, Denmark, Estonia, Finland, Greece, Hungary, Latvia, Lithuania, Poland, Portugal, Slovakia and Slovenia were on the list, and that countries already under an excessive deficit procedure remain bound by the framework. Romania was not among them. Its procedure has been open since 2020, and the Council established twice, on 26 July 2024 and 20 June 2025, that Bucharest had not taken effective action. On the Commission's assessment of June 2026, COM(2026) 223 states, "the excessive deficit procedure for Romania is held in abeyance." Romania must therefore carry higher defence spending inside the strictest version of the rules, having forfeited the flexibility designed for that purpose by failing the rules earlier.

What the Commission actually counts

Based on Eurostat data, COM(2026) 223 puts total general government defence expenditure in Romania at 1.5% of GDP in 2025, with the Commission's Spring 2026 Forecast projecting 1.7% in 2026 and 1.8% in 2027. This is the general government measure, not NATO's — but it is the figure the fiscal rules apply to.

Against it stands the Hague Summit Declaration of 25 June 2025, in which allies committed "to invest 5% of GDP annually on core defence requirements as well as defence- and security-related spending by 2035", of which at least 3.5% of GDP is for core defence requirements. The Commission's 2027 projection for Romania is roughly half the core component alone, with a review of the trajectory due in 2029.

The macroeconomic room is thin. COM(2026) 223 records real GDP growth of 0.7% in 2025, a fiscal stance contractionary by 2.2% of GDP in 2025 and a projected 2.5% of GDP in 2026, and general government debt rising from 54.8% of GDP at end-2024 to 59.3% at end-2025 and 63.4% by end-2027. bne IntelliNews reported on 11 June 2026 that finance ministry data put debt at 60.2% of GDP at end-March, the first crossing of 60% on semi-definitive figures, at an average cost of 4.7%.

The SAFE loan does not change the deficit test

Romania's answer to the capability gap is borrowing. COM(2026) 26 final of 15 January 2026, the Commission's proposal for a Council implementing decision under SAFE, provides that "[t]he Union shall make available to Romania a loan amounting to a maximum of EUR 16,680,055,394.00", with EUR 2,502,008,309.10 as a pre-financing payment. Romania submitted its request on 28 November 2025, against a total SAFE envelope of EUR 150bn and nineteen interested member states.

The decision changes nothing on the fiscal side. Recital 10 states that it "should be without prejudice to the obligation of and outcome of any procedures under Regulation (EU) 2024/1263" and Council Regulation (EC) No 1467/97 — the economic governance regulation and the excessive deficit procedure regulation. SAFE is cheap money, not an exemption: the spending it finances still passes through the national budget and still counts against the net expenditure path.

A budget without a government

The political constraint is now binding. Interim Finance Minister Alexandru Nazare told the public broadcaster TVR on 1 October that January-to-August execution had cut the deficit by 1.6 percentage points against 2025, with the shortfall RON27bn (more than EUR 5bn) lower than a year earlier and investment spending up RON25bn to RON97bn, bne IntelliNews reported. Romania is targeting a cash deficit of 6.2% of GDP and an ESA deficit of 6% for 2026. He was blunter about next year. "We need a 2027 budget agreed by all parties and adopted by the end of the year, because investors are looking at these aspects," he said, warning that an early-election timetable could threaten the budget's implementation and the sovereign rating: "A scenario of early elections that would result in a downgrade would take several years to recover." S&P rates Romania BBB-, the lowest investment grade, with a negative outlook; a review was due on 2 October. In July, bne IntelliNews reported Erste Group's expectation that the agencies would hold off until the 2027 budget appeared.

The 2027 ceiling of 4.6% is the loosest Romania has had since the corrective path was revised, and 2027 is also the year in which SAFE-financed procurement, pension and public-wage reform and a further deficit cut must be written into one document — by a cabinet that does not yet exist.

What to watch

• Whether a government is installed in time to adopt a 2027 budget by end-December, and whether its deficit target is consistent with the 4.6% ceiling.
• Whether Romania requests activation of the national escape clause, and whether the Commission entertains a request from a state whose excessive deficit procedure is only in abeyance.
• How much of the EUR 16.68bn SAFE loan is contracted and disbursed, and how the associated national spending is scored against the net expenditure path.
• Whether the Commission's autumn forecast revises the 1.8%-of-GDP defence projection for 2027, and what that does to the deficit path.

Romania's problem is not a choice between consolidation and defence. It is that Brussels has told it to do both, on a path that assumes neither slips, with no escape clause and, as of 4 October, no cabinet.

Sources

• European Commission — Recommendation for a Council Recommendation on the economic, social, employment, structural and budgetary policies of Romania, COM(2026) 223 final
• European Commission — Proposal for a Council Implementing Decision on making the financial assistance under Regulation (EU) 2025/1106 available to Romania, COM(2026) 26 final
• European Commission — SAFE: Security Action for Europe
• European Commission — Excessive deficit procedure: Romania
• Euronews — 15 EU countries allowed to violate deficit limit for defence spending
• NATO — The Hague Summit Declaration
• bne IntelliNews — Romanian finance minister argues early elections could jeopardise investment-grade rating
• bne IntelliNews — Rating agencies begin Romania review as authorities seek to preserve investment-grade status
• bne IntelliNews — Romania's public debt exceeds 60% of GDP for first time at end-March