The change of Romania’s government late last month has prompted a shift in the direction of fiscal policy from loosening to tightening. But the new administration has struggled to put together a legislative agenda and has already backtracked on several policy proposals. As we explain in this Watch, even those policies that look like having any chance of being passed won’t be enough to prevent the budget deficit from widening further next year. And with policymakers concerned about Romania re-entering the European Commission’s Excessive Deficit Procedure, we think a sharper fiscal squeeze looms.
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