Moody’s warns failed Wage Law will result in a loss of EU funds and increase fiscal risks

The political impasse that hindered the adoption of a Wage Law for the budgetary sector may complicate the drafting of a credible 2027 budget in line with the medium-term fiscal consolidation plan set under the Excessive Deficit Procedure (EDP), which would significantly deteriorate the country’s credibility among foreign investors, according to Moody’s rating agency. Although the rating agency does not mention downgrade risk in its note, weaker political support for further deficit reduction was associated in its August 7 update with such risks.

“In our opinion, the failure to adopt the public sector payroll law is a signal that a political consensus in favour of implementing and maintaining a large fiscal effort, which structurally controls the growth of expenditures, may no longer exist, despite the very substantial reduction in the deficit that we expect to see this year,” according to Moody’s note cited by Profit.ro.