COMMISSION IMPLEMENTING DECISION on the partial suspension of the disbursement of the third instalment of the non-repayable support and the third instalment of the loan support for Romania 

y principle of the system; - increase the adequacy of minimum and lower pensions, in particular for those below the poverty threshold; - ensure financial viability of the Pillar II of the pension system by increasing contributions to this pension pillar. The government shall seek for technical assistance to prepare the draft law, which shall also be subject to consultation with social partners. As part of the preparation of the law, there shall be an ex-ante assessment of the impact of the new pension system in particular on fiscal sustainability, which shall feed in the reform process. There shall EN 28 EN  also be an ex-post analysis of the adopted legislation by the technical assistance provider, which shall establish, after the reform is adopted by the government, baseline / reference projections for total pension expenditure (as a share of GDP) and the fiscal sustainability of the system over the medium to long term (2024-2070). These analyses and projections shall be made public. Any amendments to the law, which increase the cost of the reform and result in a deviation from the reference projections mentioned above shall be accompanied by compensating measures to keep pension expenditure in line with the reference path established after adoption of the reform by the government. The recalculation of pensions shall be in line with the new legal framework and shall contain total public pension expenditure at a level that ensures the fiscal sustainability of the pension system. An analysis of special pensions shall also be carried out with a view to identifying concrete solutions aimed at streamlining special pensions, and at correcting the inequities between beneficiaries of these pension categories and beneficiaries of the public pension system from the point of view of the contributory aspect, also taking into account the case-law of the Constitutional Court. Technical assistance is envisaged (through a public tender) to produce ex-ante analysis of the pension reform, to elaborate the legislation of the reform, and to produce an ex-post analysis and impact assessment. The implementation of the reform shall be completed by 30 March 2023.” (122) Milestone 215 of the Council Implementing Decision, which pertains to measure C8.R6 requires that “The new legislative framework shall review special pensions and bring them in line with the contributory principle. - No new categories of special pensions shall be created and current categories shall be streamlined. - Current special pensions shall be calculated based on the contributory principle, seniority in the profession, and the readjustment of the percentage related to the obtained income. The minimum contribution period shall be similar to that applied in the public pension fund. - The protection of the decisions of the Constitutional Court shall refer only to the pensions of magistrates and not for other categories and shall refer only to the limits explicit in the arguments of the Court. No special pension shall exceed the income obtained during the contribution period”. The fulfilment of the milestone is subject to the “Provision in the law indicating the entry into force of the legislative framework for reducing the expenditure on special pensions”. (123) Romania has not provided to the Commission due justification that this milestone has been satisfactorily fulfilled. (124) On 9 October 2023, the World Bank delivered a report (the ‘World Bank report’) under the Reimbursable Advisory Services Agreement providing an “Analysis, impact assessment and recommendations for the reform of special pensions”. Law No. 282/2023 on the amendment and addition of legislative acts in the field of service pensions and Law No. 227/2015 on the Fiscal Code (hereinafter referred to as “the reform”) was published in the Official Journal No. 950 on 20 October 2023. The reform entered into force on 1 January 2024. Art I, VI, VIII, IX, XI, XII, XIII, XIV, XVII and XVIII of the reform, among others: tighten eligibility conditions for retirement and foresees a gradual increase in the standard or statutory retirement age for all special pensioners, to ultimately align it with that in the general pension system; establish that special pensions are calculated based on the contributory principle, seniority in the profession and readjustment of the percentage related to the obtained income; establish that the minimum contribution period of special pensions categories is similar or, in most cases, higher than for the general system and; establish that net pensions cannot exceed the net income obtained during the contribution period. EN 29 EN  (125) The Commission took into account all the above elements to positively assess milestone 215 as satisfactorily fulfilled in its positive preliminary assessment of 15 October 2024. On 19 December 2024, the Romanian Constitutional Court adopted Decision 724/2024. In this Decision, the Court declared a key element of the reform, the progressive taxation for special pensions, unconstitutional (specifically, the Constitutional Court ruling declares the provision of Art. 101 of the Law No. 227/2015, which was introduced through Article XVIII of Law No. 282/2023, unconstitutional). (126) With respect to the requirements according to which the reform shall “strengthen the contributory principle of the system” and “correct the inequities between beneficiaries of these pension categories and beneficiaries of the public pension system from the point of view of the contributory aspect”, the following should be noted. The reform introduced higher taxation for the non-contributory part of special pensions which are above a certain threshold. Most special pensions include both a contributory and a non- contributory part. The latter is funded by the State budget and is particularly large for high special pensions. A higher taxation of this non-contributory part therefore increased the contributory nature of the system. All pensions in Romania are taxed at a 10% tax rate, applicable to the full pension minus a fixed non-taxable income of RON 3.000. Article XVIII of Law No. 282/2023 introduced a 15% tax rate for special pensions (which only concerns the non-contributory part) higher than the average net wage used at the time of the preparation of the previous year’s social security state budget, and a 20% tax rate of personal income tax for pensions (non-contributory part) higher than the average gross wage used at the time of the preparation of the previous year’s social security state budget. As a result, the introduction of additional taxation for the non-contributory part of special pensions increased the contributory nature of special pension regimes. This provision applied only to high and very high pensions, which are generally paid to judges and magistrates in Romania. Even after the reform, magistrates retained an 80% replacement rate applied to the average earnings over 4 years before retirement (for all other special regimes the replacement rate was reduced by the reform to 65%, applied to a longer period before retirement) and pensions of beneficiaries already in profession remained indexed on wages. Therefore, the higher taxation measure, which would apply to high and very high pensions (i.e. with a high non-contributory part) reduced inequities within the pension system, ensuring that pensioners receiving high or very high pensions (such as magistrates), disconnected from the contributions paid during their working life, contribute to financing the pension system. (127) In its observations of 9 April 2025 with regard to the requirements that the new legislation shall “strengthen the contributory principle of the system” and that an analysis of special pensions shall also be carried out with a view to identifying concrete solutions aimed at “correcting the inequities between beneficiaries of these pension categories and beneficiaries of the public pension system from the point of view of the contributory aspect”, Romania did not dispute the conclusions in the Communication to Romania of the Commission’s assessment of milestone 215 of the third instalment of the non-repayable support in accordance with Article 24(6) of Regulation (EU) 2021/241 of 25 March 2025, and stated its intention to address the issues identified by the Commission through a legislative initiative introducing a replacement rate of 65% and accelerating the increase of the retirement age for magistrates and judges. (128) Furthermore, in its observations of 9 April 2025, Romania did not provide new evidence that reform shall “strengthen the contributory principle of the system” and “correct the inequities between beneficiaries of these pension categories and beneficiaries of the EN 30 EN  public pension system from the point of view of the contributory aspect”. Whilst the Commission takes note of these intentions, the Commission maintains the assessment and considers that whilst the higher taxation of high and very high pensions, which was a key element of the reform, strengthened the contributory nature of special pension regimes and ensured greater equity of the overall pension system, following the Decision 724/2024 of the Romanian Constitutional Court adopted on 19 December 2024, the relevant provisions of Law No. 282/2023 introducing the higher taxation of high and very high pensions cannot be implemented by the government. (129) On the basis of the information provided, the Commission concludes that milestone 215 cannot be considered satisfactorily fulfilled, as the new legislation on special pensions does not “strengthen the contributory principle of the system” and does not “correct the inequities between beneficiaries of these pension categories and beneficiaries of the public pension system from the point of view of the contributory aspect”. (130) Regarding milestone 440, measure C14.R9 is entitled “Improve the procedural framework for the implementation of corporate governance principles in state-owned enterprises” and its description requires that “The objective of this reform is to improve the corporate governance of all state-owned enterprises in Romania by enforcing OECD standards. The reform shall be implemented through the entry into force of amendments to Law 111/2016, removing all exceptions to compliance with the corporate governance standards, including for state-owned companies at local level. These amendments shall enforce a separation between the regulatory and ownership functions, remove any direct or indirect advantage that might derive from State ownership, be it in terms of market rules/regulations, financing, taxation, or public procurement, and ensure that any state- owned enterprise pursue obtaining profitability. The reform shall also set up and operationalise a task-force at the Centre of the Government to ensure the monitoring of the application of corporate governance standards, having the ultimate responsibility of ensuring a transparent and competitive selection procedure for approving the appointment of administration board members, monitors, and for evaluation and controls. The task force shall publish regular reporting of performance indicators and enforces sanctions for state owned enterprises non-compliant with key performance indicators. A Monitoring Dashboard with financial and non-financial targets and performance indicators for all categories of public companies (including key sectors such as transport, energy, public utilities) shall be developed, yearly published and used centrally for reporting and monitoring progress in achieving performance for all categories state-owned enterprises. In line with Article 7 (2) of the Recovery and Resilience Regulation, Romania has requested technical support through the instrument on technical assistance for the implementation of reform to improve the framework on corporate governance in state-owned enterprises. Technical assistance is needed with a view to amend the relevant legislation (Law No 111/2016 and Government Decision No 722/2016) and the State’s shareholding policy (including consultation of all interested parties), and to create the appropriate institutional framework in order to centralise the State shareholder function under one structure/institution. Technical assistance is also needed for the development of institutional capacity in the area of state-owned enterprise management (increasing the expertise of the corporate governance departments in ministries managing state-owned enterprises), and the capacity for coordinating and monitoring the new taskforce set up at the centre of the government. The implementation of the reform shall be completed by 30 June 2026. The updated legislation for state- owned companies (including those at local level) shall enter into force by 31 December 2022. The permanent task-force to ensure the monitoring and enforcement of the EN 31 EN  application of corporate governance standards shall be operational by 31 December 2022. The Monitoring Dashboard shall be operational by 30 June 2023.” (131) Milestone 440 of the Council Implementing Decision, which pertains to measure C14.R9 requires the “On the basis of the recommendations of an independent expert panel, a permanent taskforce is established in compliance with the OECD corporate governance standards, and becomes operational (i.e. legally mandated and resourced) to ensure the monitoring of the application of corporate governance standards, has the ultimate responsibility of ensuring a transparent and competitive selection procedure for approving the appointment of administration board members, monitors, evaluates, controls, and publishes regular reporting of performance indicators and enforces sanctions for state owned enterprises non-compliant with key performance indicators”. The fulfilment of the milestone is subject to the “Provision in the Decision of the Prime Minister indicating the entry into force of the Prime Minister Decision on the organisation and functioning of the Task force at the General Secretariat of the Government”. (132) Romania has not provided to the Commission due justification that this milestone has been satisfactorily fulfilled. (133) On 15 December 2023 Romania provided the Commission with the documentation related to the creation and operationalisation of a permanent taskforce for corporate governance policy coordination and monitoring, i.e., AMEPIP. (134) On 27 July 2023, Romania established AMEPIP by Government Decision No. 617/2023 51. Based on Article 6 of the Government Decision, AMEPIP is legally mandated to “ensure the monitoring of the application of corporate governance standards, has the ultimate responsibility of ensuring a transparent and competitive selection procedure for approving the appointment of administration board members, monitors, evaluates, controls, and publishes regular reporting of performance indicators and enforces sanctions for state owned enterprises non-compliant with key performance indicators.” (135) On 26 August 2024, Romania also informed the Commission that out of the 92 vacancies envisaged in AMEPIP’s organigram, it only employed 53 persons, resulting in an occupancy rate of 57%. Such a staffing situation does not demonstrate that AMEPIP has become “operational (i.e. legally mandated and resourced) to ensure the monitoring of the application of corporate governance standards, has the ultimate responsibility of ensuring a transparent and competitive selection procedure for approving the appointment of admini