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nt intentions in the plan responding to the main challenges identified in the context of the European Semester and addressing the common priorities of the Union (39) Besides the set of reforms and investments underpinning an extension of the adjustment period, the plan describes policy intentions concerning other investments to respond to some of the challenges identified in the context of the European Semester, especially the CSRs, including those pertaining to the MIP, and to address the common priorities of the EU. (40) Concerning the common priority of a fair green and digital transition, including the climate objectives set out in Regulation (EU) 2021/1119, the plan includes reforms and investment to support the decarbonisation of large industries (steel and chemicals), through electrification of production processes and switching to the use of renewable hydrogen or renewable hydrogen fuels. The total budget of the scheme is EUR 1 bn, with payments to be made in the period 2025-2031. The financing of this scheme is to be achieved through the sale of greenhouse gas emission allowances EN 14 EN  (CO2 allowances). The plan also includes an investment programme for the rehabilitation of main irrigation infrastructure (EUR 2.3 bn) and drainage infrastructure (EUR 34 mn). These measures will help addressing CSRs issued in 2022 and 2023 related to the need to reduce reliance on fossil fuels and accelerate the energy transition, by deploying renewable energy faster and improving grid capacity to allow new capacity to operate in the market. Aspects related to the fairness of the green and digital transition are not described in the plan. (41) Concerning the common priority of social and economic resilience, including the European Pillar of Social Rights, the plan includes a new State Support scheme for investments to support regional development, through large scale investment projects targeting high-end sectors and supporting the diversification of economic activities in the least favoured regions. The total allocated budget is EUR 450 mn. The plan also includes a State aid scheme for strategic investments, with grants, tax breaks and administrative simplification measures (shortening of deadlines for permits, direct award of land for the implementation of investments in the public or private domain owned by the state/local public authorities, provision of transport infrastructure and utilities necessary for the investments). The total budget of the scheme is EUR 1 bn, with payments to be made in the period 2025-2031. The sectors that will be able to benefit from this scheme are: the food industry, the chemical industry, the pharmaceutical industry, the metallurgical industry, the defence industry, the metal construction industry, construction of machinery and installations, manufacture of machinery and equipment, and electrical equipment. These measures will help address the CSR on the provision of liquidity support to the economy for businesses issued in 2020. (42) However, the plan does not address other important CSRs in the area of social and economic resilience, including CSR recommendations from 2019 and 2020 on increasing the coverage and quality of social services, extending social protection measures,, completing the minimum inclusion income reform, improving access to and cost-efficiency of healthcare (including the shift to outpatient care), strengthening the resilience of the health system (including in the areas of health workers and medical products), and improving access to health services. CSR recommendations issued in 2019 and 2020 on the need to improve the functioning of social dialogue and the predictability of decision-making, including through an adequate involvement of social partners, are not fully addressed, even if the minimum wage reform goes in the right direction. The CSR recommendations from 2019 and 2020 on improving the quality and inclusiveness of education (in particular for Roma and other disadvantaged groups), on improving skills, including digital (by increasing the labour market relevance of vocational education and training and higher education), on strengthening skills and digital learning, and on ensuring equal access to education are not addressed. Additionally, the 2023 CSR on stepping up policy efforts aimed at the provision and acquisition of the skills needed for the green transition is not addressed. Overall, the investments listed in the Plan do not sufficiently address CSRs in the employment, skills and social domain. (43) Concerning the common priority of energy security, the plan mentions Romania’s participation in trans-national energy transport infrastructure initiatives aimed at increasing Europe’s energy security, including the Southern Corridor, the BRUA Corridor (Bulgaria-Romania-Hungary-Austria) and the Trans-Balkan Corridor. (44) Concerning the common priority of defence capabilities, the plan refers to new initiatives to regulate the general legal framework for granting facilities to EN 15 EN  investments with a significant impact in the field of manufacturing. One of these facilities is a state aid scheme aiming at covering, inter alia, the defence industry. (45) The plan provides some information on the consistency and, where appropriate, complementarity, with the cohesion policy funds and Romania’s RRP. cohesion policy funds and their benefits for Romania, and stresses the complementarity between national and European funds, especially regarding major infrastructure and rural development projects, and that the success of the use of European funds depends on the efficient management of European funds and funds allocated through Romania’s consolidated general budget. (46) The plan provides an overview of the public investment needs of Romania related to the common priorities of the EU. Concerning a fair, green and digital transition, the plan refers to the aid scheme for the decarbonisation of industrial production processes by electrification of production processes and switching to the use of renewable hydrogen or renewable hydrogen fuels. In relation to social and economic resilience, including the European Pillar of Social Rights, the plan reports in particular the need to implement an investment programme for the rehabilitation of the main irrigation infrastructure, the state aid scheme to support investment projects in the manufacturing sector, and investments to ensure the regional development including large scale investment projects. On the build-up of defence capabilities, the plan reports the need to fully implementation the state aid scheme for strategic investments, with grants, tax breaks and other forms of support, which will support the defence sector, among others. Conclusion of the Commission’s assessment (47) Overall, the Commission is of the view that Romania’s plan fulfils the requirements of Regulation (EU) 2024/1263. OVERALL CONCLUSION (48) In accordance with Article 17 of Regulation (EU) 2024/1263, the net expenditure path as set in the plan should be recommended by the Council to Romania and the set of reforms and investments underpinning the extension of the adjustment period to 7 years should be endorsed. HEREBY RECOMMENDS that Romania 1. Ensure that net expenditure growth does not exceed the maxima established in Annex I to this Recommendation. 2. Implement the set of reforms and investments that underpins the extension of the fiscal adjustment period to 7 years, as established in Annex II to this Recommendation, by the indicated deadlines. In addition, the Council invites Romania to ensure the delivery of other reforms and investments responding to the main challenges identified in the context of the European Semester, in particular in the country-specific recommendations, and addressing the common priorities of the Union. EN 16 EN  ANNEX I Maximum nominal growth rates of net expenditure (annual and cumulative growth rates, in nominal terms) Romania Years 2025 2026 2027 2028 Growth rates Annual 5.1 4.9 4.7 4.3 (%) Cumulative 20.2 26.0 31.9 37.6 (*) (*) The cumulative growth rates are calculated by reference to the base year 2023. EN 17 EN  ANNEX II Set of reforms and investments that underpins an extension of the adjustment period to 7 years for Romania Main objectives Description and timing of key Monitoring steps 13 indicator(s) Pension Reform The key objective of the reform is to ensure (Existing RRP the sustainability of the general pension The normative act reforming the Relevant RRP measure: system. The reform includes the following general pension system entered into milestone C8.R6.0.M214) elements: new calculation formula for force on 1st September 2024. C8.R6.0.M214 pensions, new pension indexation rule and a satisfactorily fulfilled mechanism to prevent ad-hoc increases in pensions, reduced early retirement Implement the law in opportunities, incentives to extend working accordance with the life, automatic increase in the standard Plan. retirement age in line with life expectancy, alignment of the legal retirement age for men and women at 65 years by 2035. Special Pension The new legislative framework revises Reform (Existing special pensions to better align them with the The normative act revising special Relevant RRP RRP measure: contributory principle. No new categories of pensions to align them with the milestone C8.R6.0.M215) special pensions are created, and the existing contributory principle entered into C8.R6.0.M215 categories are streamlined. Special pensions force on 1st January 2024. satisfactorily fulfilled are calculated based on the contributory principle, length of service, and adjustment of the percentage linked to earnings. The minimum contribution period is similar to that applied in the general pension system. No special pension is allowed to exceed the income earned during the contribution period. Minimum Wage Establishing a minimum wage setting By Q1-2025: Reform mechanism based on objective criteria that supports job creation and national Entry into force of the act Entry into force of the [Adding to RRP competitiveness, involving the adjustment of regulating the new minimum wage normative act milestone the gross minimum wage in line with the setting system. C13.R5.0.M392] forecasted inflation rate and productivity growth rate. If the new ratio between the adjusted gross minimum wage and the forecasted average gross wage for the following year is below 45%, the gross minimum wage may also be additionally adjusted by 0% - 50% of the forecasted productivity growth rate, but the ratio should never exceed 50%. Public Sector Ensure a fair and sustainable wage policy by When the government deficit is Wage Reform revising the hierarchy coefficients for each below 5% of GDP: occupational family of the public sector, [Adding to RRP reintroducing salary grids for local Step 1: Adoption and entry into Entry-into-force of the milestone administration officials, revising the force of the new legal framework new legislative C14.R4.0.M420] allowance system and capping the monetary for the remuneration of public framework, after the amount of allowances at 20% of the basic officials, ensuring the public wage government deficit has salary. bill remains, as a share of GDP, in been reduced to below line or below that included in the 5% of GDP. Ensuring the fiscal sustainability of the projections of the medium-term remuneration system of public sector fiscal plan. officials. To this end, the reform will come into effect only after the budget deficit, in Step 2: Rigorous adherence to the Reduction in the public ESA terms, falls below 5% of GDP projections of the MTFSP regarding wage bill, as a share of (including if that implies amending the timing the public wage bill as a share of GDP, by 1.5 pps of this reform under the RRP). The new GDP, for all the years covered by between 2024 and 13 The timing of RRP measures is indicative and corresponds to commitments in the relevant Council Implementing Decision. EN 18 EN  system will be implemented fully respecting the plan. 2031, in line with the provisions of the Fiscal-Budgetary projections of the Responsibility Law. The reform will ensure medium-term fiscal the public wage bill will remain contained plan. within the envelope in the medium-term structural budget plan. Microenterprise Gradual reduction of the scope of the tax By Q1-2025: Tax Reform regime for micro-enterprises. Ensure full compliance with the objectives of milestone Preparation and entry into force by Entry into force of a [Adding to RRP 206 of the RRP, including by reviewing the the end of Q1-2025 of a law normative act milestone and eligibility threshold to the regime (and amending the taxation regime of amending the target possibly aligning it with the VAT threshold microenterprises, to bring it in line eligibility conditions to C8.R4.0.M206] over the medium term), and updating the tax with milestone 206 of the RRP. the tax regime for rate for micro-enterprises. Relative to the microenterprises, to system currently in place, the reform bring it in line with generates additional revenue of at least 0.1% milestone 206 of the of GDP in 2025 and beyond. RRP and generating 0.1% of GDP in