EU praises Romania for reforms while urging Spain to raise VAT

The European Commission’s Spring 2026 Economic Package delivers starkly divergent verdicts on fiscal discipline and reform progress across member states, with Romania praised for meeting its commitments while Spain faces pressure to overhaul its VAT system.

Romania has "satisfactorily" fulfilled its reform and investment pledges under the European Semester, the Commission states in its assessment released Wednesday. The country met all milestones due by 30 April 2026, keeping disbursements from the Recovery and Resilience Facility on track . This marks a rare positive note in the Commission’s latest round of country-specific recommendations, where structural deficits and energy-driven job losses dominate concerns.

Spain, by contrast, is urged to raise VAT on hospitality services to 21%—a move Brussels calculates could generate up to €7 billion in additional revenue. The Commission argues Spain’s reduced VAT rates disproportionately benefit higher-income households, particularly in the restaurant sector, and calls for a broader realignment of tax policies to address fiscal imbalances .

Austria receives qualified approval for narrowing its deficit below the threshold set by the Excessive Deficit Procedure, though the Commission notes persistent structural weaknesses remain unaddressed despite years of criticism. The country’s net borrowing fell below the 3% of GDP limit in 2025, but long-term challenges—including an aging population and rigid labor market—continue to weigh on sustainability .

The economic fallout from Russia’s war in Ukraine casts a shadow over the EU’s labor market, with the Commission warning that over one million jobs remain at risk due to elevated energy costs. European businesses, particularly in energy-intensive sectors, face sustained pressure, with no immediate relief in sight .

The Spring Package, presented in Brussels on Wednesday, sets the stage for negotiations with member states ahead of the June European Council. While Romania’s compliance offers a template for others, the Commission’s calls for VAT reform in Spain and deficit reduction in Austria underscore the bloc’s struggle to balance fiscal consolidation with growth amid persistent external shocks.