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Brussels vs Bucharest: the excessive deficit procedure, gas price caps and conditionality of EU funds on respecting EU rules

The article explains how EU fiscal and energy rules interact, why Romania’s policies may trigger infringement or budgetary pressure, and what corrective paths exist. It also looks at the growing use of EU funds conditionality and what it means for national policymaking and political debate.

In public debates in Romania, the conflict between „Brussels” and „Bucharest” often appears as a clash between a technocratic European Commission and a national government that claims to defend citizens against austerity and high energy prices. In legal reality, what we see is mainly the application of three sets of European rules:

Romania is simultaneously under an excessive deficit procedure and subject to several infringement procedures concerning its complex scheme of gas and electricity price caps. At the same time, the country relies heavily on EU funds – cohesion policy, the Recovery and Resilience Facility and other instruments – for infrastructure, social programmes and reforms. Understanding how these dossiers interact is essential for citizens, companies and even for litigants who may want to challenge national measures or support the state’s position in Luxembourg.

This article explains, in accessible language but with legal precision, what the excessive deficit procedure is, why the European Commission criticises Romania’s price cap scheme, what risks exist of infringement judgments at the Court of Justice of the EU (CJEU) and how EU funds can be suspended. It also looks at the 2025 Rule of Law Report for Romania and at budget and rule‑of‑law conditionality, in order to understand how political slogans like “Brussels forces us to…” translate into concrete legal mechanisms.

1. The EU legal framework: excessive deficit, internal market and state aid

1.1. What is the excessive deficit procedure (EDP)?

Under the EU Treaties, Member States have agreed to keep their government deficit below 3% of GDP and public debt below 60% of GDP, or at least to make sufficient progress towards this level. These reference values are laid down in Article 126 TFEU and in the Protocol on the excessive deficit procedure, and are explained in accessible terms on the Council’s page on the excessive deficit procedure.

The Stability and Growth Pact (SGP) has two pillars: a preventive arm and a corrective arm. The corrective arm is the actual excessive deficit procedure, governed mainly by Council Regulation (EC) No 1467/97, as amended in 2024 by Council Regulation (EU) 2024/1264. The aim is to ensure that excessive deficits are corrected promptly, through a combination of surveillance, recommendations and, in the last resort, sanctions.

In practice, the procedure works in several steps, summarised by the Commission in its overview of excessive deficit procedures:

  1. The Commission monitors deficits and debt and, when necessary, prepares a report under Article 126(3) TFEU analysing whether the deficit or debt breach is excessive and whether exceptional circumstances apply.
  2. If the Commission concludes that an excessive deficit exists, it recommends the Council to open an excessive deficit procedure and to adopt a recommendation to the Member State with a correction path and deadlines.
  3. If the Member State does not take “effective action” to correct the deficit, the Council may step up the procedure, leading, in the case of euro area countries, to possible financial sanctions.
  4. Under the reformed rules, the adjustment path is more country‑specific and allows for investments and reforms, but the obligation to eventually get the deficit below 3% of GDP remains.

Importantly, Article 19 of Regulation (EU) 2021/1060 provides a direct link between the excessive deficit procedure and the suspension of cohesion policy funds. If the Council decides, under Article 126(8) or (11) TFEU, that a Member State has not taken effective action to correct its excessive deficit, the Commission must propose to the Council the suspension of part or all of the commitments or payments for one or more programmes, within certain limits and with proportionality safeguards, as can be seen in Article 19(7)–(13) CPR.

1.2. Internal energy market rules and price regulation

In the field of energy, EU law combines market‑based principles with limited and targeted possibilities for intervention in prices. The main legal instruments are:

These instruments are built on the idea that wholesale prices for electricity and gas should be formed freely by supply and demand on competitive markets, with cross‑border trade ensuring security of supply and efficient allocation of resources. Member States may intervene in retail prices for vulnerable or energy‑poor consumers, and may adopt temporary emergency measures in exceptional situations, but such measures must be proportionate, time‑limited and consistent with the structure of the internal market.

During the 2022 energy price crisis, the EU adopted a special emergency framework, in particular Council Regulation (EU) 2022/1854, which allowed Member States to introduce a cap on market revenues of infra‑marginal electricity producers and to use the captured revenues to finance support for consumers. However, these emergency rules were temporary and did not authorise Member States to permanently re‑regulate wholesale markets or to restrict exports in a way that undermines the internal market.

When a Member State goes too far in capping prices or limiting cross‑border trade, the Commission can launch an infringement procedure under Articles 258–260 TFEU, arguing that the national measures violate the electricity and gas rules, as well as the Treaty provisions on the free movement of goods and services.

1.3. Conditionality regimes for EU funds: economic governance and rule of law

The conditionality of EU funds does not rely on a single instrument, but on several layers that can interact:

  • Macroeconomic conditionality under Article 19 of Regulation (EU) 2021/1060, which links the effectiveness of cohesion funds (ERDF, ESF+, Cohesion Fund, JTF) to compliance with recommendations under the Stability and Growth Pact and, in particular, with decisions in the excessive deficit procedure.
  • Rule of law conditionality under Regulation (EU, Euratom) 2020/2092, which allows for the suspension of payments or commitments where breaches of the rule of law affect or seriously risk affecting the sound financial management of the EU budget.
  • Specific conditionality in sectoral instruments, such as the Recovery and Resilience Facility Regulation (EU) 2021/241, where funds are disbursed only if Member States implement milestones and targets agreed in their national recovery plans.

In the case of Romania, the debate on “Brussels vs Bucharest” must therefore be placed at the intersection of the excessive deficit procedure, the internal energy market rules and these forms of conditionality. Non‑compliance can lead not only to infringement proceedings and possible judgments at the CJEU, but also to delays, interruptions or suspensions of EU funding.

2. Romania’s specific situation: excessive deficit and the energy price cap scheme

2.1. Romania under an excessive deficit procedure

Romania has been in the corrective arm of the Stability and Growth Pact since before the COVID‑19 crisis. The Commission notes, in its overview of excessive deficit procedures , that Romania was already in an excessive deficit situation when Article 126(3) reports were prepared for other Member States in 2021, and that the Council adopted a revised recommendation to correct the excessive deficit, setting a new deadline.

As deficits remained high, the Commission continued to assess compliance with the deficit and debt criteria, for example in the 2024 report under Article 126(3) TFEU, and in a further report adopted on 4 June 2025, as recorded on the same overview page. These reports take into account not only the numerical thresholds, but also relevant factors such as the economic cycle, investment needs and the implementation of reforms.

The updated framework for the excessive deficit procedure, as amended by Regulation (EU) 2024/1264, allows for more gradual and country‑specific adjustment paths, but still keeps the possibility of stepping up the procedure. If the Council were to conclude, under Article 126(8) or (11) TFEU, that Romania has failed to take effective action, Article 19 of Regulation (EU) 2021/1060 would require the Commission to propose to the Council the suspension of part of the commitments or payments from cohesion policy funds, within the limits and under the conditions specified in that article.

In other words, while there is no automatic “switch‑off” of EU funds, the legal link between the excessive deficit procedure and cohesion policy is explicit. Whether and to what extent funds are actually suspended depends on political decisions by the Council, based on a proposal from the Commission, and on assessments of proportionality and the economic and social situation of the Member State concerned.

2.2. Romania’s energy price cap scheme and the Commission’s objections

In response to the energy price crisis, Romania adopted a complex set of measures capping final prices for electricity and gas for certain categories of consumers and introducing revenue caps and contributions for electricity producers, as well as obligations for gas producers to sell part of their domestic production at fixed prices to specific customers. These measures have been adopted and modified through several emergency ordinances and laws since 2022, and have been analysed by various independent experts, including in studies by energy think tanks and market regulators.

On 3 October 2024, the European Commission opened an infringement procedure by sending a letter of formal notice to Romania concerning some of these measures. In its news item “October infringement package – key decisions on energy” , the Commission states that Romania restricts the freedom of market participants to determine their wholesale prices for electricity and gas and restricts gas exports. More specifically, the Commission points to national measures that:

  • require certain electricity producers to contribute all revenues above a specific threshold to an energy transition fund; and
  • oblige gas producers to sell part of their production at fixed prices to certain customers.

According to the Commission, these measures are incompatible with Directive (EU) 2019/944 and Regulation (EU) 2019/943 on the internal market for electricity, as well as with Directive 2009/73/EC on the internal market in natural gas and, for export restrictions, with Articles 35–36 TFEU. The core legal argument is that these measures limit the fundamental principles of free price formation and free cross‑border trade in wholesale energy markets.

On 7 May 2025, the Commission escalated the dispute regarding gas prices by sending a reasoned opinion to Romania, as reported in the news item “May infringement package – key decisions on energy” . The Commission criticises a national measure that obliges gas producers to sell part of their domestic production at a fixed price to wholesale customers, considering this incompatible with Directive 2009/73/EC because it distorts price signals in the EU‑wide wholesale market and undermines the internal market to the detriment of consumers.

The same news item clarifies that this reasoned opinion does not yet address the legality of the Romanian revenue cap for electricity producers, because several preliminary references on similar measures are pending before the Court of Justice of the EU. Depending on the outcome of those cases, the Commission will decide whether to pursue that aspect further through infringement measures.

Legally, Romania argues that its measures are necessary to protect households and businesses from extreme price spikes and to preserve social stability. The Commission’s position is that, even in crisis situations, intervention must remain targeted and temporary and cannot undermine the basic architecture of the internal market. The dispute is therefore not about whether support to consumers is allowed, but about the design and proportionality of that support.

3. Legal risks: from infringement procedures to CJEU judgments and suspension of EU funds

3.1. The infringement procedure track

The infringement procedure launched against Romania for its energy price cap scheme follows the classical steps set out in Articles 258–260 TFEU:

  1. Letter of formal notice – already sent in October 2024 regarding pricing and export restrictions for electricity and gas. Romania has a period (normally two months) to respond and to take corrective measures.
  2. Reasoned opinion – already sent in May 2025 specifically on the gas wholesale price obligation. This formal request calls on Romania to comply with EU law within a set deadline.
  3. Referral to the Court of Justice of the EU – if Romania does not adequately address the Commission’s concerns, the Commission may bring the case before the Court, which can declare that the Member State has failed to fulfil its obligations.
  4. Financial penalties – if Romania still does not comply with a CJEU judgment, the Commission may ask the Court to impose lump‑sum fines and/or daily penalty payments under Article 260 TFEU.

In parallel, the national laws remain applicable unless the Romanian authorities amend them or the courts disapply them based on the primacy of EU law. This opens the door to strategic litigation by energy companies or consumers, which can raise questions of compatibility with EU law before national courts, possibly leading to preliminary references to the CJEU.

3.2. The macroeconomic conditionality track: when the excessive deficit meets cohesion funds

Article 19 of Regulation (EU) 2021/1060 provides that, when a Member State does not take effective action to correct its excessive deficit and the Council adopts the corresponding decisions, the Commission must propose to the Council the suspension of part or all of the commitments or payments for one or more cohesion policy programmes. The level of suspension must be proportionate and may, in the first stage, be limited to a maximum of 25% of commitments relating to the next calendar year or 0.25% of nominal GDP, with the possibility of higher percentages in cases of persistent non‑compliance.

This is sometimes presented politically as “Brussels will cut our funds if we don’t raise taxes or cut spending”. Legally, however, the mechanism is more nuanced:

  • a prior Council decision under Article 126 TFEU confirming that the Member State has not taken effective action is required;
  • the Commission proposal and the Council decision on suspension must respect the principles of proportionality and equal treatment between Member States and must take into account social and economic conditions (unemployment, poverty, impact on crucial programmes);
  • the suspension can be lifted once the Council finds that the Member State has corrected its excessive deficit or the procedure is put in abeyance.

In other words, the risk of cohesion fund suspension is real in law, but it is also a political last resort instrument. It is designed to give the Commission and Council leverage in enforcing fiscal rules, but used carefully in order not to punish citizens for government decisions more than necessary.

3.3. Rule of law conditionality and the 2025 Rule of Law Report

Separately from macroeconomic conditionality, the EU has created a rule of law conditionality mechanism through Regulation (EU, Euratom) 2020/2092. Under this instrument, the Commission can propose to suspend payments, commitments or pre‑financing if breaches of the principles of the rule of law in a Member State affect or seriously risk affecting the sound financial management of the Union budget or the protection of the Union’s financial interests.

When assessing whether to use this mechanism, the Commission can take into account a wide range of information, including its annual Rule of Law Reports. The 2025 edition is available, together with all country chapters, on the Commission’s page “2025 Rule of Law Report – Communication and country chapters” . The specific country chapter for Romania is published as a PDF and is summarised by independent platforms such as RCMedia Freedom.

According to these summaries, the 2025 Rule of Law Report for Romania highlights persistent challenges to media independence, including opaque political advertising, weak enforcement by regulators and stalled reforms of public service media governance. The report also notes, as covered for example by Spotmedia and analysed in the Creative Unite article on media freedom threats , that Romania has made progress in judicial reform and anti‑corruption, but remains vulnerable in terms of independent press and opaque media financing.

In parallel, civil society organisations such as Liberties point out in their Liberties Rule of Law Report 2025 that Romania is among the states where political actors have used smear campaigns and legislative changes to weaken the rule of law. This type of independent analysis can be used as additional context when the Commission evaluates whether rule‑of‑law breaches might affect the protection of the EU budget.

As of November 2025, there is no published Commission decision proposing or adopting the suspension of EU funds to Romania under Regulation 2020/2092. However, the combination of concerns in the Rule of Law Report and the importance of EU funds for the Romanian budget means that rule‑of‑law conditionality remains a credible potential instrument if serious problems were to emerge in areas such as judicial independence, anti‑corruption or the effective investigation of fraud affecting EU financial interests.

4. Sovereignty versus obligations: how far can national policy go?

In the political arena, fiscal and energy disputes with the Commission are often framed as a question of national sovereignty: “Bucharest” defending its right to decide tax levels, spending priorities and social protection measures, and “Brussels” allegedly forcing austerity or blocking price controls. From the legal point of view, however, Romania has voluntarily assumed binding obligations when it joined the EU and has accepted the primacy of EU law in areas covered by the Treaties.

In the fiscal domain, Article 126 TFEU and the SGP do not prohibit deficits altogether; they require that deviations from the reference values remain limited and are corrected over time. National choices on how to reduce deficits (tax increases, expenditure cuts, efficiency gains, better collection etc.) remain a matter of domestic political decision, as long as the overall adjustment path respects the Council’s recommendations. The narrative that “Brussels forces us to raise VAT” is therefore a political simplification, not a legal necessity: the EU requires deficit correction, not specific tax measures.

In the energy field, Member States remain free to decide their energy mix and to design social policies for vulnerable consumers. What EU law requires is that measures do not permanently re‑nationalise or fragment the internal market, do not discriminate arbitrarily between market participants and are proportionate. Short‑term price caps or compensation schemes for households can be compatible with EU law if they are well targeted and time‑limited; broad, indefinite obligations for producers to sell at fixed wholesale prices or restrictions on exports are much harder to justify.

The real legal debate is therefore about proportionality, non‑discrimination and market design, not about a crude opposition between national sovereignty and European obligations. A well‑designed national scheme can protect consumers and respect EU rules at the same time; a poorly designed scheme can trigger infringement procedures and, ultimately, financial risks for the Member State.

5. Possible scenarios before the CJEU and for EU funds

5.1. Scenarios in the energy infringement cases

In the short to medium term, several scenarios can be envisaged for the energy price cap dispute:

  • Full compliance and closure of the case – Romania amends its legislation to remove wholesale price obligations and export restrictions that the Commission considers incompatible with EU law, while possibly redesigning support for consumers through more targeted and market‑friendly instruments. The Commission may then close the infringement procedure.
  • Partial adjustments and litigation – Romania adopts some changes but maintains core elements of the scheme. The Commission refers the case to the CJEU, which will interpret the compatibility of the scheme with the electricity and gas rules, taking into account also preliminary rulings in similar cases from other Member States.
  • Condemnation and financial penalties – If the Court finds a violation and Romania does not comply with the judgment, the Commission can return to the Court to request financial penalties. These penalties are paid from the national budget and may further aggravate the deficit situation.

For energy companies and large consumers, each scenario has concrete implications: regulatory uncertainty, possible claims for damages, changes in contract structures and potential legal actions to recover losses caused by unlawful measures. For households, the risk is that hasty or poorly communicated adjustments to the scheme feed the narrative of “EU‑imposed price increases”, even when the underlying problem is the design of the national law.

5.2. Scenarios for cohesion and other EU funds

On the funding side, at least three layers must be distinguished:

  1. Cohesion policy funds (ERDF, ESF+, Cohesion Fund, JTF) – here, Article 19 of Regulation (EU) 2021/1060 explicitly links non‑compliance in the excessive deficit procedure to the possibility of suspending commitments or payments. The risk becomes concrete if the Council adopts decisions under Article 126(8) or (11) TFEU for repeated non‑compliance.
  2. Recovery and Resilience Facility (RRF) – according to Regulation (EU) 2021/241, disbursements depend on the fulfilment of milestones and targets in the national recovery plan. Delays or disagreements about reforms (including in justice, public administration or energy) can lead to delayed payments or reductions in available amounts, even without a formal suspension under macroeconomic rules.
  3. Rule of law conditionality – under Regulation (EU, Euratom) 2020/2092, serious breaches of the rule of law affecting the EU budget can lead to suspension of payments or commitments across different funds. This tool has been used in relation to some Member States but not, so far, in the case of Romania.

In each of these layers, the legal procedures involve multiple steps, opportunities for dialogue and political discretion. For businesses and citizens, the key message is that legal uncertainty and reputational risks increase when a Member State is simultaneously under intensified budget surveillance, subject to infringement procedures and facing rule‑of‑law criticisms, even if no formal suspension of funds has yet been adopted.

6. The role of lawyers and strategic litigation in “Brussels vs Bucharest” cases

For practitioners, these conflicts open a significant space for strategic litigation, both against the state and in its support:

  • Energy companies or investors may challenge the compatibility of national price caps, revenue caps or export restrictions with EU law, invoking the primacy and direct effect of relevant directives and regulations before national courts and, where appropriate, seeking preliminary references to the CJEU.
  • Consumers’ associations can argue that poorly designed or legally insecure schemes ultimately harm end‑users, either by triggering abrupt changes when they are struck down or by accumulating hidden costs in the system.
  • The Romanian state can build robust legal arguments to defend targeted social measures that are genuinely aimed at protecting vulnerable consumers and are proportionate, relying both on EU law flexibilities and on empirical data about energy poverty.
  • In disputes about EU fund suspensions or interruptions, national authorities and beneficiaries may litigate decisions of the Commission before the CJEU, arguing on proportionality, equal treatment and respect for legitimate expectations.

In all of these scenarios, lawyers need not only a solid understanding of Romanian administrative, budgetary and energy law, but also of the EU legal framework and of how Commission assessments, Council recommendations and Rule of Law Reports can be used as evidence. Litigation strategies must integrate both legal arguments and broader policy narratives, because the outcome often depends on how convincingly a Member State can show that its measures are necessary, proportionate and consistent with the Union’s objectives.

7. Conclusions: beyond slogans, towards legally sustainable policies

The confrontation between “Brussels” and “Bucharest” over deficit correction and energy price caps is not a simple story of good versus bad, nor a binary choice between protecting citizens and obeying EU rules. It is a complex negotiation – legal, political and economic – about the terms on which solidarity and responsibility are shared inside the Union.

For Romania, the key challenges are:

  • to bring public finances on a credible path towards the 3% deficit reference value, while protecting essential investments and social spending;
  • to redesign energy support schemes so that they protect vulnerable consumers without breaching internal market rules or deterring investment;
  • to strengthen the rule of law and media independence, not merely to avoid sanctions or fund suspensions, but to build trust in institutions;
  • to communicate honestly with the public about the nature of EU conditionality, avoiding both the myth of “Brussels as scapegoat” and the illusion that EU funds are unconditional grants.

For citizens and businesses, the practical takeaway is that European law is not an abstract constraint, but a concrete framework that shapes taxes, prices, investment decisions and the availability of EU funding. Understanding this framework – and, where necessary, using it in court – is part of protecting one’s rights and of making informed choices in democratic debates.

FAQ – Excessive deficit, gas price caps and EU funds

1. Is Romania currently at risk of having EU funds suspended because of the excessive deficit?

Romania is under an excessive deficit procedure, and Article 19 of Regulation (EU) 2021/1060 allows the Commission to propose the suspension of cohesion funds if the Council decides that the country has not taken effective action to correct the deficit. As of November 2025, there is no publicly available Council decision imposing such a suspension, but the risk is real if fiscal consolidation is repeatedly delayed.

2. Does EU law forbid all forms of price caps for electricity and gas?

No. EU law allows targeted price interventions, especially to protect vulnerable or energy‑poor consumers and in exceptional circumstances, as recognised for example in Directive (EU) 2019/944. What is problematic, according to the Commission’s infringement procedures against Romania, are broad, long‑term obligations imposed on producers to sell at fixed wholesale prices and restrictions on exports, which undermine free price formation and cross‑border trade in the internal market.

3. Can the Commission force Romania to raise taxes or cut specific expenditures?

Legally, no. The Commission and Council can recommend an adjustment path for the deficit under the excessive deficit procedure and can propose sanctions or fund suspensions if that path is not respected. However, the choice of specific measures (tax increases, spending cuts, improved collection, structural reforms) remains with the national authorities. The phrase “Brussels forces us to raise tax X” is therefore a political narrative, not a precise legal description.

4. Has Romania been targeted by rule of law conditionality under Regulation 2020/2092?

As of November 2025, there is no published Commission proposal or Council decision to suspend EU funds to Romania under Regulation (EU, Euratom) 2020/2092. The 2025 Rule of Law Report notes both progress in justice reform and persistent vulnerabilities in media independence and the fight against corruption, and these findings could become relevant if serious problems emerged that affect the protection of the EU budget, but such a step has not been taken so far.

5. What can companies and citizens do if they are harmed by unlawful national measures?

Companies and citizens can challenge national measures before Romanian courts, invoking the primacy and direct effect of EU law. Courts may disapply national provisions that conflict with directly applicable regulations or sufficiently precise directives, and they can request preliminary rulings from the CJEU on the interpretation of EU law. In some cases, if damage is caused by persistent breaches of EU law, claims for state liability may be possible, although success depends on strict conditions established in the Court’s case law.