European Commission cuts euro area growth outlook and warns of Romania debt risk

The European Commission revised its euro‑area growth forecast for 2026, lowering the projection to 0.9% from 1.2%. The downgrade reflects the impact of the Middle East conflict, which has pushed oil prices above $120 per barrel and added roughly 0.4 percentage points to the bloc’s real‑GDP estimate. The Commission warned that a prolonged disruption of shipping through the Strait of Hormuz could halve the forecast and create stagflation risk.

In a separate convergence report, the Commission noted that Romania’s fiscal pressure will ease in 2027, with net‑expenditure growth falling to 0.7% of GDP. However, the agency flagged high medium‑term debt‑sustainability risks, projecting public debt to rise from about 59% of GDP in 2025 to roughly 90% by 2036, and possibly 97% under adverse interest‑rate scenarios. Romania recorded the EU’s largest budget deficit in 2025 and still needs progress on tax administration and expenditure monitoring.