S&P Global Ratings warned Romania on Tuesday that a move by parliament to reinstate a massive 40% raise in pensions would prompt a disorderly fiscal correction just as the economy is struggling with the impact of the coronavirus pandemic.

Romania’s parliament voted this month to raise all state pensions by 40%, undoing a smaller 14% hike by the centrist minority government and opening the way for potential ratings downgrades two months before a parliamentary election.

The government, which has tried to curb social spending surges backed by the opposition Social Democrats – parliament’s biggest party – will challenge the pension hike in the top court and stall for time until a Dec. 6 parliamentary election it is seen winning.

“We believe that if the pension hike will stand, Romania will have bitten off more than it can chew, fiscally speaking,” S&P said in a statement, adding its next ratings review for Romania was on Dec.4.

“Such a sizable increase in permanent spending, if implemented, would be detrimental to both Romania’s fiscal and external performance, and would likely prompt a disorderly budgetary correction with repercussions on the economy’s fragile rebound post-COVID-19.”

The agency said the pension hike, coupled with other social spending could push Romania’s budget deficit above 10% in 2021 where it will remain for the following two years.

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