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March 23, 2023

Romania, ‘admirably’ unprepared for adopting EUR

The decision to keep the date for adopting the euro for 2015 was not made without thorough consideration, said Leonard Orban, presidential adviser on matters of European affairs, at the round table discussing the ‘Adoption of the euro in 2015: benefits and vulnerabilities’.

‘The decision was based on a continuation of reforms and modernisation of Romanian economy
Although the 2015 objective is hard to reach. The most important thing is for us to continue structural reforms. We need this kind of impetus,’ Orban explained.

He also emphasised the fact that, apart from benefits – the situation of Romania inside the hard core of European decision-making – joining the euro zone would bring along a few shortcomings, especially translated into restrictions for the Romanian economy. ‘However, it is essential for Romania to join the euro zone, to be in the middle of this ample European movement,’ Orban added.

Adrian Vasilescu, the adviser of the governor of the Romanian National Bank (BNR), also present at the debate, explained that the year 2015 had its origin at the central bank, because it is always a good thing to set a benchmark and strive to reach it.

‘You know very well there are many steps to be taken. At first, we will stay in the buffer area for a period of 2 years, then there will be an evaluation period to see if we meet the requirements or not and only after that can we speak about being completely accepted into the euro zone or not,’ Vasilescu noted.

As for our preparedness, Vasilescu say we are definitely no ready. ‘But, if we look at history, we have never been prepared. We were not ready for the 1859 Unification, we were not ready for the 1918 Unification, and yet we did them both. I would say we are admirably unprepared. We must hurry as much as we can,’ the BNR governor’s counsellor also said. About the meaning of adopting the euro, Vasilescu says it will open a path leading Romania to a better situation in a closer or more distant future. According to him we may be out of recession, but the crisis is still with us and so will be for another two or three years and that a crisis categorically makes the world change. ‘The citizen has to adopt a different lifestyle.’

The certain thing is that Romania at least fulfils the technical conditions for acceding to the euro zone, Orban further said. ‘The most important criterion – the one of real convergence – is far from having been met. We still need to do structural reforms and place ourselves on truly competitive bases, areas where we still have a lot of work to do.’  On the other hand, the Euro Plus Pact package is another very important step for Romania. ‘This pact has brought up the issue of coordinated fiscal policies not just in the euro zone, but also measures that are extremely useful to Romania, such as combating of fraud, practices in the area of taxation, so on and so forth,’ Vasilescu also said.

The Ministry of Finance needs to become involved in the drafting of a study on the euro zone. Romania needs an elaborated study to describe in practical terms what joining the euro zone means, Fiscal Council President Ionut Dumitru said in his turn.  ‘The Ministry of Finance should become more involved in that respect. For example, similar studies have been already conducted in the Czech Republic and Poland and all have had an input from their respective financial authorities,’ Dumitru said. The most important consequence of adopting the euro currency is the fact that exporters will no longer face foreign exchange risks, he explained, while the biggest shortcoming will be that we will be losing the independence of our monetary policy, plus there is a risk of asymmetric games which are disadvantageous for the economy. ‘Another area where we have some serious problems is inflation and the still very high deficit. We need to understand that we are a poor state of the EU and, therefore, we need to grow very fast. It looks like Romania will probably be the poorest country in the euro zone,’ said the president of the Fiscal Council.

Like the other speakers within the debate, Ionut Dumitru believes that Romania’s biggest issues are from a structural perspective. ‘In point of infrastructure, we are in a worse situation than Bulgaria, and we are not doing well in the area of labour and education either. Quite a few problems.’ In the end of his speech, Dumitru stressed out that, although very ambitious, the objective of the adoption of the European single currency in 2015 was still achievable, provided that we stepped up structural reforms.

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