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June 25, 2021

Commitment to adopt EUR, ‘achievable and necessary goal’ in 2019

Romania has transmitted to the European Commission the new convergence program for the 2014-2017 period, informing the officials in Brussels that the commitment to adopt the Euro “will become an achievable and necessary goal” on January 1, 2019.
“The Convergence Program’s macroeconomic framework is taking into account the international outlook and the European economy’s outlook published in the European Commission’s forecasts. Likewise, the macroeconomic scenario proposed for 2014-2017 is convergent with the EC estimates on the Romanian economy’s evolution. Romania is making the overtures needed in order to take part in the Single Resolution Fund and will take the necessary steps in order to adhere to the Banking Union’s pillars. In parallel, the important economic progress registered throughout 2013 and the estimates on the maintenance of this trend in the following years too allow for a medium time frame necessary for the fulfilling of the nominal convergence criteria and the closing in on real convergence. In this context, the Romanian government’s commitment to adopt the Euro will become an achievable and necessary goal on January 1, 2019,” the document reads.
Victor Ponta said Wednesday at Giurgiu that adoption of the euro in 2019 is ambitious but possible, showing that the Romanian economy needs to be able to withstand the competition in the euro area, which means fulfilling all criteria convergence.
At the same time, a Finance Ministry communique shows that Budget Minister Liviu Voinea took part on Tuesday in the ECOFIN Council summit and the summit of the European Investment Bank’s Board of Governors in Brussels, where he announced that based on the progress made in what concerns the real and nominal convergence, the government has set January 1, 2019, as the target date for Romania’s Euro accession.
In the document sent to Brussels, the government shows that the convergence program illustrates Romania’s capacity to fall within the medium-term budgetary objectives in 2015, representing a structural deficit of the general consolidated budget of 1 per cent of GDP (which does not however include help for the co-financing of projects financed with European funds with positive long-term effects on the economic growth potential, nor the situations entailed in the Treaty on stability, coordination and convergence within the Union).
On the medium term, the budget policy goal is represented by the continued adjustment of the budget deficit, the planned targets being 2.2 per cent of GDP in 2014 and below 2 per cent of GDP (in line with ESA methodology) in 2015-2017.
The government points out that from the point of view of real convergence, evaluated through the GDP per capita’s (expressed through standard purchasing power) lag compared to the European average, Romania has made significant progress in the last two years, currently standing at approximately 54 per cent of the EU-28 average, compared to 52.9 per cent in 2012 and 51.2 per cent in 2011.
Isarescu, BNR: Euro adoption in 2019, not unrealistic, it needs political consensus
The objective of adopting the Euro in 2018 – 2019 is not unrealistic, but it needs a strong political consensus and the evaluation of consequences, especially of those related to the alignment of prices, says Romania’s Central Bank (BNR) Governor Mugur Isarescu in his turn. ‘We support any objective that the political factor will set, in a consensual manner, and we will say whether it is realistic or not. About 2018 – 2019, I do not think that it is unrealistic, but it is advisable, if we anchor to this goal, to give you some intermediary deadlines, because it will not happen like this: on January 1, 2019 someone will come with a wand and will say, ‘you have joined the Eurozone.’ People should know what it is about,’ BNR governor told a Tuesday’s press conference. He added that setting the goal of adopting the Euro is a political matter and it does not depend on the BNR or not only on the BNR.
Base of calculus expanded for CAS
As part of the same convergence program sent to the EC, the government plans to introduce a new system of mandatory social contributions (CAS), by expanding their base of calculus to all income registered by natural persons engaged in independent activities, irrespective of whether they have other incomes or not. The measure was included in the chapter concerning the elements of consolidating the fiscal-budgetary policy fixed by the government on the medium term, in order to register revenues. In this sense, Victor Ponta stated yesterday while in Giurgiu that such a measure concerning the payment of social contributions by authorized natural persons will not be applied this or next year. He also took the “firm commitment” that as long as he is Prime Minister “not a penny will be cut from any pension and public sector salary.”
In the program the government also points out that in order to stimulate the business sector and to lower taxes on labor, a central goal is to lower the level of social contributions in a budgetary neutral manner. Likewise, the government plans to lower the number of exemptions from the payment of local taxes stipulated by law and will allow the local authorities to decide who will still be exempt from this payment or will contribute a smaller sum, extra revenues being however already forecast as a result of this measure. Last but not least, the government will apply the blanket salary law, but by hiking salaries solely in the case of young people with low incomes.
In his turn, the BNR Governor added that he hopes that both the exemption from the payment of taxes on reinvested profits, as well as the lowering of the CAS will be a breath of fresh air for the business sector. Isarescu said that the relaxation of the fiscal policy will bring to light a part of the underground economy, including unregistered jobs, which will have a positive impact on the budget, as happened in 2000 too, back when the profit tax was lowered from 40 to 25 per cent and the revenues doubled.

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