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March 21, 2023

Isarescu, BNR: Reforms for euro adoption, oftentimes painful

He underscored that the adoption of the euro is not unconditional, and that is why Romania has to make sure that nominal convergence criteria are sustainable got.

Romania is fulfilling most of the nominal convergence criteria for a switchover to the European single currency, but it still has a long and hard way before getting the necessary competitiveness to join the Eurozone,
‘I am firmly convinced that we had ahead of us a long and hard way of some years to bridge the real convergence gap, to continue structural reforms, which, oftentimes are politically and socially painful, and also to secure competitiveness of Romania’s national economy,’ Governor of the National Bank of Romania (BNR) Mugur Isarescu told a Euromoney conference on regional finance and investment for South-Eastern Europe held in Bucharest on Thursday, Agerpres informs.
He underscored that the adoption of the euro is not unconditional, and that is why Romania has to make sure that nominal convergence criteria are sustainable got. ‘We know very well that a very wide gap in real convergence can complicate business, management decisions in the absence of independent monetary policy. Moreover, it is important for us to prove the efficiency of the institutions and prevent imbalances,’ said Isarescu. He mentioned that fact that Romania has recently got political consensus over a switchover to the euro in 2019. ‘Such an objective, although still very ambitious, could act as a catalyst for consistent political actions. Romania is currently fulfilling three of the four nominal criteria: a stable fiscal position, long-term interest convergence and stable exchange rates, although technically Romania is no inside the Exchange Rate Mechanism II. Moreover, fulfilling the price stability criterion is a matter of months only,’ said Isarescu.
And yet, the governor warned there are still many things to be done to bridge the gap separating Romania from the Eurozone member states in terms of economic competitiveness ad real convergence criteria, particularly those related to the per capita income. BNR official mentioned that before the crisis fulfilling the nominal convergence criteria would be seen as sufficient for the adoption of the euro. He added that Central and Eastern Europe EU member states are closer than ever before to fulfilling the nominal criteria, but even the most advanced of them in terms of real convergence gave up on an accession schedule after the crisis and adopted a wait and see position.
Isarescu said adopting the euro automatically entails joining the Banking Union, which could happen either when joining the Eurozone, or as soon as possible, given that it will bring to strengthened financial stability, increased confidence and a harmonisation of supervisory rules and guarantee schemes.
In a convergence report published early this June, the European Commission says Romania is failing to fulfil two of five nominal convergence criteria to switch over to the euro, namely inflation and exchange rates, but it is fulfilling the criteria related to the Government deficit, public debt and long-term interest.
Besides Governor Isarescu at the Euromoney conference was also PM Ponta. In another context, he said Romania’s international financial partners will have to understand that a competitive energy market and lower labour taxes will make the country more prosperous and more stable.

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