Romania’s prospects to adopt the single European currency

The Central Bank Governor, Mugur Isarescu believes that Romanias joining the Eurozone on January 1st, 2019 is a very ambitious goal

România Internațional, 21.04.2015, 13:43

Romanian authorities should give a serious thought to whether they maintain or not January 1st 2019 as the deadline for switching to the Euro, as this is a very ambitious goal which requires the commitment of the entire Romanian society, Central Bank governor Mugur Isareascu warned on Monday. Attending the conference “Romania’s Way Towards the Eurozone”, held by the European Commission in Bucharest, Isarescu said the deadline was not unrealistic but it required a coherent plan of action.

Our pledge to adopt the Euro in 2019 is more of a verbal agreement, Isarescu said, adding that Romania’s problem was its lack of structural reforms, although it has two such programs under way, with the IMF and the European Commission respectively, both of them seriously delayed. Isarescu pointed out that Romania currently met all nominal criteria of Eurozone accession, which is still not enough, as genuine convergence, involving among others, adjusting Romanians’ living standard to that in the developed EU countries, was still needed. According to the Central Bank Governor, another aspect to be considered is that Romania, of all EU countries, has the biggest development gap among its regions. Mugur Isarescu:

“The lack of quality infrastructure that should interconnect the country’s historical provinces deepens this gap in the development of its various regions, by concentrating investment on Romania’s western border and making those differences permanent. So we have an Achilles’ heel, but we do not have a functional framework for the development, prioritization and execution of public investment prices, beyond any election cycle or thinking manner.”

Moreover, according to Isarescu, joining the Euro club in 2019 involves adopting the exchange rate mechanism as of January 1st, 2016, which is something the country is unprepared for. Giving up the monetary policy is also part of the process, with the tax system and enterprises having to take over that burden, which means they must be very well prepared in terms of effectiveness and competitiveness at the moment of accession, Isarescu has explained. In his opinion, the most important challenges in the upcoming period are maintaining financial stability and spending wisely the public money, prioritizing investment and stimulating competitiveness.

The participants in the Bucharest conference, both Romanian and foreign officials, agreed that Romania had the best macroeconomic balance in the past 25 years, and that it should take advantage of that situation in order to speed up its structural reforms which are needed in order to switch to the single currency. The head of the European Commission Office in Bucharest, Angela Filote, said, in turn, that adopting the Euro might be Romania’s next major country project. Brussels hopes that after the accession, Romanians will live equally well as the citizens of the other EU countries.