About Romania's prospects of joining the eurozone with former Romanian prime minister and current Euro MP Theodor Stolojan.
Romania has been a member of the European Union since 2007. Even before accession, the adoption of the euro would often feature on the public agenda. Since then, several potential accession dates have been put forward, with 2019 being presented as the most likely to see the event happen. The economic crisis and the frailty of the European single currency have complicated matters, but no other alternative date has been proposed.
We asked the Romanian MEP, Theodor Stolojan, a member of the European People's Party and a former prime-minister and finance specialist if Romania's joining the eurozone in 2019 is still a realistic objective. Theodor Stolojan:
"No. We should have already begun the exchange rate monitoring process, which lasts two years. During time, the Central Bank is not supposed to intervene in any significant way to support the rates. This means that the exchange rate should have been the result of economic balance and should have been predictable and stable. So, this cannot happen in 2019."
Recently, the Romanian currency, the leu, has reached its lowest value ever against the euro, which has raised concerns at all levels, political, economic and social. What should the National Bank of Romania do under these circumstances? Here is Theodor Stolojan again:
"The Central Bank can intervene either by supporting the interest rate or the leu's exchange rate, as long as this unwanted exchange rate variation is the result of temporary factors, such as a ban on exports due to war or tensions in a country to where we export. If we assume that situations of this kind are temporary, it doesn't make sense to cause a fracture in the economy. What any Central Bank cannot, or shouldn't, do, including the Romania's, is to waste its international reserves to support a certain exchange rate when the economy has lost some of its competitiveness. I haven't seen any solid arguments yet coming from the National Bank, just information that the current account deficit is growing, which means that the balance of merchandise and service import-export operations is characterised by a growing deficit, and this puts pressure on the market. As you can see, European funds are delayed and hard currency transfers from the Diaspora to Romania have slowed down. And of course that all these are telling of the fact that there is high pressure on the currency exchange rate. However, we could do with some more data and analyses from the National Bank to get a clearer picture."
It's clear that all these things are not helpful when it comes to the prospects of Romania's joining the eurozone. There are even sectors that benefit from the current situation, such as the banking sector, Theodor Stolojan says:
"Right now, the Romanian banking system makes a pretty good profit from the leu-euro exchange rate. The Romanians working abroad send home euros, the Romanians here exchange euros into lei. In addition, the banking system also earns very well from the difference in interest rates, which is still here, and will continue to be. It is one thing to borrow in euros in Romania, and another thing to borrow in Belgium or Germany. There is still a high difference in interest rates."
Banks have a theoretical approach to the way in which the process of Romania's joining the eurozone should take place, an approach that Theodor Stolojan does not agree with:
"The banking system still insists that Romania cannot successfully join the eurozone until we reach a degree of real convergence. By this they understand mainly a per capita GDP - adjusted for purchasing power - that is closer to the EU average. [...] My view is that Romania can join the eurozone today as long as it observes balances. Being in the eurozone does not necessarily mean that you have to have a level of development up to the EU average. We can be a eurozone member state even if we have products and services with a lower added value as long as we are competitive, as long as we live within our means and maintain predictable and stable balances within the economy. Unfortunately, if we look at what happens in the Romanian economy right now, even though we have economic growth, we are witnessing the beginning of the deterioration of economic balances. The current account deficit is rising and the budget deficit is also under pressure so there's no predictability in the balances we have to sustain in order to be a part of the eurozone."
Beyond the economic and financial outlook on the issue, the political side has to be considered as well. Here is once again Euro MP Theodor Stolojan:
"When it joined the European Union, Romania committed to taking all measures to live up to the criteria for integration. Therefore, if we want to be taken seriously, we have to stick to our commitments. As an aside, as long as Romania is outside the eurozone, it won't be a part of major EU decisions. Of course we take part in decision making, we have something to say, but increasingly the trend in the EU is to concentrate on the eurozone and the decisions being made in this zone."
What should be done to get back on the path to the joining the eurozone? MEP Theodor Stolojan, a member of the European People's Party, explains:
"The Romanian government should come up with an action plan that clearly states when it plans to join the eurozone. It could be 2025, 2030, whenever we want to. It could even be 2100! But we need an action plan stating concretely what we want to do, what should be done in terms of economic, fiscal and monetary policy, an action plan that should bring Romania within five years of joining the Eurozone."