BNR Governor: Not skeptical, just trying to stay realistic about joining euro

Romania is not skeptical about joining the euro, but we are trying to be realistic and to ensure a certain amount of time for this moment, governor of the National Bank of Romania (BNR) Mugur Isarescu on Thursday told the conference ‘The Danube Triangle’ on ‘Convergence towards euro enlargement’ organized on Thursday  by the central bank in cooperation with the European League for Economic Cooperation – Romania. “With regard to the differences among the countries’ strategies, some might find it amazing that Bulgaria considers joining the euro even faster than Romania, Hungary, Poland or the Czech Republic. It’s true that these neighboring countries have much in common, yet there is also an element that differentiates them. Bulgaria has a Monetary Council and it is natural for Bulgaria to consider joining the eurozone. The adoption of this mechanism, more than two decades ago, means that more than half of the steps towards joining the euro have already been made. Having a Monetary Council in place means having a fixed exchange rate system. By contrast, Romania has a floating exchange rate and a direct inflation targeting regime, just like Poland, Hungary and the Czech Republic. This is why the approach is different. This does not mean that Romania, Hungary or Poland are skeptical about switching to the euro. At least in our case, we are not skeptical, we are just trying to be realistic. One needs a comprehensive approach, this means ensuring an adequate timeframe for this moment and successfully joining the euro,” Isarescu said. According to the BNR governor, joining the euro by the new member states is a matter of “when,” not of “if.” Isarescu also mentioned that sustainable convergence is needed, and Romania must be aware that several key requirements must be fulfilled in order to truly benefit from joining the euro, and that it’s not just nominal convergence that is key to the sustainability of the single currency’s adoption, but also structural or institutional convergence.   “Wage rise should be market-driven, not result of political play”   Wages should grow in step with productivity, and a dramatic twist is for pay rises to be the effect of political play, not of market forces, governor of the National Bank of Romania (BNR) Mugur Isarescu  stated. “In Romania, we are faced with a series of challenges which are for certain not limited here, but impact the entire EU. One of the dramatic consequences would be for wages to be raised by politicians and not under the drive of the market. We are also faced with the issue of migration. More than 3 million Romanians, that’s a significant percentage of the total working-age population, have left the country to settle in other member states. In a natural order, wages should increase with productivity and we should thus become competitive. Talking about infrastructure, I want to mention that this is essential to connecting various regions Romania is a part of. In order to have a solid economy it is important to maintain a perspective where we implement consistent political reforms. Romania needs stable economic convergence. It’s the only way we can reach our destination,” Isarescu said. In the opinion of the country’s top banker, Romania should monitor the implementation of structural reforms, which is key to achieving convergence and sustained economic growth. “For enhanced effectiveness, macroeconomic policies should go along with structural reforms aimed at ensuring a more flexible economic environment, that is we need to monitor the cyclical policies included in structural reforms. Structural reforms are essential to achieving convergence by ensuring sustainable economic growth and a more flexible economy capable of dealing with asymmetric shocks and of drawing benefits from the country’s joining the eurozone”, Isarescu said.      

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