Popa: Unilateral adoption of EUR is not an option for Romania

Publish date: 05-05-2009
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The unilateral adoption of the EUR is not an option for Romania, according to those recently declared by the vice governor of the Central Bank, Cristian Popa, during the symposium "Facts and illusions in the context of the economic crisis", organized by BNR last week, Agerpres informs. "We do not intend to adopt faster the European currency. The timely adoption of the single European currency does not mean the elimination of the convergence process, but this will be shifted towards other tools, which will makes things even more complicate", Popa said. He also drew the attention that the unilateral EUR adoption does not solve the macro-economic imbalances, their adjustment having to take place in a coordinated manner. At the convergence level, substantial programs are required prior to shifting to EUR. For Romania, those set remain valid: joining the Exchange Rate Mechanism (ERM 2) in 2012, so that 2014 becomes the year to adopt EUR, and the switch to EUR to take place on January 1, 2015. If this calendar is feasible, then it will resist the crisis period, as it happens now", Cristian Popa said.

He also provided a few technical details related to the switch to the European currency. Since the Central European Bank and ECOFIN will have to make the decision for adopting this currency, they will need the final data regarding the years to which reference is made. Thus, the data for 2013 will be known in 2014. Also, there is need for a convergence report to be drafted and there is need for time in relation to the internal decision - making process of the European institution in this respect, which is expected in mid 2014.

In the context, Popa presented the advantages and disadvantages for postponing the EUR adoption over a longer time period. Thus, the advantages are: a longer period for the accomplishment of the still pending structural adjustments, a better progress in relation to the real and nominal convergence, as well as the synchronizing of the business cycle in Romania with the EUR one. In terms of disadvantages, Popa mentioned the persistence of the higher trading costs associated to the foreign currency exchange risk, which could inhibit investments and economic growth, they could induce a postponement in structural reforms and relaxation of macro-economic policies, mainly at fiscal and salary level. "When investors have fears related to the respective economy, the postponement of EUR adoption could be attributed t structural or economic policy weakness", according to BNR representative. In Popa's opinion, EUR introduction in Romania on January 1, 2015 is a reasonable target.

He reminded that a higher inflation would delay Romania's accession to the EUR zone. "The inflation issue must be solved, this is the criterion that I care most and not accidentally, the core target of the National Bank of Romania is to secure price stability", Popa said. Speaking about a statement based on which a higher inflation could help Romania, BNR representative explained that this would reduce expenditures and increase revenues, if this happens once within a time period. According to Cristian Popa, the idea that a higher inflation could reduce the deficit is "a very short - sighted perspective" since this is not a sustainable measure, which is functional for not more than one year, since an inflation rate over the budgeted one results in an increase of the nominal revenues and a decrease in expenditures.

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