Romanian central bank governor warns against euro adoption target

By bne IntelliNews April 30, 2015

bne IntelliNews -

 

Romania’s central bank governor Mugur Isarescu has warned that the benefits of joining the Eurozone are unclear, and called for the country’s euro adoption calendar to be revised.

Romania is the only one of the former communist EU members to have a euro adoption calendar, Isarescu told the Country Risk Conference organised by rating agency Coface and news agency Mediafax on April 29.

Politically, setting a euro adoption calendar might be profitable to the extent that it contributes to political consensus and encourages coherent macroeconomic policies, Isarescu admitted. However, if the calendar is not accompanied by an action plan, the process could lose credibility, he added.

Romania's central bank and government officials have agreed upon January 2019 as the euro adoption date but no formal steps have been taken in this regard. Other peer countries in the region are reconsidering the benefits and costs of joining the single currency, Isarescu told the conference.

Trade benefits have decreased following slower growth in the euro area, while the benefits of lower sovereign borrowing costs have also vanished. In fact, the countries with flexible exchange rates were those who weathered the recent crisis more easily, Isarescu argued.

Exchange rate adjustments driven by the European Central Bank’s QE policy complicate the task of identifying the equilibrium exchange rate. Lowering the minimum required reserves also has an impact on the exchange rate, Isarescu added.

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