Romania to settle imbalances before scheduling euro adoption

Romania's Government deferred with no clear calendar the adoption of the single European currency, arguing that the country must first meet the convergence criteria, according to a response sent by the Executive to lawmakers at the end of last year.

"Romania is currently facing multiple macroeconomic imbalances, some of them deepening in the context of the pandemic. Thus, the nominal convergence criteria regarding the public finances are not met, as the budget deficit exceeds the threshold of 3% of GDP, and Romania is under excessive deficit procedure. The price stability is also not achieved as the inflation rate exceeds the average of the three lowest national rates. Finally, the convergence of the long-term interest rate is also not met. Although the exchange rate did not fluctuate significantly, Romania does not participate in the exchange rate mechanism II (ERM II), where it must be maintained for at least two years before entering the euro area," the document reads, according to Ziarul Financiar.

Bringing the long-term interest rates and the budget deficit down would be challenging, according to Adrian Codarlasu, vice-president of the CFA Romania analysts' association.

The former depends on the country's rating, and bringing the public deficit under 3% of GDP will take three to four years, according to Codirlasu.

andrei@romania-insider.com

(Photo source: Pixabay.com)

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Romania to settle imbalances before scheduling euro adoption

Romania's Government deferred with no clear calendar the adoption of the single European currency, arguing that the country must first meet the convergence criteria, according to a response sent by the Executive to lawmakers at the end of last year.

"Romania is currently facing multiple macroeconomic imbalances, some of them deepening in the context of the pandemic. Thus, the nominal convergence criteria regarding the public finances are not met, as the budget deficit exceeds the threshold of 3% of GDP, and Romania is under excessive deficit procedure. The price stability is also not achieved as the inflation rate exceeds the average of the three lowest national rates. Finally, the convergence of the long-term interest rate is also not met. Although the exchange rate did not fluctuate significantly, Romania does not participate in the exchange rate mechanism II (ERM II), where it must be maintained for at least two years before entering the euro area," the document reads, according to Ziarul Financiar.

Bringing the long-term interest rates and the budget deficit down would be challenging, according to Adrian Codarlasu, vice-president of the CFA Romania analysts' association.

The former depends on the country's rating, and bringing the public deficit under 3% of GDP will take three to four years, according to Codirlasu.

andrei@romania-insider.com

(Photo source: Pixabay.com)

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