On 20 April 2015 European Commission’s representation in Bucharest and the National Bank of Romania organized the conference “Romania’s path towards Euro” in Bucharest.
The conference participants discussed the next steps necessary for adopting Euro in Romania, considering both nominal convergence criteria and real convergence and the structural reforms needed in the economy to reduce the gap between the Euro area countries.
At the conference, the National Bank Governor Mugur Isarescu declared that for Romania the 2019 established date for Euro adoption appears to be highly ambitious and “we must think well if we maintain this target because although Romania meets all five criteria to Maastricht, there is still a risk of slippages which are extremely expensive.” Ensuring a relatively high degree of lasting convergence before adopting the single currency, and not just meeting the Maastricht criteria, is essential for successful Euro area participation.
In May 2014, Romania sent the EC a new Convergence Program for the period 2014 – 2017, announcing that the commitment to adopt the euro “will become an achievable goal” on January 1, 2019.
According to Isarescu, this formal commitment must be accompanied by a detailed roadmap of the euro adoption process, including clearly defined intermediate objectives.
The detailed roadmap should have explicit support (formalized in a document) from all political stakeholders, providing guarantees that: the objectives set will transcend the opportunistic considerations related to the election cycle, progress in nominal convergence and in the correction of macroeconomic imbalances will not be reversed and that the necessary structural reforms will be implemented so as to ensure economic competitiveness within the Euro area.
The Euro adoption as of 1 January 2019 would imply participation in the exchange rate mechanism (ERM II) starting on 1 January 2016 for the minimum 2-year stay. Isarescu said that Romania is not ready to enter the ERM II 2016, because of the lack of time. In addition, uncertainties surrounding the exchange rate equilibrium level persist.
Unlike nominal convergence criteria, which are formalized in the Maastricht Treaty, there is neither a clear-cut definition for the real convergence nor a quantitative benchmark. The real convergence usually means the convergence of living standards or of the real GDP per capita to the Euro area level. In Romania, the real convergence has progressed but regional disparities have widened over time. The GDP per capita at PPS is still below the levels at which other Member States entered the Euro area.
Romania can join the Euro area only after a highway will pass Carpathians, to allow also the development of other regions not only a few enclaves where foreign investments are focused, said Isarescu. Romania is the EU Member State recording the highest disparity across regions. The poor infrastructure connecting historical provinces favors the concentration of investment near the western border and the persistence of development gaps. A first step towards bridging the significant economic development gaps across regions is undoubtedly having them interconnected by high quality transport infrastructure.
An IMF analysis said that the lack of infrastructure is a major obstacle to the economic growth. Romania lacks a functional framework for developing, prioritizing and implementing public investment projects.