ROMANIA – TO BE OR NOT TO BE IN THE EUROZONE?

Abstract:

This paper aims to present the current position of Romania’s economy regarding its accession to the ‘select club’ of the Eurozone. I have made a brief analysis of the main problems encountered by Romania on its way to complying with the convergence criteria, presenting as well the measures taken by the country to overcome its condition. Fuelled by the electoral “needs” (being the only country in a hurry to enter the Eurozone), and not backed by the economic reality, Romania still has to undergo key structural reforms before adopting the single currency.

Keywords:

Eurozone, convergence criteria, legislation, real convergence, nominal convergence, structural reforms, competitiveness, inflation, deficit

2014

If we take a look in the international newspapers, we can easily find a plethora of articles regarding the European countries which decided either not to join the Eurozone, either, due to the economic crisis, opted for keeping their national currency or were constrained to postpone the date of accession. Romania is one of those member states that were compelled to delay the adoption of the single currency, as a premature entry can be harmful not only for the state itself but also for the whole Eurozone.

Adopting the single currency is not an easy step to make, especially when the structure of the economy of the newcomer state is not healthy enough to foster a catch up trend or to resist asymmetrical shocks.

The preliminary activities for the participation to the euro zone are focused towards fulfilling the convergence criteria, also known as the Maastricht criteria[1]: inflation and interest rates close to the ones of the most developed Eurozone members, stability of the exchange rate, low public debt and low deficit. Additionally, the degree of sustainability of the convergence process can be determined by analyzing the indicators of real convergence, such as the level of GDP per capita, the degree of openness of the economy, the structure of the economy, the prospects of funding the public deficit, the cost of labor force, the degree of financial intermediation etc. Another requirement is to ratify and implement on the domestic level the European regulations, reaching thus the juridical convergence. Along with the adoption of the euro comes also the transfer of the decision making power to the Central European Bank, which acts independently and provides common monetary policies for all the members of the Eurozone.

Joining the Eurozone has been a strategic target for Romania ever since it joined the EU in 2007, this being part of the state’s commitment to reach a deeper integration with Europe and to develop a strong market economy. Having set this target, the timing of Romania’s accession is shaped by two main factors: the fulfillment of the convergence criteria and the resolution of the challenges within the Eurozone.