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Nicolae Danila (BNR) : Under present conditions, Romania’s chances to adopt the euro in the target time are 50/50

« Under the present conditions and in the European and global context Romania's chances to adopt the euro in the time schedule targeted are 50/50. We need decision, action and speed' Nicolae Danila, member in the BCR board and former executive chair.

According to Danila, the lack of coordinates between the economic policies and the political hesitations make economic adjustments necessary and very costly from a social point of view – inflation, unemployment, debts and difficult process of single currency adoption. According to the high official of the central bank, the danger is double.« We continue to waste our resources ( human and financial capital) in economic policies which target only annual results. Secondly, the coordination between economic policies is lacking, and the danger is the human capital' Nicolae Danila says.

• What is the situation in the rest of the countries which want to adopt the euro ?

In consecinta, Djankov a anuntat 'oficial' reportarea proiectului de aderare la mecanismul ratelor de schimb ERM-2. 'Ar fi insolent cu acest deficit bugetar sa ne prezentam candidatura la ERM-2', a subliniat el.The Bulgarian government revised on Friday a soaring budgetary deficit die 2009 at 3.7 percent of GDP due to the contracts signed by the previous government and abandoned the project to adopt the exchange rate mechanism this year. ERM-2, before the accessing the euro zone, says AFP.

As a consequence, Djankov announced “ officially” the The Czech Republic could adopt the euro the earliest in 2015 if they manage to reduce the budgetary deficit under the level of 3% of GDP imposed by the EU, the Czech minister of finances Eduard Janota said. The Prague authorities have no target to enter the euro zone, but they have to reduce the budgetary deficit under 3% until 2013 from the level of 6.6% reached last year, when the Czech Republic had the hardest recession since the fall of communism. For 2010,the Czech budget includes a deficit of 5.3% of GDP, quoted by Bloomberg.

Hungary will have the possibility to adopt the euro in 2014 if they keep the budgetary level established by its government, the Hungarian premier Gordon Bajnai said on Thurday if they leave the post after the legislative elections of April, MTI says. The Hungarian official warned that the adoption of the euro would be misleading and should be done so that it should keep the economic growth instead of leading to its stagnation. However, Gordon Bajnai appreciated that it would be wiseless to delay the adoption of the euro by Hungary.  The countries in the eurozone would like to be sure they do not bring “ another Greece” in the club, Diego Iscaro, economist with HIS Global Insight, for Sofia Echo said. According to the analysts, only Estonia will access the euro after the minister of finances Jurgen Ligi announced, last week that he expected that the country adopt the euro in 2011. All these possible delays to accession to the euro zone to the  accessing countries are caused by the financial turbulences of Greece.

• In the public sector the increase of salaries transferred directly to fiscal deficit

Another source of deepening the budgetary deficit was, according to the former BCR leader the increase of salaries in the public sector. “ If in the real economy the salaries eroded the work productivity, in the public sector the increase of salaries changed directly in fiscal deficit. Under these conditions, the fiscal deficit, as a share in the GDP increased almost 10 times between 2005 and 2009 so that the share of expenditure with salaries almost doubled during the same period. The fiscal policy as well as the income one should stop this behaviour” Danila said.

• When foreign currency reserves were larger than the debt on short term, the leu was attacked

The manual of good economic practice says that the adequate level of foreign currency reserves should be at least equal to that of short term debt. At the level of 2008, Romania was in danger to break this criterium, and international investors profited of this weakness to attack the leu in October 2008. « This attack marked a loss of credibility for the economy of Romania. The credibility is the assets the most precious of the central bank. From the BNR point of view, regaining trust in Romania’s economy had to be a costly process” said the former head of BCR.

At the level of 2009, Romania did not meet the criteria of  Maastricht to adopt the single currency with the exception of the public debt,he explained. The real test for economic policies in Romania is connected to non-mentioned criteria explicitly explained in the Treaty and the so-called criteria of real convergence.

These criteria have as a basis the only element – work productivity. The real convergence supposes the diminution of differences between countries with regard to the level of development and living conditions. The convergence criteria refer to the level of GDP/inhabitant, the structure of national economy branches, the degree of openness of the economy, the volume of foreign commerce, the costs with the working force. GDP per inhabitant in Romania in 2009 is 21.6% of the average GDP of EU-25.

• Although the inflation target for eight quarters is jointly assumed by BNR and the government, the economic policies do not seem to be applied with the same time perspective

Romania had at the level of 2008 an hourly productivity of approximately 40% of the average level of the eurozone. The accession now to the eurozone, which has a hourly productivity more than our double, and the loss of independence of monetary policy would mean that the difference of productivity is translated rapidly through salary and/or unemployment.

Although the inflation target for eight quarters is jointly assumed by BNR and the government, the economic policies do not seem to be applied from the same time perspective. Outside the human capital, Romania has to continue its structural reforms to increase the level of work productivity. A relevant indicator of the difference between physical capital, and as result of efficient use of resources,is the energy consumption to make a GDP unit.  It is necessary to have many investments to bring Romania’s economic level to that of the eurozone and the restructuring made in the private sector must have under consideration the reallocation of resources so that they insure the efficiency of their use.

Sursa: http://www.actmedia.eu

Tags: budgetary government deficit policies level salaries criteria productivity economy economic between conditions under bnr danila romania adopt target euro nicolae bcr

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