Academician Daniel Daianu: Joining euro requires at least two-year wait in antechamber

Academician Daniel Daianu, who sits on the Board of Directors of the National Bank of Romania, said during a lecture delivered at the University of Craiova on Wednesday that Romania would have to wait at least two years in the antechamber in order to join the euro area; in this time span it should prove economic robustness and reduce the budget deficit to about 1 pct. 

"We want to join the eurozone. In order to not suffocate in the eurozone - because there are certain countries that lose breath - you must enter with an as robust as possible economy. What is far less known is that before entering the eurozone one is required to wait in the antechamber (the Exchange Rate Mechanism) for at least two years. And we do not have a Monetary Council. ... For at least two years one has to prove robustness, that is, run very small deficits, because it's hard to believe one would be admitted without such robustness. One doesn't just knock on the door and enter the eurozone, it's not as if I went to the sanatorium. To join, one has to pass endurance tests, somewhat like astronauts before being sent into space. So there is this desire to enter as soon as possible - you may have seen a relevant calendar recently evoked in the public space. So if, for instance, one plans to enter the eurozone in 2024, one has to understand that you have an at least two-year wait in the antechamber ahead, therefore you should enter the ERM and cruise into 2022 with very small deficits," Daianu explained. 

According to him, the construction of the 2019 budget should take into account a correction step, so that by 2022 Romania has a budget deficit of around 1 percent; other measures should also be implemented to increase the robustness of the economy. 

"Otherwise, they won't even talk to us. To join the euro, everyone else has to agree to that - surely, the nod of the big decision makers matters - the European Central Bank makes an assessment, there's an assessment by the Eurogroup, and by the European Commission. So we have to prepare, because not even the eurozone works the way it should," said Daianu. 

The former Minister of Finance also said that all the countries Romania compares with - Poland, Hungary, the Czech Republic - have a balanced external account, and that Hungary has a commercial surplus of 5 - 6 percent. 

"We have a competitiveness issue and an entire debate arises from here: what should we do to be more competitive, what should we do to make our industry stronger? Competitiveness is an issue for us and we need a correction in the public finance sector to help cope with an inevitable recession. Recession will revisit Romania at a certain time, because it's unrealistic to think that we are in for uninterrupted economic growth for the next 10 years, it is against the logic of market economy, and if things go wrong in the big markets, we will be affected too. We need more robustness and reserves in the economy," said academician Daniel Daianu. 

The National Bank of Romania organizes in October and November, in partnership with the University of Craiova a series of four seminars for representatives of the academic milieu who work in non-economic areas (professors, doctoral and masters students); Daniel Daianu's lecture was delivered as part of this program.