Romania and the euro

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Romania is scheduled to replace the current national currency, the Romanian leu, with the euro once Romania fulfils the euro convergence criteria. According to the Romanian government, it will strive to comply with the first four convergence criteria by 2013, but will not be ready to join the European Exchange Rate Mechanism (ERM-II) before 2013–2014.[1] The fifth euro adoption criteria is that the country has been an ERM-II member for a minimum of two years, making the earliest possible year for Romania to qualify for euro adoption is 2015, with the earliest date for adoption on 1 January 2016. However, the eurozone crisis could delay adoption.

EIU analysts suggested in May 2012, that 2016-2017 would be the earliest realistic dates for Romania's adoption of the euro.[2] The governor of the National Bank of Romania confirmed in November 2012, that Romania would not meet its previous target of joining the eurozone in 2015. He mentioned that it had been a financial benefit for Romania to not be a part of the euro area during the European debt-crisis, but that the country in the years ahead would strive to comply with all the convergence criteria.[3] In April 2013 Romania submitted their annual Convergence Programme to the European Commission, which for the first time did not specify a target date for euro adoption.[4][5] Prime Minister Victor Ponta has stated that "eurozone entry remains a fundamental objective for Romania but we can't enter poorly prepared", and that 2020 was a more realistic target.[5] In April 2013, the Banca Naţională a României (BNR) submitted draft amendments to the Romanian Constitution to the European Central Bank (ECB) for review. The amendments would make the BNR's statue an organic law to ensure "institutional and functional stability", and would allow for the "transfer of BNR tasks to the ECB and the introduction of the euro as legal tender" using organic law.[6]

To simplify future adjustments to ATMs after the adoption of the euro, when the new Romanian new leu replaced the old leu in 2005 (at 10,000 old lei to 1 new leu) the new banknotes were the same physical dimensions as euro banknotes, except the 200 lei bill, which had no euro size correspondent, and the 500 lei bill, which was the same dimension as the €200 bill.[7]

Contents

Coins design [edit]

Romanian euro coins have not yet been designed. Romanian law requires that the coat of arms of the country be used on coin designs.[8] The European currency is called in Romanian euro [ˈe.uro], and its subunit eurocent [e.uroˈt͡ʃent].

Status [edit]

The Maastricht Treaty originally required that all members of the European Union join the euro once certain economic criteria are met. Romania meets 2 out of the 5 criteria.


Convergence criteria
Assessment month Country HICP inflation rate[9]
(12-months average
of annual rates)[nb 1]		 Budget deficit to GDP Debt-to-GDP ratio ERM II member[10] Long-term interest rate[11]
(12-months average
of 10yr bond yields)[nb 2]
2012 ECB Report Reference values[nb 3] max. 3.1%
(as of 31 Mar 2012)		 max. 3.0%
(Fiscal year 2011)[13]		 max. 60%, or declining
(Fiscal year 2011)[13]		 min. 2 years
(as of 31 Mar 2012)		 max. 5.80%
(as of 31 Mar 2012)
 Romania 4.6% 5.2% 33.3% No 7.25%
April 2013 Reference values max. 2.5%[nb 4][nb 5]
(as of 31 Mar 2013)		 max. 3.0%
(Fiscal year 2012)[15]		 max. 60%, or declining
(Fiscal year 2012)[16]		 min. 2 years
(as of 31 Mar 2013)		 max. 4.81%[nb 4][nb 6]
(as of 31 Mar 2013)
 Romania 4.1% 2.9% 37.8% No 6.36%


  Criterion fulfilled
  Criterion potentially fulfilled: If the budget deficit exceeds the 3% limit, but is "close" to this value (the European Commission has been deemed 3.5% to be close by in the past),[17] then the criteria can still potentially be fulfilled if either the deficits in the previous two years are significantly declining towards the 3% limit, or if the excessive deficit is the result of exceptional circumstances which are temporary in nature (i.e. one-off expenditures triggered by a significant economic downturn, or by the implementation of economic reforms that are expected to deliver a significant positive impact on the government's future fiscal budgets). However, even if such "special circumstances" are found to exist, additional criteria must also be met to comply with the fiscal budget criterion.[18][19] Additionally, if the debt-to-GDP ratio exceeds 60% but is "sufficiently diminishing and approaching the reference value at a satisfactory pace" it can be deemed to be in compliance.[20]
  Criterion not fulfilled


Notes
  1. ^ The 12-months average for the annual HICP inflation rate must be no more than 1.5% larger than the unweighted arithmetic average of the similar HICP inflation rates in the 3 EU member states with the lowest HICP inflation. If any of these 3 states have a HICP rate significantly below the similarly averaged HICP rate for the eurozone (which according to ECB practice means more than 2% below), and if this low HICP rate has been primarily caused by exceptional circumstances (i.e. severe wage cuts or a strong recession), then such a state is not included in the calculation of the reference value and is replaced by the EU state with the fourth lowest HICP rate.
  2. ^ The annual average for the yield of 10-year government bonds must be no more than 2.0% larger than the unweighted arithmetic average of the bond yields in the 3 EU member states with the lowest HICP inflation. If any of these states have bond yields which are significantly larger than the similarly averaged yield for the eurozone (which according to previous ECB reports means more than 2% above) and at the same time does not have complete funding access to financial markets (which is the case for as long as a government receives bailout funds), then such a state is not be included in the calculation of the reference value.
  3. ^ Reference values from the ECB convergence report of May 2012.[12]
  4. ^ a b The reference values for HICP inflation and long-term interest rates are calculated based on the "calculation principle" outlined in the 2012 ECB Convergence Report,[14] with the input of forecasted data for the sliding assessment year 1 April 2012 - 31 March 2013.
  5. ^ The 3 best performing countries in regards to HICP inflation were Greece (0.614%), Sweden (0.843%) and Latvia (1.567%), with no outliers detected.
  6. ^ As Greece is still part of a bailout program, and suffered from elevated interest rates significantly above the eurozone average (being 15.40% above), this country was excluded from the calculation of the reference limit for "long term interest rates", leaving just Sweden (av. rate=1.61%) and Latvia (av. rate=4.00%) as benchmark countries for the calculation of the reference value limit.

Earlier evaluations on the target year for euro adoption [edit]

In May 2006, it was announced that the Romanian government planned to join ERM II, only after 2012.[21] The president of the ECB said in June 2007, that "Romania has a lot of homework to do ... over a number of years" before joining ERM II.[22] The Romanian government announced in December 2009, that they now officially planned to join the eurozone by 1 January 2015.[23] However, in October 2012, Valentin Lazea, the NBR chief economist, said that "the adherence of Romania to euro currency in 2015 is difficult for Romania". Financial market sources say that, presumably, the new objective of currency changeover will be the year 2019.[24]

References [edit]

  1. ^ http://business-review.ro/news/update-new-euro-adoption-target-to-be-set-by-the-end-of-the-month-pm/11455/
  2. ^ "The EIU view on Romania joining the Eurozone". 2012-05-17. Retrieved 2012-10-25. 
  3. ^ "Resilient Romania Finds a Currency Advantage in a Crisis". The New York Times. 3 November 2012. Retrieved 5 November 2012. 
  4. ^ "Government of Romania - Convergence Programme - 2013-2016". Government of Romania. April 2013. 
  5. ^ a b Trotman, Andrew (2013-04-18). "Romania abandons target date for joining euro". The Daily Telegraph. Retrieved 2013-05-01. 
  6. ^ "Opinion of the European Central Bank of 7 May 2013: On strengthening Banca Naţională a României’s institutional role and independence (CON/2013/31)". ECB. 7 May 2013. Retrieved 11 May 2013. 
  7. ^ "Coins and notes in circulation". The National Bank of Romania. Retrieved 25 December 2012. 
  8. ^ Chamber of Deputies of Romania, Law No. 102/September 21, 1992 regarding the Country Coat of Arms and the State Seal, Article 4
  9. ^ "HICP (2005=100): Monthly data (12-month average rate of annual change)". Eurostat. 16 August 2012. Retrieved 6 September 2012. 
  10. ^ "What is ERM II?". European Commission. 31 July 2012. Retrieved 8 September 2012. 
  11. ^ "Long-term interest rate statistics for EU Member States (monthly data for the average of the past year)". Eurostat. Retrieved 18 December 2012. 
  12. ^ "Convergence Report May 2012". European Central Bank. May 2012. Retrieved 2013-01-20. 
  13. ^ a b "European economic forecast - spring 2012" (PDF). European Commission. 1 May 2012. Retrieved 1 September 2012. 
  14. ^ "Convergence report 2012". European Central Bank. May 2012. Retrieved 2013-01-15. 
  15. ^ "Government deficit/surplus data". Eurostat. 22 April 2013. Retrieved 22 April 2013. 
  16. ^ "Government debt data". Eurostat. 22 April 2013. Retrieved 22 April 2013. 
  17. ^ "Luxembourg Report prepared in accordance with Article 126(3) of the Treaty" (PDF). European Commission. 12 May 2010. Retrieved 18 November 2012. 
  18. ^ "EMI Annual Report 1994" (PDF). European Monetary Institute (EMI). April 1995. Retrieved 22 November 2012. 
  19. ^ "Progress towards convergence - Nov. 1995 (report prepared in accordance with article 7 of the EMI statute)" (PDF). European Monetary Institute (EMI). November 1995. Retrieved 22 November 2012. 
  20. ^ "Progress towards convergence - November 1995 (report prepared in accordance with article 7 of the EMI statute)" (PDF). European Monetary Institute (EMI). November 1995. Retrieved 17 March 2013. 
  21. ^ "Isarescu: Trecem la euro dupa 2012" (in Romanian). 2006-05-18. Retrieved 2011-02-01. 
  22. ^ "ECB: Introductory statement with Q&A". ECB. 2007-06-06. Retrieved 2009-01-06. 
  23. ^ "Raport privind situația macroeconomică" (PDF). Government of Romania. Retrieved 2009-12-31. 
  24. ^ "Romania misses adopting the euro in 2015. NBR said the new government will decide the next date", Ziarul Financiar
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