Romania and the euro

From Wikipedia, the free encyclopedia
Jump to: navigation, search
Eurozone participation
  19 European Union member states in the eurozone
  7 European Union member states not in ERM II but obliged to join
  1 European Union member state in ERM II, with an opt-out (Denmark)
  1 European Union member state not in ERM II, with an opt-out (United Kingdom)
  4 non-European Union member states using the euro with a monetary agreement (Andorra, Monaco, San Marino and Vatican City)
  2 non-European Union member states using the euro unilaterally (Kosovo and Montenegro)

Romania is required by its EU accession agreement to replace the current national currency, the Romanian leu, with the euro, as soon as Romania fulfills all of the six nominal euro convergence criteria. The leu is not yet part of the European Exchange Rate Mechanism (ERM2), of which minimum two years of stable membership is one of the six nominal convergence criteria to comply with to qualify for euro adoption. The current Romanian government in addition established a self-imposed criteria to reach a certain level of "real convergence", as a steering anchor to decide the appropriate target year for ERM2-membership and euro adoption. As of April 2015, the government reported it was on track to ensure compliance with all of the nominal convergence criteria and its "real convergence" target by the end of 2018, and consequently the official target for euro adoption on 1 January 2019 was re-affirmed still to be valid.[1]

History[edit]

To simplify future adjustments to ATMs after the adoption of the euro, when the 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 note, which had no euro size correspondent, and the 500 lei note, which was the same dimension as the €200 note.[2]

In May 2006, it was announced that the Romanian government planned to join the European Exchange Rate Mechanism (ERM), a prerequisite for euro adoption, only after 2012.[3][4] 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.[5] The Romanian government announced in December 2009, that they now officially planned to join the eurozone by 1 January 2015.[6][7] In April 2011, the Romanian government announced it would strive to comply with the first four convergence criteria by 2013, but would not be ready to join the ERM II before 2013–2014.[8]

EIU analysts suggested in May 2012, that 2016-2017 would be the earliest realistic dates for Romania's adoption of the euro.[9] 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". 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.[10] Concerns about its workforce productivity were also been cited for the delay.[11]

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.[12][13] 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.[13] In April 2013, the National Bank of Romania submitted draft amendments to the Romanian Constitution to the European Central Bank (ECB) for review. The amendments would make the NBR's statue an organic law to ensure "institutional and functional stability", and would allow for the "transfer of NBR tasks to the ECB and the introduction of the euro as legal tender" using organic law.[14] In 2014, Romania's Convergence Report set a target date of 1 January 2019 for euro adoption.[15][16]

According to the Erste Group Bank, it would be very difficult for Romania to meet this 2019 target, not in regards of complying with the five nominal convergence criteria values, but in regards of reaching some appropriate levels of real convergence (i.e. raising the GDP per capita from 50% to a level above 60% of the eurozone average) ahead of the euro adoption.[17] The Romanian Central Bank governor, Mugur Isărescu, admitted the target was ambitious, but obtainable if the political parties passed a legal roadmap for the required reforms to be implemented, and clarified this roadmap should lead to Romania entering ERM-2 only on 1 Jan 2017 - so that the euro could be adopted after two years of ERM-2 membership on 1 Jan 2019.[18]

As of April 2015, the Romanian government concluded it was still on track to attain its target for euro adoption in 2019, both in regards of ensuring full compliance with all nominal convergence criteria and in regards of ensuring a prior satisfying degree of "real convergence". The Romanian target for "real convergence" ahead of euro adoption, is for its GDP per capita (in purchasing power standards) to be above 60% of the same average figure for the entire European Union, and according to the latest outlook, this relative figure was now forecast to reach 65% in 2018 and 71% in 2020,[1] after having risen at the same pace from 29% in 2002 to 55% in 2013.[19] Finally, the Romanian government also expressed its commitment fully to join all pillars of the Banking Union, as soon as possible.[1]

Status[edit]

The Maastricht Treaty originally required that all members of the European Union join the euro once certain economic criteria are met. As of April 2014, Romania meets 5 out of the 7 criteria.


Convergence criteria
Assessment month Country HICP inflation rate[20][nb 1] Excessive deficit procedure[21] Exchange rate Long-term interest rate[22][nb 2] Compatibility of legislation
Budget deficit to GDP[23] Debt-to-GDP ratio ERM II member[24] Change in rate[25][26][nb 3]
2012 ECB Report[nb 4] Reference values Max. 3.1%[nb 5]
(as of 31 Mar 2012)
None open (as of 31 March 2012) Min. 2 years
(as of 31 Mar 2012)
Max. ±15%[nb 6]
(for 2011)
Max. 5.80%[nb 7]
(as of 31 Mar 2012)
Yes[27]
(as of 31 Mar 2012)
Max. 3.0%
(Fiscal year 2011)[28]
Max. 60%
(Fiscal year 2011)[28]
 Romania 4.6% Open No -0.6% 7.25% No
5.2% 33.3%
2013 ECB Report[nb 8] Reference values Max. 2.7%[nb 9]
(as of 30 Apr 2013)
None open (as of 30 Apr 2013) Min. 2 years
(as of 30 Apr 2013)
Max. ±15%[nb 6]
(for 2012)
Max. 5.5%[nb 9]
(as of 30 Apr 2013)
Yes[29]
(as of 30 Apr 2013)
Max. 3.0%
(Fiscal year 2012)[30]
Max. 60%
(Fiscal year 2012)[30]
 Romania 4.1% Open (Closed in June 2013) No -5.2% 6.36% Unknown
2.9% 37.8%
2014 ECB Report[nb 10] Reference values Max. 1.7%[nb 11]
(as of 30 Apr 2014)
None open (as of 30 Apr 2014) Min. 2 years
(as of 30 Apr 2014)
Max. ±15%[nb 6]
(for 2013)
Max. 6.2%[nb 11]
(as of 30 Apr 2014)
Yes[31]
(as of 30 Apr 2014)
Max. 3.0%
(Fiscal year 2013)[32]
Max. 60%
(Fiscal year 2013)[32]
 Romania 2.1% None No 0.9% 5.26% No
2.3% 38.4%


  Criterion fulfilled
  Criterion potentially fulfilled: If the budget deficit exceeds the 3% limit, but is "close" to this value (the European Commission has deemed 3.5% to be close by in the past),[33] 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.[34][35] 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.[36]
  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. ^ The change in the annual average exchange rate against the euro.
  4. ^ Reference values from the ECB convergence report of May 2012.[37]
  5. ^ Sweden, Ireland and Slovenia were the reference states.[37]
  6. ^ a b c The maximum allowed change in rate is ± 2.25% for Denmark.
  7. ^ Sweden and Slovenia were the reference states, with Ireland excluded as an outlier.[37]
  8. ^ Reference values from the ECB convergence report of June 2013.[38]
  9. ^ a b Sweden, Latvia and Ireland were the reference states.[38]
  10. ^ Reference values from the ECB convergence report of June 2014.[39]
  11. ^ a b Latvia, Portugal and Ireland were the reference states.[39]

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.[40] The European currency is called in Romanian euro [ˈe.uro], and its subunit eurocent [e.uroˈt͡ʃent].

Public opinion[edit]

According to a eurobarometer poll in April 2014, 74 per cent of Romanians are in favor of introducing the euro while 24 per cent are opposed.[41]

References[edit]

  1. ^ a b c "Government of Romania Convergence Programme 2015-2018" (PDF). Government of Romania. April 2015. 
  2. ^ "Coins and notes in circulation". The National Bank of Romania. Retrieved 25 December 2012. 
  3. ^ "Isarescu: Trecem la euro dupa 2012" (in Romanian). 2006-05-18. Retrieved 2011-02-01. 
  4. ^ Isarescu: Trecem la euro dupa 2012 | Eveniment | Ziarul Financiar[dead link]
  5. ^ "ECB: Introductory statement with Q&A". ECB. 2007-06-06. Retrieved 2009-01-06. 
  6. ^ "Raport privind situația macroeconomică" (PDF). Government of Romania. Retrieved 2009-12-31. 
  7. ^ "Romania to join the euro zone in 2015". Business Review. 1 November 2011. 
  8. ^ "Update: New Euro adoption target to be set by the end of the month, PM". http://business-review.eu. Retrieved 7 September 2013. 
  9. ^ "The EIU view on Romania joining the Eurozone". 2012-05-17. Retrieved 2012-10-25. 
  10. ^ "Resilient Romania Finds a Currency Advantage in a Crisis". The New York Times. 3 November 2012. Retrieved 5 November 2012. 
  11. ^ Banking News (22 June 2012). "Croitoru (BNR): Adoptarea monedei euro, un orizont indepartat". Retrieved 22 July 2012. 
  12. ^ "Government of Romania - Convergence Programme - 2013-2016" (PDF). Government of Romania. April 2013. 
  13. ^ a b Trotman, Andrew (2013-04-18). "Romania abandons target date for joining euro". The Daily Telegraph. Retrieved 2013-05-01. 
  14. ^ "Opinion of the European Central Bank of 7 May 2013: On strengthening Banca Naţională a României’s institutional role and independence (CON/2013/31)" (PDF). ECB. 7 May 2013. Retrieved 11 May 2013. 
  15. ^ "Guvernul Romaniei - Programul de convergenta - 2014-2017" (PDF). Government of Romania. April 2014. Retrieved 2014-05-14. 
  16. ^ "Romania Sets 2019 as Target Date to Join Euro Area, Voinea Says". Bloomberg. 2014-05-06. Retrieved 2014-05-14. 
  17. ^ "Erste: Romania in zona euro in 2019, un obiectiv „foarte ambitios”.Realist ar fi dupa 2021. (Erste: Romania in the euro area in 2019, a goal "very ambitious". Realistically it would be after 2021.)" (in Romanian). Wall-Street Romania. 19 May 2014. 
  18. ^ "Isarescu: Romania needs law to enforce 2019 Euro-adoption target". Business Review. 19 August 2014. 
  19. ^ "GDP per capita - annual Data [tec00114]: purchasing power parity". Eurostat. 1 December 2014. 
  20. ^ "HICP (2005=100): Monthly data (12-month average rate of annual change)". Eurostat. 16 August 2012. Retrieved 6 September 2012. 
  21. ^ "The corrective arm". European Commission. Retrieved 2014-07-05. 
  22. ^ "Long-term interest rate statistics for EU Member States (monthly data for the average of the past year)". Eurostat. Retrieved 18 December 2012. 
  23. ^ "Government deficit/surplus data". Eurostat. 22 April 2013. Retrieved 22 April 2013. 
  24. ^ "What is ERM II?". European Commission. 31 July 2012. Retrieved 8 September 2012. 
  25. ^ "Euro/ECU exchange rates - annual data (average)". Eurostat. Retrieved 5 July 2014. 
  26. ^ "Former euro area national currencies vs. euro/ECU - annual data (average)". Eurostat. Retrieved 5 July 2014. 
  27. ^ "Convergence Report - 2012" (PDF). European Commission. March 2012. Retrieved 2014-09-26. 
  28. ^ a b "European economic forecast - spring 2012" (PDF). European Commission. 1 May 2012. Retrieved 1 September 2012. 
  29. ^ "Convergence Report - 2013" (PDF). European Commission. March 2013. Retrieved 2014-09-26. 
  30. ^ a b "European economic forecast - spring 2013" (PDF). European Commission. February 2013. Retrieved 4 July 2014. 
  31. ^ "Convergence Report - 2014" (PDF). European Commission. April 2014. Retrieved 2014-09-26. 
  32. ^ a b "European economic forecast - spring 2014" (PDF). European Commission. March 2014. Retrieved 5 July 2014. 
  33. ^ "Luxembourg Report prepared in accordance with Article 126(3) of the Treaty" (PDF). European Commission. 12 May 2010. Retrieved 18 November 2012. 
  34. ^ "EMI Annual Report 1994" (PDF). European Monetary Institute (EMI). April 1995. Retrieved 22 November 2012. 
  35. ^ "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. 
  36. ^ "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. 
  37. ^ a b c "Convergence Report May 2012" (PDF). European Central Bank. May 2012. Retrieved 2013-01-20. 
  38. ^ a b "Convergence Report" (PDF). European Central Bank. June 2013. Retrieved 2013-06-17. 
  39. ^ a b "Convergence Report" (PDF). European Central Bank. June 2014. Retrieved 2014-07-05. 
  40. ^ Chamber of Deputies of Romania, Law No. 102/September 21, 1992 regarding the Country Coat of Arms and the State Seal, Article 4
  41. ^ http://ec.europa.eu/public_opinion/flash/fl_400_en.pdf