Analysis shows Romania has a way to go to the Euro zone

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Joining the euro area is a priority for Romania and meets consensus in the political class, but high deficits and the fragility of the external balance represent major obstacles to entry into the MCS2 in the immediate perspective and then the accession itself, reveals the Convergence analysis report „Romania – MONITOR euro area” no. 10/2022, coordinated by academician Daniel Daianu, reports ACT Media.

Without sustainable fiscal consolidation it is not realistic to hope for rapid accession, the authors of the report state.

„Communication of the Council of 1st June 2022 regarding the Decision for the Accession of Croatia to the euro zone (EC,2022c ;Council, 2022c) reiterates the fact that accession to the euro zone is a political decision, but the issue is the same as before the pandemics: the capacity of the candidate member state to prevent macroeconomic and financial vulnerabilities and have a sustainable capacity to absorb macroeconomic shocks and imbalances (Darvas, 2019).Euro adoption will cost the local banks from Croatia approximately one billion kuna (almost 133 million euro) per year under the form of commissions for conversion and between 80 and 100 million euro – expenses necessary for the adaptation of the IT services and of the ATM network according to an evaluation of the Croatian Association of Banks (2022). The conclusions presented by ECB and EC in the Reports for convergence (EC, 2022d) published on 1st June this year, which evaluate the progress in Bulgaria, the Czech Republic, Croatia, Hungary, Poland, Romania and Sweden – the seven member states outside the euro zone which legally committed to adopt the euro currency – totally converge: (i) only Croatia and Sweden meet the criterion of price stability; (ii)all member states meet the criterion regarding public finances, with the exception of Romania which is the only member state in Procedure of Excessive Deficit (PDE); (iii)Bulgaria and Croatia meet the criterion of exchange rate; (iv)  Bulgaria, Croatia, the Czech Republic and Sweden meet the criterion of long term interest rate; (v) Croatia meets the four criteria of nominal convergence, and its legislation is totally compatible to the TFUE requirements”, the document says.

According to the report, the convergence report of Croatia (EC, 2022d) was discussed in the European committees (The Economic and Financial Committee and the Ecofin Council); similarly, the proposal for a decision of the Council and a regulation of the Council regarding the introduction of the euro in Croatia on 1st January 2023 were adopted.

At the end of June 2022 a letter of the Chairman of the Council to the European Council was sent, with regard to the proposal to extend the euro zone; similarly, the European Council was informed with regard to the steps that will be taken in the European institutional procedure to allow Croatia to join the Euro area. The ratification of the European decision by the 27 national parliaments of all Member States follows.

„While the authorities in Bulgaria reiterate the objective for accession to the euro zone in 2024, in other member states outside the euro zone – Poland, the Czech Republic, Hungary – the road towards the European single currency does not seem to be a priority at present, the attention being focalized on the management of the energy crisis and the economic-social impact of the war in Ukraine, as well as on the efforts to stop inflation and avoid powerful recession”, the authors state.



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