ROMANIA’S PATH TO THE EUROZONE

ELEC ConferenceOctober 26, 2012

Bucharest, Romania

Romania’s population remains one of the most confident in the merits of adopting the Euro.

According to the April 2012 Eurobarometer, 54 percent of Romanians consider that Euro adoption would have a positive effect for them, compared with 45 percent of Latvians, 44 percent of Hungarians (the three countries where Euro enjoys a majority), 37 percent of Bulgarians, and of Poles, 36 percent of Lithuanians and 21 percent of Czechs.

Valentin Lazea

The new Government resulting from the Parliamentary elections of December 9 will have to confirm or to revise the proposed adoption date, of 2015.

However, maintaining the current timetable is extremely difficult, since it supposes: entering the ERM2 starting January 2013 a minimum stay within the ERM2, of only two years acceptance by the Commission and by the ECB of the adoption

taking place not at the beginning of 2015, but during that year.

The nominal convergence criteria should not constitute an unsolvable problem. Romania already fulfills 3 of the 5 Maastricht criteria and 7 of the 10 Scoreboard criteria.

The real problem consists of the real convergence criteria.

% of GDP3 year

average% of GDP

3 years% change

5 years% change

3 years% change

1 year% change

% of GDP % of GDP% of GDP

3 yearaverage

-4%/+6%of GDP

-35%of GDP

±5% (EA)±11% (non-EA)

-6%+9% (EA)

+12% (non-EA)+6%

160%of GDP

+15%of GDP

60%of GDP

10%

2010 -11.2 -95.4 10.4 14.9 33.9 -11.1 170.1 -0.1 16.3 7.5

2011 -3.4 -85.6 17.2 20.3 146.0 -6.7 16.3 9.4

2010 -2.8 -48.2 12.7 10.2 5.7 -2.6 77.2 1.7 37.8 6.1

2011 -3.0 -49.3 8.4 3.3 40.8 6.9

2010 -2.2 -112.8 -0.5 1.4 6.4 -6.7 154.0 -21.6 81.8 9.7

2011 0.6 -105.8 -2.8 3.7 167.3 6.4 81.4 10.7

2010 -5.2 -65.4 -0.5 20.1 11.3 -6.1 74.0 3.6 54.8 8.3

2011 -4.6 -63.5 12.8 4.3 80.3 7.1 56.4 9.2

2010 -6.7 -63.8 -10.4 21.2 36.5 -14.5 76.4 1.7 30.5 6.6

2011 -4.3 -62.5 22.8 12.9 71.8 1.8 33.3 7.2

*) last update: 22 October 2012

Source: Eurostat

Poland

Romania

Macroeconomic Imbalance Procedure Scoreboard*

Current account balance

Net international investment

position

Real effective exchange

rate (based on HICP)

Exporter market share of goods and

services

Nominal unit labour cost

index

House price index

Private debt

Unemploy-ment rate

Bulgaria

CzechRepublic

Hungary

Private credit flow

Public sector debt

Inflation rate (HICP) 3.1

(percent, annual average) (September 2012)

Long-term interest rates 6.9(percent per annum) (September 2012)

Exchange rate (vs. euro)(maximum percentage change***)

General government deficit**** 5.5(percent of GDP) (2011)

Government debt**** 33.4(percent of GDP) (2011)

Source: Eurostat, National Institute of Statistics, National Bank of Romania, Ministry of Public Finance

Maastricht Criteria(Nominal Convergence Indicators)

+0.1pp

Nominal Convergence Indicators Maastricht Criteria

<1.5 pp above 1.5%* (average of the three best performing Member States)

RomaniaDifference from the criteria

<2 pp above 1.7%** (average of the three best performing Member States in terms of

price stability)

± 15 percent

+2.5pp

+3.2pp

+4.7 / -8.3

below 3 percent

****) according to ESA95 methodology

**) reference level, October 2011 - September 2012 (Sweden).

***) Maximum percentage deviations of the bilateral exchange rate against the euro from its September 2010 average level in October 2010 to September 2012 based on daily data at business frequency. An upward/downward deviation implies that the currency was stronger/weaker than the average exchange rate in September 2010.

*) reference level, October 2011 - September 2012 (Sweden, Ireland, Greece).

below 60 percent

0

20

40

60

80

100

Bu

lga

ria

Cze

ch

Re

pu

blic

Est

on

ia

Cyp

rus

La

tvia

Lith

ua

nia

Hu

ng

ary

Ma

lta

Po

lan

d

Ro

ma

nia

Slo

ven

ia

Slo

vaki

a

percent

2000 2011

Share of imports from EU in total imports

0

20

40

60

80

100

Bu

lga

ria

Cze

ch

Re

pu

blic

Est

on

ia

Cyp

rus

La

tvia

Lith

ua

nia

Hu

ng

ary

Ma

lta

Po

lan

d

Ro

ma

nia

Slo

ven

ia

Slo

vaki

a

percent

2000 2011

Source: Eurostat, NIS

Share of exports to EU in total exports

Gross value added

0

10

20

30

40

50

60

70

80

90

100

20

00

20

11

20

00

20

11

20

00

20

11

20

00

20

11

20

00

20

11

20

00

20

11

20

00

20

11

20

00

20

11

20

00

20

11

20

00

20

11

20

00

20

11

20

00

20

11

Bulgaria CzechRepublic

Estonia Cyprus Latvia Lithuania Hungary Malta Poland Romania Slovenia Slovakia

Source: Eurostat, NIS

agriculture industry construction services

share of GVA, percent

GDP/capita (PPS)

0

10

20

30

40

50

60

70

80

90

100B

ulg

aria

Cze

ch

Re

pu

blic

Est

on

ia

Cyp

rus

La

tvia

Lith

ua

nia

Hu

ng

ary

Ma

lta

Po

lan

d

Ro

ma

nia

Slo

ven

ia

Slo

vaki

a

share in EU27, percent

2000 2011

Source: Eurostat

Options for the new Government:

a) maintaining the current accession date

b) proposing a new accession date

c) leaving the question of accession date open-ended.

Reasons for option c): in the short term and in the medium term, there is little

willingness from the Eurozone to accept new members real convergence criteria require time to be fulfilled the disciplinary role of the Euro has been, to a large extent,

taken over by new instruments at the Commission’s disposal (European Semester, Six Pack etc.).

Thank you!