Romania's Euro-Zone Entry Could be Delayed Due to High Inflation

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Romania's Euro-Zone Entry Could be Delayed Due to High Inflation

Romania’s accession to the euro-zone, scheduled for 2014, could be delayed without a sustainable cutback in inflation in 2008 and 2009, said the Governor of the National Bank of Romania (BNR), Mugur Isarescu, cited by reporter.gr.

''High inflation this year and in 2009 would require in 2010-2012 “measures so tough we would be unable to apply. Then we would have to sacrifice economic growth,'' Isarescu said, Business Standard daily reports.

''The burden of the current account deficit should be reduced, thus allowing for a drop in inflation, by deterring consumer loans,'' the governor added.

In order to join the euro-zone in 2014, Romania must undergo a preparation period in 2012-2014, called Exchange Rate Mechanism (ERM 2), when it must prove the inflation is close to the EU level and that this can be kept under control.

Isarescu emphasized that the inflation rate should be lowered through sustainable measures. “We have learned our lesson, namely that if you cut back inflation through unsustainable measures, especially for an emotional people, such as the Romanians, you create illusions and the disappointment is later excessive,” he said.

According to Isarescu, the RON 3.1/€1 exchange rate, registered last summer, was not sustainable. “The exchange rate later rose to RON 3.6/€1, which led some to say that we are witnessing a crash of the leu,” he said.

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