Romania is currently the least prepared European Union member state outside the Euro area for adopting the euro, fulfilling only one out of the four economic criteria, European Commission said in its latest Convergence Report released on Wednesday.
“The report concludes that Romania currently fulfils one out of the four economic criteria necessary for adopting the euro: the criteria relating to public finances. Romania does not fulfil the price stability, exchange rate and long-term interest rate criteria and legislation in Romania is not fully compatible with the Treaty,” the European Commission indicates.
All the other EU member states outside the Eurozone are better prepared to join the 19-member area. All member states, except the United Kingdom and Denmark, are required to adopt the euro and join the euro area.
According to EU’s executive arm, Bulgaria currently fulfils three out of the four economic criteria, the Czech Republic 2/4, Croatia 3/4, Hungary 2/4, Poland 2/4 and Sweden 3/4.
The convergence criteria, sometimes referred to as the ‘Maastricht criteria’, include price stability (average inflation over one year before the examination not more than 1.5 percentage points above the rate of the three best-performing EU countries), sound public finances (public deficit below 3 percent of GDP, not under excessive deficit procedure at the time of examination), exchange rate stability (participation in the Exchange Rate Mechanism – ERM II – for two years without severe tensions) and durability of convergence (long-term interest rate not more than 2 percentage points above the rate of the three best-performing EU countries in terms of price stability).
Romania announced a new target to adopt euro in 2024, after several missed attempts, but during the last year moved away from meeting the convergence criteria due mainly to recent fiscal measures, a recent Business Review analysis showed.
The member states also need to obtain compatibility of national legislation with the ‘acquis’ (existing EU legislation) as regards the national central bank, notably its independence and that of the members of its decision-making bodies.
The Convergence Report 2018 says that Romania doesn’t fulfill the compatibility of national legislation with the ‘acquis’.
The incompatibilities in the BNR Law are linked to: definition of monetary policy and monetary functions, operations and instruments of the ESCB, conduct of foreign exchange operations and the definition of foreign exchange policy, holding and management of foreign reserves, right to authorise the issue of banknotes and coins, non-recognition of the role of the ECB in regulating, monitoring and controlling foreign currency transactions and lack of reference to the role of the ECB in payment systems.
“As regards the independence of the BNR, the prohibition on monetary financing and the BNR’s integration into the ESCB at the time of euro adoption, the legislation in Romania, in particular the BNR Law, is not fully compatible with the compliance duty under Article 131 of the TFEU. The Romanian authorities are invited to remedy the abovementioned incompatibilities,” the report said.