Authors: Daniel Daianu, Ella Kallai, Gabriela Mihailovici, Aura Socol
Our paper contributes to the current debate with a discussion of a series of pre-conditions that we consider to be fundamental for making euro adoption commonsensical in economic terms: a/ the achievement of a critical mass of real convergence ex ante (before accession) and the fulfilment of a range of structural conditions, b) the reforms in the Eurozone which should make accession attractive to new member states. In addition, our analysis does not ignore the strategic (geo-political) imperatives which might hasten accession.
In our opinion, the Eurozone entry should mainly depend on the achievement of a critical mass of structural convergence, which should diminish risks to operate in a monetary union. We argue that the true stake of euro adoption in Romania should be neither ”if’’ nor “when”, but “under what terms” and “how it will be done”. The essential prerequisite for real convergence is raising competitiveness. Our analysis shows common problems regarding competitiveness in the region considered in terms of infrastructure, institutional development, business sophistication, and above all, innovation; it points out the scale of risks attached to a premature accession to Eurozone.
The euro adoption does not require the achievement of the euro area average level of GDP/capita. As we argue, one can imagine accession after having achieved 75% of the Eurozone average and the fulfilment of other structural conditions. Structural convergence analysis has to be nuanced.
JEL Classification: F02, FM5, G01, H12, P52
Keywords: Eurozone accession, real convergence, structural convergence, Eurozone sustainability, integration degree
This paper is a compressed version of the homonymous study prepared by the four authors under the aegis of the European Institute of Romania (EIR), as part of a 2016 SPOS strategy and policy project. Acknowledgements: Adrian Alter (IMF), Dan Armeanu (ASE), Aurelian Dochia (BRD), Anca Gălățescu (NBR), Laurian Lungu (Cardiff Business School), Adina Popescu (IMF), Valentin Lazea (NBR) and Radu Vrânceanu (ESSEC–Paris) for their comments. The authors would also like to thank experts from the Romanian Academy institutes, the academia and governmental institutions for their comments to this study at EIR and NBR seminars. Sole responsibility for this paper lies with the authors.
*The full article can be read here: Romania and the Eurozone_Daianu et all_EJCS style-secured