The National Bank of Romania (BNR) does not consider that the objective of joining the single currency system is not feasible before fiscal consolidation, BNR governor Mugur Isarescu said on October 1 while speaking in front of lawmakers at the hearings for a new term at top of the central bank.

Increasing taxation is not feasible ahead of the elections but will be a necessary ingredient of the fiscal consolidation, Isarescu stated. Separately, the FDI companies borrowing from Romania (instead of borrowing indirectly from abroad through parent groups) would diminish the external debt (with a positive impact on the external balance), he added.

Bringing inflation within required limits is an implicit condition not mentioned by the BNR governor.

"The National Bank does not consider that, at the moment, the objective of moving to the eurozone is feasible in a certain perspective because everything depends on how the country will succeed with correct, consistent policies to reduce the public deficit to 3% of GDP. If this can be done in four years, in five years, in seven years, probably it's then when we will have a transition to the euro – not sooner. The things are connected," stated Isarescu, as reported by Economica.net.

He also said that the options to cut the public deficit by rising revenues exist, but depend on the political will. 

"It's about political will, a decision [of rising taxation] definitely cannot be taken in an election year," the BNR governor pointed out.

Mugur Isarescu argued, on the other hand, that companies with foreign capital should be financed from within the country through banks in order to stop borrowing from abroad, adding that the private external debt of Romania reflects, among others, the fact that Dacia borrows partially through Renault.

iulian@romania-insider.com

(Photo source: Inquam Photos/Octav Ganea)