Eurozone Entry Unlikely for Romania Amid High Deficit

The adoption of the euro remains an unattainable goal for Romania due to its persistent fiscal deficit, according to Mugur Isărescu, Governor of the National Bank of Romania (NBR), as cited by local media. Romania's deficit stood at 5.68% last year, one of the highest in the European Union, a figure that far exceeds the requirements for adopting the single currency. Even before the pandemic, Romania struggled to meet these criteria.

Isărescu explained that reducing the deficit to below 3%, as required by the European Union, would be difficult. He mentioned that the challenge lies in balancing interest rate measures and spending cuts, stating that the numbers simply don't add up. He highlighted that finding a European path to fiscal consolidation is critical but noted that Romania's budget revenue is below 30% of GDP, making it hard to meet inflation targets.

The governor emphasized that fiscal consolidation is essential, though he believes increasing taxes—an often-suggested measure—would be politically unfeasible before the next elections. He also suggested that addressing tax evasion and reducing tax breaks could help increase revenue. However, Isărescu predicted that it would take four to seven years to reduce the deficit enough to seriously consider adopting the euro.