Isarescu: Euro Area Not Cozy for Economies with Lagging Competitiveness

“Practical experience with euro adoption so far has proved that real convergence is also critical for success. Even in the absence of a clear definition and a consensus on a numerical benchmark, it became clear that a high-enough level of real convergence is a prerequisite for minimizing the costs associated with losing monetary policy independence after euro adoption,” Isarescu said.

He said clear prospects for EU entry favored Romania’s real convergence before 2007. Afterwards, actual membership in the EU “convergence club” has fueled the catching-up process and the obvious next stage is joining the euro area.

However, Isarescu argued, a successful adoption of the single currency, however, requires optimal timing. Unlike the EU, the euro area is not a “convergence club”, as its current members did not necessarily increase their convergence level after adopting the euro. He added the consistency and sustainability of real convergence are at least as important as its level.

“At the end of the day, forcing convergence is as harmful as postponing it,” Isarescu said.