Friday, November 23, 2007

Romania leu equilibrium level 3.4 per euro-finmin

BUCHAREST, Nov 23 (Reuters) - The Romanian leu has fallen beyond its "equilibrium" level of 3.4 lei per euro in recent days in response to global market turbulence and earlier unsustainable gains, Finance Minister Varujan Vosganian said on Friday.

Vosganian also said the weakening of the leu will help to consolidate export competitiveness and discourage some imports.

"The equilibrium level of the national currency is 3.4 per euro, if we take into account economic competitiveness, trade and productivity in Romania," Vosganian said in a statement.

One of Europe's best performing currencies in the first half of 2007, the leu has lost some 16 percent against the euro since a five-year high in the summer due to worries over sustainability of the economy and a yawning external shortfall.

On Friday it hit a nearly 2-year low of 3.6900 per euro before recouping some ground in what dealers said was covert central bank intervention. The bank declined to comment.

Vosganian said Romania's yawning external shortfall, which has fanned much of the foreign investor concerns that powered the leu decline, leaves the economy vulnerable to global shocks.
But it is unavoidable as the European Union newcomer races to catch up with its western neighbours.

The central bank and international observers have repeatedly urged the government to tighten fiscal and wage policies to boost economic competitiveness and to curb the external gap.

"Certainly, a more unfavourable external economic climate correlated with the existence of a high current account deficit pushes us to promote prudent wage policy in the public sector, including the minimum salary hike policy," Vosganian said.

The leu showed no reaction to Vosganian's comments and dealers said the market sees more room for leu weakening.

At 1330 GMT the leu was quoted at 3.5960. (Reporting by Bucharest newsroom; Editing by Ron Askew)

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