Monday, March 2, 2009

Romania sticks to 2014 euro entry goal-report

BUCHAREST, March 2 (Reuters) - Romania's centre-left government has kept its 2014 deadline for joining the euro in a convergence report sent to Brussels, hoping it will give it enough time to enforce much needed reforms.

The report, approved by the government last week, says Romania can join the Exchange Rate Mechanism 2, a two-year period during which it must conform to monetary targets to gain full-fledged membership in the euro zone, no sooner than 2012.

The world crisis has made many European Union countries more eager to join the single currency, now shared by 16 nations, because of the exchange rate stability it offers.

Last week, Hungary called for shortening the two-year ERM-2 rule to bring the EU's eastern members under the euro shield more quickly to safeguard them from the crisis, but EU leaders have said changing euro zone entry rules now would be a mistake.

'Given the need to implement additional structural reforms that will raise the flexibility of the Romanian economy and its capacity to handle shocks, it is considered that the national currency will not be able to enter ERM-2 earlier than 2012,' Romania's convergence report for 2008-2011 said.

'This consideration also takes into account the necessity to fulfil conditions that would allow limiting ERM-2 participation to the two mandatory years.'

Many economists see Romania as among the most vulnerable in the EU because of its vast current account deficit, which means many foreign investors have long fled its markets, leaving the leu trading near record lows to the euro.

The report sees the consolidated budget deficit at just under 1 percent of gross domestic product in 2012, sharply down from last year's shortfall of over 5 percent.

It sees foreign direct investment falling to 4.7 billion euros in 2009, down by nearly a half from last year's inflows.

The Maastricht Treaty's targets on deficits, exchange rates, and inflation are the main headaches for those in the bloc's ex-communist arm seeking to join the euro as they strive to converge with western European economies.

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