Thursday, November 10, 2011

Euro Crisis Increases Need for Unity, Romanian Premier Boc Says

Nov. 10 (Bloomberg) -- The euro area’s sovereign-debt crisis, which has toppled political leaders and sent markets plunging, shows that Europe needs more unity, not less, to increase stability, Romanian Prime Minister Emil Boc said.

The Balkan country is sticking to its plan to adopt the euro in 2015, before richer eastern European nations such as the Czech Republic and Hungary, as the country sees the currency as a tool for stability, Boc said an interview in Bucharest yesterday.

The crisis raised concern that the 17-nation euro region may not stay intact and prompted some eastern European countries to delay plans to adopt the currency. Romania, the second- poorest European Union nation behind Bulgaria, wants to drop the leu as soon as it meets the terms to ensure stability and complete its integration with Europe, Boc said.

“It’s very important for Romania to be part of this area and the benefits will be also for the people,” said Boc, 45. “I think the lesson of this crisis is not less integration. The lesson of this crisis is more integration.”

The leu has lost 6 percent against the euro in the past six months, the seventh-worst performance among more than 20 emerging-market currencies tracked by Bloomberg. It closed at 4.3649 per euro yesterday.

Prime Ministers Fall

Prime ministers in euro-area members Greece, Italy and Slovakia have promised to step down as European leaders struggle to regain investors confidence amid a risk of default. Irish and Portuguese voters ousted their leaders this year, with Spain and Slovenia likely to follow suit next month, according to opinion polls.

The Czech Republic won’t consider joining the euro area for several years and has refrained from naming a target date, central bank Governor Miroslav Singer said on Oct. 17. Bulgarian is putting adoption on hold until European leaders have a plan to prevent future crises, Finance Minister Simeon Djankov said on July 25. Hungarian adoption is “unimaginable before 2020,” Premier Viktor Orban said in February.

Romania would be better off in the euro area and already meets some requirements, Boc said. Public debt was at 31.7 percent of gross domestic product last year, the fourth-lowest in the 27-nation EU. The budget deficit will be less than 3 percent of gross domestic product next year, Boc said. The inflation rate was 3.45 percent in September, the lowest since the fall of communism two decades ago.

‘Populist Electoral Measures’

Countries that have joined the EU since 2004 are required to adopt the euro when they qualify. Rules include keeping public debt below 60 percent of GDP, the budget deficit at less than 3 percent of GDP and inflation within 1.5 percentage points of the average 12-month inflation rate for the three EU nations with the slowest price growth.

Romania won’t raise spending before next year’s election and will freeze public wages and pensions to narrow the budget gap to 1.9 percent of GDP from an estimated 4.4 percent this year by Romanian accounting standards, Boc said.

“Why should we lose these advantages which we have right now and get back to the populist electoral measures and give up this country’s opportunity to be part of the euro zone?” Boc said. “Politicians were the ones who raised the level of their countries’ debt and politicians should be the ones to have the responsibility to take the decisions” to lower it.

Taking decisions on austerity measures to voters isn’t the answer, Boc said. Greek Prime Minister George Papandreou, who is giving up the reins of government to an interim Cabinet, unilaterally called for a referendum on a bailout plan hammered together by European leaders before backing down.

‘Not a Solution’

“This isn’t a solution because politicians were the ones who put in practice policies that raised the level of public debt,” said Boc, without naming any country.

The government, which signed a 5 billion-euro ($6.8 billion) two-year precautionary loan agreement with the International Monetary Fund and the EU in March, approved the outline of the 2012 budget on Nov. 7. The country has met all the targets agreed with international lenders and doesn’t plan to draw on the precautionary funds.

“Just in case things are going to get worse and worse and worse and worse in Europe, we may apply, but that’s not the case at the moment,” Boc said. “We are able to finance our public deficit now and we’re going to be able to finance next year’s gap. We just hope that things won’t get worse in Europe or in a country around us because that will inevitably affect us.”

--Editors: James M. Gomez, Balazs Penz

To contact the reporters on this story: Irina Savu in Bucharest at isavu@bloomberg.net; Andra Timu in Bucharest at atimu@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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