Mugur Isărescu: Is European financial integration stalling?
Opening remarks by Mr Mugur Isărescu, Governor of the National Bank of Romania, at the
EUROFI High Level Seminar, Bucharest, 3 April 2019.
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Honourable guests,
Ladies and gentlemen,
Please allow me to welcome you here, at the Royal Palace. We are honoured to host here, in
Bucharest, so many outstanding guests at such a landmark event. It is a perfect occasion to
exchange views and liaise with representatives of public and banking authorities and of the
financial industry across the European Union.
During the talks over the past few days, and particularly on the occasion of the EUROFI
Highlevel Seminar, I heard strong voices from the banking community which were rather pessimistic
about the prospects of further banking and financial integration. We, at the Eastern frontier of the
EU, are compelled to take a more positive outlook regarding the future of our continent.
Speaking about the difficulties of the financial sector in Europe, it is important to point out the
positive aspects and evolutions as well. Certainly, favourable developments have taken place all
over Europe and we should acknowledge them and move forward with more confidence.
Specifically, financial fragmentation has been mitigated as a result of broad-based non-standard
policy measures taken by the ECB. Looking ahead, completing the Economic and Monetary
Union, which involves risk-sharing tools and risk-reduction efforts, is the way forward to address
financial fragmentation.
In the case of Romania, I could say we have already taken important steps towards joining the
banking union: no public funds were resorted to after the crisis outbreak to support the banking
system and now its liquidity and solvency ratios are well above the prudential thresholds. While
the NPL ratio has declined from a peak of around 22 percent in 2014 to 4.8 percent in February
2019, profitability returned and credit growth has started to pick up.
Indeed, we have to be aware that there is a fragmented banking landscape in Europe and a
danger of further fragmentation, as well as other threats facing the financial system. Yet,
whenever I see a problem, I say to myself that it is our job to address them. This means we
should stand ready to deal with all the challenges that need to be overcome. Whenever things
seem to look bad in the EU, I remember the words of Jean Monnet, one of the founding fathers of
the EU project: "Europe will be forged in crises and will be the sum of the solutions adopted for
those crises". Time has proved him right and I trust his words will always remain true.
Besides, we need to value that Europe is united in diversity. Diversity is an outstanding asset for
Europe, and it should not be regarded as a permanent liability. In trying times it is essential to
capitalise on what unites us. And many things already created bridges between us well before
the creation of the EU. We have always been diverse, yet connected.
I recall how amazed I was when, during my first visit to Portugal, two decades ago, I realised
that in two countries located at the two ends of the European Union - Portugal and Romania
(which were also the extremities of the Roman Empire) - a saying about the bare necessities of
life sounds almost the same in the two languages. The sentence that really shocked me was the
following: "In this house with a litre of wine and a kilo of beef, one cannot be dying of hunger or
thirst".
This is not an exception, though. In Spanish and Italian, a lot of words are close to the
Romanian ones. A proof in this respect is that many Romanians have chosen to work or to live in
those countries as they find it easy to adapt to the local culture and language. It's like a home
away from home.
In the very heart of Rome, anybody can see Trajan's Column, the monument commissioned by
the Roman Emperor Trajan, born in Spain. It was completed in the year 113 AD and features a
remarkable spiralling, sculpted bas-relief depicting the wars between the Dacians and the
Romans. Trajan solved a budgetary crisis by crossing the Danube and entering Transylvania -
the land beyond the forests in Latin (trans silvae) - to seize the gold of the Dacians. I wouldn't
say this would qualify as model behaviour nowadays. However, a good thing came out of this: the
Romanian people is virtually the result of a fiscal and monetary decision. This explains the
linguistic and historical similarities that stem from our common Latin roots.
Nevertheless, I have discovered similar words with other languages as well. For example, in
Slovenian and Croatian, a regional ruler used to be called a ban, which was also the case in
parts of Romania. Since these rulers had the right to mint coins, money was and still is called
bani in Romanian.
Looking now at the Baltic countries, maybe it is no coincidence that they and Romania have
folk songs called doina and daina, respectively, included in the intangible UNESCO heritage.
Romania is a mostly Greek-Orthodox Christian country, the same as and
Greece, Cyprus
Bulgaria. By the way, let me congratulate our Bulgarian friends on the 140th anniversary of the
establishment of their central bank!
The legal and political systems of modern Romania were inspired by the French (I limit myself to
just mentioning the Napoleonic Code). This is also the case with modern Romanian culture:
prominent Romanian artists such as Constantin Brâncuși and George Enescu achieved
international recognition in Paris.
Coming back to the legal system, the first Constitution of modern Romania in 1866 took after the
Belgian one. In addition, the NBR was founded based on the constitutive principles of the Belgian
central bank. The report to Parliament underlying the establishment of the National Bank of
Romania in 1880 saw Belgium as - and I quote - "a small but happy country", which developed
rapidly with the assistance of its national bank, rendering it a suitable model for the institutional
set-up of Romania. As regards the neighbouring the name of Romania's domestic
Netherlands,
currency - the leu (meaning lion) - comes from a Dutch silver coin very popular in this part of
Europe in the 17th and 18th centuries: the lion-thaler.
Crossing the channel, our most beloved Queen Marie was the granddaughter of Queen Victoria
of the United Kingdom. It was her son, King Charles II, who reconstructed this Royal Palace.
Moving west again, let us not forget that the Irish writer Bram Stoker took Vlad the Impaler as an
inspiration for his famous novel Dracula, creating a myth that Romania is frequently associated
with.
Returning to Romania's monarchs, under whose reign the country saw a remarkable
modernisation, they belonged to the House of Hohenzollern-Sigmaringen. As for the
German
economic ties with Germany, I would mention the fact that the name of the street where the Old
Palace of the National Bank of Romania is located, i.e. Lipscani, derives from Leipzig (Lipsca in
Romanian), the place where long ago local merchants used to bring their goods from. Going
further back in time, the Saxons (originating also in the Luxembourg area) settled in
Transylvania, which they called Siebenbürgen (seven fortified towns). One of these towns is
Sibiu or Hermannstadt, where Romania's current President was born and where the Informal
Summit of Heads of State or Government of the European Union will take place in May.
On a lighter note, children in Romania enjoy playing with Lego, Denmark's registered trademark.
As regards Finland, Mika Waltari's books have consistently been bestsellers in Romanian
bookshops and Angry Birds ranks as one of the most popular mobile apps among young
Romanians. As surprising as it may seem, there is a link with Sweden as well. In the early 18th
century, King Charles XII, after the battle of Poltava, moved southwards to Romanian lands,
turned into an entrepreneur and built the Colțea Tower, the tallest building in Bucharest at the
time, which stood very close to the current headquarters of the National Bank of Romania.
The importance of and of its capital city, Vienna, for Romania is unquestionable. It should
Austria
be pointed out that the Austrian influence is not confined to Transylvania. To give you just one
example of a Romanian landmark figure who refined his personality in Vienna, our national poet
Mihai Eminescu studied a few years in this prestigious academic hub. I cannot conclude without
mentioning that Romania is inhabited by diverse minorities belonging to nations in the region,
namely, Hungarians, Czechs, Poles, Slovaks, with whom we have so many things in common
that it would take me too long to talk about.
And if I add that beautiful and sunny Malta became an increasingly popular holiday destination
among Romanian tourists, I think I have touched on each of the 27 current EU Member States
besides Romania.
Let me conclude by saying that Romania is fully committed to the united Europe and to European
values, but this is nothing new and is also the case with the other Member States. The need for
unity of Europe is better perceived from its Eastern border, on the Black Sea coast, as we are so
close to Crimea. And I want to make a call for unity in Europe and to stress that it is us who,
through our decisions, shape its future. As Abraham Lincoln once said, "The best way to predict
your future is to create it". With this in mind, allow me to make a toast for a strong and united
Europe.
Thank you for your attention!