mugur isarescu : 10 years since the launch of ziarul financiar speech by mr mugur isarescu, governor of the national bank of romania, on the occasion of 10 years since the launch of ziarul financiar, bucarest, 16 december 2008. * * * it is a great pleasure for me to be present at this special anniversary of ziarul financiar. the one - decade long presence of this prestigious economic daily newspaper overlapped a turbulent period in the history of romania. allow me to dwell for a while upon a series of events that occurred shortly after the release of the first issue of ziarul financiar. in the wake of the crises in russia and southeast asia, romania ’ s need for external financing was much more difficult to cover, while the then level of foreign currency reserves left the authorities with little room for manoeuvre. back then, the same as today, the rating agencies were extremely cautious in assessing romania ’ s country risk, and according to the headlines disseminated obsessively by international agencies for over a year, romania would have faced an imminent payment default. at that moment, the situation became even more complex due to the fact that the international monetary fund resorted to a new approach to indebted countries, called p. s. i. ( private sector involvement ) or “ burden sharing ”. this approach, which was tested in four countries including romania, proved to be a failure, and the imf later abandoned it. however, romania had to choose between adjusting its external deficit by its own means or take foreign borrowings under unacceptable conditions. romania adopted the former solution and subsequently signed an agreement with the imf. nevertheless, standard & poor ’ s, which had promptly downgraded romania ’ s rating to one notch above a level which would have indicated external debt payment default – which had not occurred in the case of romania – maintained this low rating for a long time, even after the crisis had been overcome band the country ’ s reserves had resumed growth. i reminisced this event that occurred ten years ago as i have been experiencing a particularly strong deja - vu feeling during recent months. first came the bleak assessments of some foreign analysts, followed by the failed speculative attack against the ron. the next stage of the game was the downgrading of the sovereign rating to below investment grade, romania being the only eu

mugur isarescu : hard landing unlikely for romania interview with dr mugur isarescu, governor of the national bank of romania, by mediafax news agency, bucharest, 8 september 2008. * * * mr. governor, foreign analysts have placed romania along with four other states – lithuania, latvia, estonia and bulgaria – in a group of countries heading to a hard landing. in fact the economies of estonia and latvia have contracted sharply, with growth plunging from levels of around 10 percent into negative territory ; inflation has reached two - digit levels and the external deficit exceeded 15 percent of gross domestic product. is it possible for romania to witness similar negative growth dynamics? is it fair to include romania in that group? reading what those foreign analysts said, i have hardly found a solid rationale that would justify romania's being placed within the hard - landing risk zone. on the contrary. turning now to comments, i will underline that there are some similarities among the countries in this group : gdp per capita is below the eu average, they all have registered high growth rates in the catching - up process. however, there are also fundamental differences, among which the most important in my view is the monetary policy mechanism. three of the four countries mentioned in the group have currency boards in place, and the fourth, i. e. latvia, has a mechanism close to a currency board. of course, currency board has its clear benefits. let us remember that, for example, in bulgaria the inflation rate had topped 1, 000 percent and the economy was in shambles. the introduction of the currency board was the solution which, at unavoidable social costs, brought the bulgarian economy afloat, with inflation falling steeply and staying close to eu levels for a good couple of years. but the currency board has its limits and constraints. the bnr has constantly opposed the adoption of such a system by romania given these limits and constraints. actually, a country adopting the currency board is deprived of monetary policy and thus the central bank becomes a sort of an institute for statistics. instead of a two - pedal vehicle – monetary and fiscal policies – the economy of currency board countries has only one pedal left, namely the fiscal policy. assuming the risk of an extended comment, let us look at what happened in the four countries and what happened in romania in the past few years in a rather unusual international context, with the euro appreciating simultaneously with the increases in farming products and energy prices.