mugur isarescu : romania, the eu and the euro area opening speech by mr mugur isarescu, governor of the national bank of romania, at the " the future of the euro area and its enlargement " conference, bucharest, 17 october 2017. * * * professor sapir, ladies and gentlemen, the national bank of romania ’ s board and i are honored to extend a warm welcome to all of our distinguished guests attending the conference this morning. allow me to wholeheartedly welcome our speaker, professor andre sapir. it has become quite a tradition here, at the national bank of romania to invite well - renowned lecturers to address the audience on important topics of the day. this morning, we are privileged to listen to prof. sapir ’ s lecture on the future of the euro area and its enlargement. please, allow me to briefly introduce to you prof. andre sapir. he is a well - known name among european economists. he is an active member and senior fellow of bruegel institute in brussels. prof. sapir has a rich academic career and important contributions in the field and study of economics. i wish to express my appreciation for his diligent work dedicated to the strengthening of the conceptual underpinnings of the european union and the euro area ’ s economic and financial systems. for those of you who are not familiar with bruegel institute in brussels let me pinpoint a few facts. bruegel was set up in 2005 and has emerged as an important independent and non - doctrinal european think tank focused on economics. according to their mission statement, it aims to improve the quality of economic policy with open and fact - based research, analysis and debate, targeted at improving the quality of economic policy. at the same time, we are proud that the national bank of romania has been a member of bruegel think tank since 2016. returning to our guest speaker : andre sapir is a professor at the universite libre de bruxelles ( ulb ), he also teaches “ international economics and european integration ” at the solvay brussels school of economics and management. prof. sapir has a phd from johns hopkins university in baltimore, where he studied with the famous trade economist bela balassa. he was elected member of the academia europaea and of the royal academy of belgium for science and the arts. he was a visiting fellow at the international monetary fund, the world bank and the world trade organization.

had to face amid a flood of capital. third, the exit from these measures has not been easy. while the post - crisis environment provided an opportunity to gradually normalize the reserve requirements levels ( thus supplying an additional counter - cyclical tool ), they remain high by european standards. however, despite all these obstacles, i think the resort to unconventional policy instruments had 3 major advantages. bis central bankers ’ speeches i would name first the fact that they certainly managed to limit the size of the disequilibria. i have no doubt that the outcome would have been a lot worse had we been complacent and relied entirely on the self - corrective behaviour of markets. i will give here just one example : forex interventions limited significantly exchange rate fluctuations, with the appreciation during the massive capital inflows and the depreciation after the crisis outbreak not exceeding 25 percent. in the absence of such interventions, the magnitude of fluctuations could have been as high as 40 to 60 percent. the foreign exchange purchases made before the crisis not only limited the unsustainable leu appreciation and the associated loss of export competitiveness, but supplied the ammunition for subsequent interventions to cushion the currency depreciation once the outbreak of the crisis changed the direction of the flows. and i believe this is the second benefit of the approach. last, but not least, thinking outside the box allowed us to avoid incurring losses after 2006. while profitability should not be a concern for a central bank, this development proved very fortunate from the perspective of the political economy. on the one hand, it allowed the nbr to preserve its independence in relation to the government by not generating quasi - fiscal deficits in a period with an increasing fiscal imbalance. on the other hand, it helped preserve institutional credibility in relation to the banks subject to nbr supervision, which were closely monitored in terms of capital adequacy. moreover, through our actions we wanted to avoid rewarding the speculative behaviour several commercial banks were engaged in ( i. e. carry trade ) and instead incentivize them to focus on their core activities. bis central bankers ’ speeches