mugur isarescu : challenges to economic growth in the european union – reforms for the future of europe opening speech by mr mugur isarescu, governor of the national bank of romania, at the conference “ challenges to economic growth in the european union. reforms for the future of europe ”, organized by the national bank of romania and the british embassy, bucharest, 29 september 2011. * * * ladies and gentlemen, distinguished audience, it is with great pleasure that i welcome you all here, at the national bank of romania, which tonight hosts a conference on a particularly interesting and up - to - the - minute topic : “ challenges to economic growth in the european union. reforms for the future of europe ”, an event benefiting from the extraordinary support of the embassy of the united kingdom in bucharest. i am honoured to salute very dearly mr. vincent cable, the british minister for business and innovation. i also wish to extend my greetings to mr. martin harris, the british ambassador to bucharest, and to the other diplomats. ladies and gentlemen, sustainable economic growth of both romania and the entire european union hinges decisively on economic policy consistency. moreover, the global economic and financial crisis has proved to us yet again that there is no valid substitute for consistent economic policies. the correction of economic policy errors is, for all countries in the world, painful, often difficult to comprehend by the public at large and inherently delayed, but it is absolutely necessary. i will now tell you from my own expertise that denying the need for adjustment is not a viable option. it is nevertheless true that ensuring fiscal sustainability without jeopardising the prospects for economic growth is a major challenge to decision - makers. no doubt the recent heated debates within the european union and heightening fears about the euro and the euro area could not make things easier. economic and financial conditions have tightened worldwide, but we, here in romania, have already grown accustomed that our european dream has to pass exceedingly rigorous and tough exams. i realised a long time ago that the european union would not bring forth roses on our way there. even countries with robust economies, the old eu member states, face major difficulties to integrate into the monetary and fiscal mechanisms, and some are even compelled to seek international support. however, the great benefits that the establishment and enlargement of the european union has brought about should neither be forgotten, nor denied. the european union has made europe a robust economy at global level and, just to quote romano

the key interest rate by 1 percentage point to 5. 25 percent, contributed further to increasing the banking sector ’ s opportunities to provide liquidity at a lower cost. economic development at home during 2010 will be supported by a more favourable global economic situation, which will provide a better setting for foreign investments and will better boost the demand for the albanian exports. in the domestic economy, the developments noted during 2009 as regards the increase of budget deficit and domestic debt, the lower banking sector lending, and a more rigid situation in production and consumption, need to be addressed through quick and decisive actions and in the course of an adequate time span. it is therefore indispensable to keep the budget deficit for 2010 under check and at levels that guarantee the observance of the targets outlined in the medium - term macroeconomic framework as regards budget deficit and public debt level. the consolidation of public finances, reflected through the restoring of budget deficit ’ s downward trend is of great importance in terms of the decline of its financing cost. it will also lead to improved liquidity situation in the financial market, releasing more financial resources into the system, the use of which will boost the private sector lending. the entrepreneurship and households need to assess the expected outlook of the albanian economy for 2010 realistically. this period should be used by the entrepreneurship to control the costs and take the necessary measures for restructuring the activity in order to enhance the efficiency. in general, these actions of the fiscal authority and the private economic agents are in the short - term necessary to provide a more adequate environment that will enable the undertaking of other measures for increasing the contribution of production to economic growth and increasing the domestic savings in a longer - term. during 2010, the banking sector will expand its activity at higher rates than in 2009, however less than the average long - term annual growth. the expansion of activity will likely be more rapid in the second half of the year. as regards the financial resources, the banking sector will benefit from the stable growth of public deposits. the growth of all deposits will continue to be supported by the more stable savers ’ flows, the positive real return and the expectation for greater exchange rate stability. the growth of foreign currency deposits will reflect the seasonal performance, hence being higher during summer. the maturity structure of deposits is not expected to display any significant changes from the present situation ; however the average maturity term of deposits is expected to be higher in 2010 relative to 2009. the extent of this change will be determined by the performance of