mugur isarescu : convergence towards euro enlargement opening speech by mr mugur isarescu, governor of the national bank of romania, at the european league for economic cooperation ’ s ( elec ) monetary conference, national bank of romania, bucharest, 4 june 2019. * * * as prepared for delivery your excellency baron snoy, dear members of elec, ladies and gentlemen, it is a pleasure for me to open this elec conference, which is the 9th taking place in romania and hosted by the national bank. it all started in 2011 with “ renewable energy and transport infrastructure in the black sea region ”. one year later we talked about “ eastern europe and the emu : finding the optimal path for introducing the euro ”. in 2013, there was the 3rd edition of the danube financing dialogue. the following year the dialogue focused on “ agriculture and environmental protection in central and eastern europe and their contribution to growth and employment ”. in 2016, we discussed “ how the eu can generate a virtuous circle in the black sea region – the case of food and energy security ” and in 2017 we debated on “ the challenges for eastern europe in the present turmoil in the eu and emu – persevering in the reforms and investing for the future ”. the topic of the last year, “ convergence towards euro enlargement ”, is approached again today, which is more than welcome, given the importance attached to this issue. the debate on convergence and euro adoption is broad - based and complex. the topic has been addressed in yesterday ’ s dinner speech by academician daniel daianu. you will discuss it extensively today in two panels, moderated by wim boonstra and servaas deroose. i am looking forward to listening to your views on the matter. however, i would briefly refer to three ideas. first of all, the nbr ’ s approach to euro adoption is a balanced one. on the one hand, we are fully aware that a higher degree of real convergence is needed – at least 70 – 75 percent of the eurozone average in terms of gdp per capita at ppp. otherwise, we would be insufficiently developed and, therefore, vulnerable to asymmetric shocks and unable to synchronise our business cycle with that of other euro area economies. on the other hand, however, a high enough level does not mean that we are so ambitious as to aim for a convergence level of 90 % of

enough for a single currency? for example, shouldn ’ t its mandate include the role of lender of last resort? the role of lender of last resort is a traditional role for central banks and we fulfil it. this contributes to financial stability. the problem is that some economists and some politicians say that the central bank should stand ready to finance government deficits. this is incompatible with the mandate of a price stability - oriented central bank. this is why in the treaty there are clauses prohibiting monetary financing and guaranteeing central bank independence. in a monetary union, it is however important to have institutions that can support member states confronted with serious financial difficulties. if you don ’ t have that you face the permanent risk of instability. this is one of the lessons of the crisis and was the reason for creating the european stability mechanism ( esm ), a permanent crisis management institution. for the esm to properly play its role, shouldn ’ t it become a european institution, with joint decision - making at the “ community ” level? i mean, a federal institution instead of the present intergovernmental institution? it is essential for successful crisis management to have an efficient decision - making procedure, because crisis management requires effective and quick action. crises risk being exacerbated by decision rules, such as unanimity, that prevent timely decisions from being taken and cast doubt on the effectiveness of crisis management institutions. decision - making procedures of a federal nature are in this sense preferable to intergovernmental ones that often come with veto rights. in economic and monetary union ( emu ), emergency funding is basically provided subject to conditionality on economic and fiscal policies. it is not a transfer ; rather, financial support is granted to smooth the adjustment process. is this the correct way to deal with potential crises? i think so. it is a responsibility of member states to consider their economic policies as a matter of common interest and ensure sustainable public finances. adverse economic developments can put a member state under financial stress and bring about a need for reform. ill - designed policies, fiscal profligacy for example, can also eventually lead a country into crisis. it is a collective responsibility of member states to ensure a smooth functioning of emu and this is why they agreed that a crisis management framework was needed. the emu member states have lost the traditional adjustment tools to deal with shocks – 2 / 5 bis central bankers'speeches such as the devaluation of their currency – whilst emu