and the requirements of competition on an increasingly demanding international market. at first glance, there are few connections between the changeover to the euro and labour market flexibility. in fact, the connection is strong, even essential, i would say. before proceeding to a more in - depth analysis of the topic, allow me to clarify an issue that was subject to previous public debate. the national bank of romania has nothing against wage hikes. quite the opposite, we might say. the romanian economy could only benefit from an increasingly fast rise in wages, in order to enjoy a higher living standard, surmount the historical disparities that separate us from the western economies and put a stop to labour force migration. nonetheless, we must analyse with a clear mind and assert bluntly that a mismatch between pay rises and labour productivity gains is unsustainable. wage hikes in excess of labour productivity are not likely to bring about a higher living standard, but on the contrary, they may lead to a lower living standard, given that, sooner or later, the disparity between the two fundamental indicators will entail a fast - paced rise in prices, the weakening of domestic currency, external indebtedness. all this has a negative influence on investment and delays the achievement of real convergence of the economy rather than speed it up. over the past few years, annual productivity gains came in at impressive 10 % and beyond each year. multiple factors stood behind this performance, such as the initial low level, the significant decline – even if not always illustrated by statistical indicators – in the population working in agriculture and, highly important, the strong increase in investment. however, this increase was exceeded by far by the wage hikes, which explains the sizeable widening of the external deficit, as well as the increasing inflationary pressures over the past year and a half. so, we embark upon this path, carrying a serious burden on our shoulders. i wonder what will happen the moment the increase in labour productivity slows down. such a trend is closely connected to economic rigidities, the infrastructure - related issues, the slowdown in economic restructuring. in view of all these issues, the nbr does not embrace the idea of slowing down wage increases, but rather it advocates the creation of conditions likely to render this hike sustainable and maintain its actual nature. after all, from a nominal point of view, there is no limit to increasing wages. however, the market will admit only pay rises matched by labour

mugur isarescu : romania - post - crisis performance and current challenges speech by mr mugur isarescu, governor of the national bank of romania, at the amcham ceo forum, bucharest, 31 may 2019. * * * accompanying slides of the speech. ladies and gentlemen, i am honoured to address, this morning, such a distinguished audience. i have gladly accepted your kind invitation, for amcham romania has become, during the last 25 years, an important voice of the business community, speaking on behalf of many us - based, international and local companies that are doing business in romania, and promoting its members ’ best practices. 1. growth, convergence and sustainability i am aware that, when talking to business community representatives, more than to other categories of public, the topic of economic growth, with all its determinants, trends, uncertainties and tensions, is of great interest. indeed, romania ’ s post - crisis performance has been impressive : average annual growth rate of 4. 6 percent in the last five years. romania ’ s economy is constantly growing, yet some tensions surround the macroeconomic equilibria. the advance seen in recent years was primarily driven by consumption that benefited from a loose fiscal and income policy, coupled with a tight labour market profile, which additionally spurred wage growth. the pass - through of consumption to output was nevertheless limited by the weak competitiveness position of some local industries on the domestic market, so that high consumption rates were accompanied by strong imports. thus, in spite of high export growth rates, net external demand has not made a positive contribution to the gdp advance since 2013. instead, this caused a significant current account deficit widening. therefore, in order to preserve the gdp growth trend, economic policies should focus on its sustainability. in the quest for supporting potential growth and increasing the resilience of the economy, there is no substitute for a coherent mix of macroeconomic policies and structural reforms. a durable economic growth is extremely important also from the perspective of euro adoption, as it would lead to progress in convergence, which will put us on the right track for achieving the goal of joining the eurozone. in order to stay on course, economic growth and convergence must advance in line with economic fundamentals. otherwise, the gains, as spectacular as they might be, could be jeopardised by abrupt setbacks. at the end of the day, forcing convergence or postponing convergence is equally harmful. i had the honour to be one