Goodbye, lion? The unexpected solution of a top economist for Romania to switch to the euro without waiting for politicians
Professor Bogdan Glăvan explains, in an analysis, how Romania could switch to the euro currency as quickly as possible and thus solve a series of economic problems. For now, however, politicians lack political will and ingenuity.
Romania can switch to the euro despite the figures that do not favor it. PHOTO: Pexels
University professor, expert in macro and microeconomics, development economics and monetary economics and director of the “Murray Rothbard” Romanian-American Center for Political Economy and Business, Bogdan Glăvan explains how Romania could switch to the euro faster and what it would have to do to avoid a brutal transition.
Professor Bogdan Glăvan's message is a cold shower for a political class used to postponing major decisions. The switch to the euro is not just a figure in a convergence table, but an exit ticket from a vulnerable economic system. It remains to be seen if the leaders from Bucharest will have the courage to “jump into the boat” or if they will prefer to let us continue rowing in a boat that is taking on water.
Strict conditions, easy solutions
Although the Maastricht Treaty established a series of conditions for the convergence to the single European currency, i.e. the transition of the EU member states to the euro, Romania could overcome certain constraints, if we had more proactive and sufficiently determined politicians.
Basically, for a state to be able to adopt the euro, the conditions are price stability (low inflation), solid public finances, exchange rate stability through the MCS II mechanism and long-term interest rate convergence. At the end, the candidate states are evaluated by the European Commission and the ECB.
“Joining the euro can be done at any time. This is because the euro is a political project, and the possible accession of Romania is also a political project. In a recent discussion with a European diplomat, who asked me what I thought about the euro, I confessed to him that I have always supported Romania's accession to the euro, not for scientific reasons, but for political reasons“, says the expert.
Even if, he adds, it would not be mandatory to switch to the euro currency in order to achieve prosperity, in the conditions of a state like Romania, where politicians do not adopt the healthiest economic policies, the European currency would be of great help.
“From a scientific perspective, it would be best for us to have a currency that is separate from the state, independent from politics, whose production cannot be politicized, maneuvered, manipulated. In addition, you don't have to be part of the euro zone to do well, to carry out healthy policies. Adopting the euro is not a necessary condition for ensuring prosperity, see Switzerland. But when we refer to the specific case of Romania, to its flawed institutions, to the majority of its politicians, to the general level of education, to the mentality of many citizens, then it is clear that the adoption of better institutions from the West is beneficial. From a political perspective, therefore, if we have an opportunity to exchange a rickety boat for a boat (even if it is not a solid ship), then we must exploit the opportunity and jump into the boat”adds the economist.
I've already nailed it
Bogdan Glăvan also recalls that Romania was very close to meeting all the theoretical conditions to switch to the euro, but hesitated and lost an important train.
“We had this opportunity, but Romania's elites kicked them. That was enough. This was their level. Such a society, such elites. Those real elites died in the camps of communism, so we were left with what we were left with. This is the curse of Romania, the legacy of communism. We had this opportunity when we ticked off the famous convergence criteria“, points out Glăvan.
Even so, all is not lost. The current political class could decide, if they had enough political will, to adopt the euro, despite all the current problems.
“Convergence criteria are not scientific pillars that justify or not a monetary union. They are only political conditions, let's call them prudential, by which some matching, homogenization of budgetary and monetary policies and performances is attempted. But they in themselves neither support the creation of a monetary union nor refute it. In the end the decision must be political, because the euro itself is a political project and that is how it was conceived from the beginning. In other words: just as all kinds of armies can enter NATO, which may or may not use bullets of the same caliber, which may or may not have the same promotion criteria in the military and the same percentage of generals, so all kinds of countries can enter the Eurozone. It is not only what these countries have done before, but also what they will do nextă”, explains Bogdan Glăvan.
The Bulgarians took it from us before
He also gives the example of Bulgaria, a country that took a series of essential decisions, although it did not meet the necessary conditions.
“When in the late 1990s Bulgaria adopted the institution called the Monetary Council, was it ready for it or not? Did it meet the criteria? Which criteria?! In reality, Bulgaria ended up adopting the Monetary Council, that is, fixing the exchange rate by law and refraining from the politicization of money only because it had reached the knife to the bone. And then it adopted a foreign institution, which it was not at all used to, but which served it quite well, because it kind of put handcuffs of extreme demagoguery, it forced governments not to jump the horse with the deficits. And it worked. So we can adopt the euro tomorrow.”points out Bogdan Glăvan.
In other words, Romania, if it wanted, could adopt the European currency at any price.
“Okay, we could adopt the euro without asking the West's permission (it's called Euroization, it's spontaneous), but we don't do such a thing, it wouldn't be civilized, we're just part of the European family and until the end we live on the West's money”, concludes Bogdan Glăvan.
