CONVERGENCE PROGRAM AND MACROECONOMIC POLICIES FOR ROMANIA JOINING THE EURO-ZONE
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Authors:
• Magdalena RĂDULESCU, Afiliation: University of Piteşti
• Carmen SECARĂ, Afiliation: University of Piteşti -
Keywords: The budgetary strategy, external deficit, macroeconomic stability, euro-zone, macroeconomic policies for Romania.
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Abstract:
Romania submitted a new update of its convergence program on 5 December 2007, covering the period 2007-2010. The budgetary strategy outlined in the program is not in line with the prudent fiscal policy necessary to contain the growing external deficit and inflationary pressures which put the convergence process at risk.
In view of the Commission assessment and the need to ensure sustainable convergence, Romania is invited to: (i) significantly strengthen the pace of adjustment towards the MTO by aiming for substantially more demanding budgetary targets in 2008 and subsequent years in order to contain the risk of an excessive deficit, foster macroeconomic stability and rein in widening external imbalances and address the risks to the long-term sustainability of public finances; (ii) restrain the envisaged high increase in public spending, review its expenditure composition so as to enhance the economy’s growth potential and improve the planning and execution of expenditure within a binding medium-term framework; (iii) adopt policies to contain inflationary pressures, complementing the recommended tighter fiscal stance, with appropriate public wage policy and further structural reforms.