Romanian economy starts looking in the euro mirror

Romania, the last EU applicant country that has been watching the dollar for years, will start pegging its currency to the euro this spring. This will mark the beginning of a transition period towards adopting the single European currency.
How will the economy adjust to this change? How long will it take Romanians to start thinking in euros and not in dollars, and exactly how noticeable will this change be?
The National Bank of Romania Governor Mugur ISarescu will officially announce tomorrow that, as of March, the ROL benchmark rate will be calculated in relation to the euro, instead of the dollar.
Practically, the ROL exchange rate will be set directly, depending on the euro demand and supply on the forex market, while the ROL/USD exchange rate will come as an indirect result, depending on the dollar’s value in euros.
This does not mean that the bank will stop watching the dollar. The present benchmark rate of the Romanian currency is calculated by relating to an implicit basket (60% euro and 40% dollar), but the euro’s share in this basket will most likely go up to 75% this March, while the dollar will drop to 25%.
As a consequence of this change, people will start thinking in euros. Many companies are already doing that, and not only those operating with the single European currency.
At first sight, pegging the ROL to the euro does not seem much of a change. Still, the Romanian economy looks different if considered from the euro angle. Expressed in euros, the strong growth predicted for 2002 turns into a drop, since the single European currency has significantly consolidated its position against the dollar. Moreover, the 20% surge logged by the exports that fully profited from this trend, would only amount to 13% if calculated in euros. Last but not least, the net average salary was sensibly raised in dollars, but it has actually dropped in euros.
Official statistics will continue to use the dollar as benchmark, but the euro will also gain increasingly more ground in this field, especially when Romania will have to compare performances with the European Union members.
“These evolutions are specific to transition periods and they are accepted, especially when it’s about a change in the benchmark currency (from the dollar to the euro, i.e.). What is really important and must be truly appreciated is the European Union accession, which will undoubtedly impose this change,” says Dan Pascariu, president of HVB Romania.