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| FORECASTS ABOUT THE ROMANIAN CURRENCY, THE LEU (1.10.2007) |
| (2007-10-01) |
| Last updated: 2007-10-02 19:21 EET |
Until the 19th century, when outlaws- the corresponding Romanian Robin Hoods were robbing the rich, they threatened them, at gun point, with the famous “Your money or your life “. Of course, everybody would rather choose life, although money is neither to disregard. In a Sunday conference entitled “Money and life “, the governor of the National Bank of Romania, Mugur Isarescu gave us some advice on how to use our money in the best possible way and with the minimum risks. After the fall of the communist regime in December 1989, Romanians started to save their money in US dollars preferentially and then in euros, especially after the scary mid 90s, when the annual inflation rate had reached more than 300 per cent.
However, for a couple of years now, inflation has been declining gradually, approaching the rates of the western, developed countries. Therefore Mugur Isarescu recommended, that until 2014, when Romania, he said, might adopt the unique European currency, people should rather place their savings in Romanian lei not in foreign currency. Then maybe to correct his somehow evasive statement, he went on to say that 2014 as a deadline for Romania’s adopting the Euro is still maintained as a target, in spite of the recent comments of rating agencies, according to which 2015 would be a more realistic time limit.
As regards, credits in foreign currency, that Romanians contracted massively, the governor of the central bank was more nuanced. He said the Central Bank is not against contracting such credits in euros or other foreign currencies in case of mortgage loans covering 30 to 40 years; however, the bank is against contracting loans in euros for consumption by those who do not have salaries or other incomes in euros. Because he said, the evolution of the exchange rate is unpredictable. It’s worth recalling that on Friday, the exchange rate announced by the National Bank was of 3.35 lei for 1 euro, a similar level to that of January 2007, while the lowest level this year was reached on July 2nd when the rate was 3.11 lei for 1 euro.
The national currency depreciated as against the euro over the last weeks, a development due to several factors, such as the crisis on the international financial markets and Romania’s macro economic development. According to the official data, by the end of August, the value of the total non governmental deposits amounted to 32 billion euros, of which 70 per cent were in lei. However, the credits stood at 36 billion euro, loans in the national currency being higher than those in foreign currency. Finally, we do hope that governor Isarescu’s optimistic forecasts on the solidity of the Romanian leu will come true. Let us remember however, that a great economist, and Nobel prize winner, Milton Friedman predicted some years ago that the euro is dying.
(Mihai Radulescu)
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2025-04-03
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