Romania pins hopes on new currency
Knocking off four zeros from its bank notes, Romania’s new leu will not spark inflation and will lead to the currency becoming convertible in the next two years, according to the National Bank governor.
The introduction of the new currency, the leu, will take 22 months, it was announced by Mugur Isarescu on Sunday.
On Tuesday, a law obliging retailers to advertise prices in the old and new currency will begin.
On 1 July, the new “heavy” leu will physically come into circulation and both currencies will be used concurrently until 1 January 2007, when the old leu will become obsolete.
The date coincides with the day when Romania hopes to join the European Union.
Isarescu said the developments with Romania’s national currency, which means “lion” in Romanian, would see an end to rampant inflation and mark a period of price stability.
Inflation was 9% last year, the lowest it has been since communism ended in 1989.
Transition to euro
Isarescu said the new leu also would simplify the transition to the euro expected from 2012 to 2014. He also denied there would be inflation caused by vendors rounding up prices.
“The leu will become totally convertible in the next two years and it would be absurd for a convertible currency to have so many zeros,” he said.
|
“The leu will become totally convertible in the next two years” Mugur Isarescu, |
Economists say that Romania’s average monthly salary will be reduced from current level of 6.875 million to 687.5 leu, which in terms of numbers is at about the same level as it was in 1957.
The highest bill will be 500 leu, which is worth about 130 euros or just over $170. The bills for the new leu will be the same size as the euro to ease the transition to the euro.
Single-digit inflation
There will be 100 bani to one leu, as it was before 1989, followed by a period of high inflation. Last year’s inflation was the first single-digit inflation since 1989.
The central bank has introduced the measure to advertise in both currencies to prevent inflation, state news agency Rompres reported.
Retailers and other vendors who fail to respect the new double-price measure will be punished by fines of up to 30 million lei (old leu), worth $1100.
The central bank decided to introduce the heavy leu in 2001, when inflation began to gradually subside.