The third episode focuses on the matter of coordination between the monetary policy and the budget policy.
     The next episode is about the National Bank"s relations with commercial banks.
     *  "I didn"t attend the Prime minister"s birthday party"
     BURSA: The National Bank plans their intervention through the instruments called the monetary mass and the exchange rate, but our economy is still not restructured. Should the National Bank not caution the Ministry of Finance as to the problems in the real economy, such as the lack of efficiency in the subsidized sectors?
     M. Isărescu: The National Bank obviously adapts monetary policies to the actual status of the Romanian economy. This is the reason why we keep a high level of the minimum mandatory reserves. We cannot sit and wait for the reform of the real economy. We can only act through the instruments that we do have. Normally, if the economy were more functional, better structured and more stable and we did not have to keep the inflation rate low, we could only use a single instrument - the interest rate. But, since we cannot act this way, we have several instruments, including the minimum mandatory reserves.
     BURSA: Last year, you addressed the Government saying: "Stop the waste of money." Are you comfortable (this is your favorite expression) with the budget execution last year? How do you regard the draft budget for 2008?
     M. Isărescu: Both last year and a short while ago I referred to the bad habit of concentrating a great deal of the expenditures of an entire year in the last quarter and especially in December. But I would like to be clearly understood: I did not refer only to budget expenditures, but also to expenditures made in the general economy, including the private sector. For example, the liquidity amassed by the general population as well as by companies through salaries and bonuses increased by 50% compared to December 2006 and by 30% compared to April 2007, when we experienced another peak. As for the budget execution in 2007, the size of the deficit can be deemed reasonable, but the budget execution timeline, which came with a great concentration of expenditures at local authority level, which timeline the Minister of Finance has already presented, definitely caused problems for us in managing the balance.
     BURSA: How long before Romania is prepared to join the Eurozone?
     M. Isărescu: We have not changed our Eurozone accession target, which is 2012 - 2014. I still believe that adopting the euro could be an objective ambitious enough to mobilize the efforts of the entire Romanian society in the next seven years.
     BURSA: What do you expect the economic growth to be in the next few years?
     M. Isărescu: With the right economic policy mix, I believe Romania has all the ingredients for another seven years of economic growth. The National Bank"s projection is between 5 and 6%.
     BURSA: How do you see the ideal coordination between the Government"s policy and the National Bank"s policies?
     M. Isărescu: I see it mainly between the fiscal - budget policy and the monetary policy, for instance, through coordination that, in 2008, will take place on a weekly basis as far as treasury operations are concerned.
     We keep in mind a stricter liquidity control. It is obvious that, unlike the previous years, when the National Bank would leave money on the market and the interest rates would decrease to 1-2% and the leu appreciated notwithstanding, now, three days of a liquidity excess on the monetary market is enough to bear effects on the currency market.
     BURSA: Are you and the Prime minister going to organize a lobby group, as the press said, and go to EU countries to convince investors to come to Romania?
     M. Isărescu: The story about the lobby is not serious, to say the least. Especially considering that I did not attend Premier Tariceanu"s birthday party, as the press reported. Also, I have at least enough experience to know that it is not in the European capitals that the leu"s exchange rate is established.
     BURSA: How are the National Bank"s losses covered?
     M. Isărescu: The National Bank"s losses appeared during the period of major sterilization, when the inflation rate went down for good, especially after 2001. Those were operating losses, amplified by financial losses. The financial losses resulted from the appreciation of the leu, because our reserves are denominated in euros or dollars (the international reserves), whereas our obligations (sterilizing the liquidity excess through deposits) are denominated in lei. When the leu became stronger, the value of the currencies, calculated in lei, became smaller. According to the law, if the National Bank has losses in one financial year, the losses are covered from the profit of the following years.
     BURSA: The National Bank"s losses represent the default capitalization of the commercial banks?
     M. Isărescu: To a certain extent, the answer could be positive. But this is a complex topic that we could discuss separately.
     BURSA: The National Bank"s job, according to the law, is to maintain the inflation rate stable, the prices relatively stable, to ensure functional crediting for investments...
     M. Isărescu: It is not only the National Bank"s job but, according to applicable legislation, it is the job of all the central banks included in the system of European central banks. Price stability and low inflation are the best social assets a central bank can offer, because the consequence is not only trust, but also sustainable economic growth. Moreover, price stability and a low inflation rate safeguard the society from great economic injustice, such as the economic and social distortion that inflation can create. No tax is more unjust than the inflation because inflation affects especially those with low, fixed revenues.
     BURSA: A variable interest rate shifts the risk of inflation upon the entrepreneur, while ensuring the profit of the banking system. It practically hijacks the mission of the central bank...
     M. Isărescu: This is why we need to keep the inflation rate down, ensuring price stability and the confidence that it will maintain. When the inflation rate is down, the banks will change their tactic. Otherwise, if we impose it on them, we could even cause them to lose money. In turn, banks, too, depend upon inflation. This is why a bank must struggle for a low inflation rate and long-term price stability.
     BURSA: Have you noticed the effects that the increase in the monetary policy interest rate has borne upon the economy?
     M. Isărescu: Effects appear after 4-6 months. Depending on the situation, they reflect on both savings, generating an increase, and on lending, which also becomes more expensive.
     BURSA: What is the correlation between the exchange rate and the stock exchange developments?
     M. Isărescu: Capital exit from the stock exchange definitely played a part in the leu"s depreciation. Shares were sold and the money was exchanged from lei into euro. The movement was not from the exchange rate to the stock exchange, but from the stock exchange to the exchange rate.