Leu depreciation only beneficial backed by strong policy

“Excessive depreciation of local currencies can lead to destabilizing movements in the economy, which must be avoided,” Isarescu said during a press conference. Furthermore, BNR’s Governor indicated that the depreciation of the leu, in the midst of a relaxed fiscal policy, is not helping the adjustment of the current account deficit and is, moreover, boosting inflation. “Unless the depreciation is backed by a strong fiscal policy, including a reasonable approach in terms of the wage policy, (...) this widens the recession and promotes major imbalances,” Isarescu added. On the other hand, Isarescu said that he is expecting mother banks of local lenders to renew financing lines for the latter, based on some studies carried out by BNR on the issue. The Governor said the studies were made due to negative reports on Romania. Reuters recently reported that Romania is the most vulnerable state in Central and Eastern Europe. Isarescu also spoke about financial support packages adopted by several EU countries, which will have “a sort of delayed” impact on the region. Several euro-zone countries, including Austria and Greece, with significant banking exposure in Eastern Europe, have taken steps to support their banking systems.