Your Excellencies,
Distinguished members of the academic community,
Ladies and gentlemen,

It is my great pleasure to welcome you to the National Bank of Romania for the 15th edition of the international conference "The Future of Europe," organized by the Faculty of International Business and Economics. We are gathered here in the charming Mitiță Constantinescu Hall, a venue that has, throughout its history, hosted numerous influential economic conversations.

First and foremost, I would like to extend my heartfelt congratulations to the Faculty of International Business and Economics on its 50th anniversary. As a prestigious faculty within the Bucharest University of Economic Studies, it has been instrumental in developing multiple generations of economists and has been home to renowned alumni, including the esteemed Governor of the National Bank of Romania, Mr. Mugur Isărescu.

This milestone is not just a celebration of past achievements but also commits you to continue providing excellence for generations to come. I wish you enduring success in enriching the Romanian community with elite professionals and academics for the next 50 years and beyond.

But for now, let's turn our attention to the European project, a visionary endeavor that has profoundly impacted our lives by enhancing economic cooperation and fostering high living standards, democracy, freedom, and peace throughout its member states. Although it remains a work in progress, continually adapting to new challenges and uncertainties in the global environment, the EU has been steering individual national economies toward a unified community committed to shared values and mutual prosperity.

The European Union has played a unique role in the convergence process of Central and Eastern European countries, including Romania. This region's rapid development over the past 20-25 years is a remarkable achievement in economic history.

It's uncommon to witness such a swift convergence as that experienced by the CEE region in the last two decades. GDP per capita in Purchasing Power Parity (PPP) terms has soared from approximately 50% to around 75-80% of the EU average in these countries. In Romania, this figure has surged dramatically from about 25% to nearly 80%. While regional disparities still persist within our country, the overall progress is undeniably positive. Yet, despite this accomplishment, the journey is ongoing, and we need to keep building on this momentum.

When considering long-term economic development, two variables stand out as most significant: labour input—the number of employees and the hours they work—and labour productivity. Labour productivity itself is influenced by capital (equipment, factories, and the infrastructure we use) and Total Factor Productivity (TFP), which encompasses technological progress.

To illustrate this concept, imagine placing a worker from Central and Eastern Europe in a Western European or U.S. company. Often, we observe that the worker becomes just as productive as their Western counterparts. Conversely, if a worker from a highly developed country were to work in an under-resourced environment, their productivity would likely diminish. This underscores the vital role that capital and technology play in enhancing productivity.

The European integration has unlocked the potential of the Romanian labour force, making us approximately three times more productive today than we were at the dawn of this century. Transitioning from a closed economy to an open market system empowered us to engage in international trade, attract investment, and integrate into global value chains. While this shift brought challenges and new competition, the overall impact has been overwhelmingly positive.

In addition, we have benefited from EU funds, which have supported the implementation of reforms and investments in capital. These funds have been instrumental in modernizing our infrastructure, enhancing public services, and boosting economic growth. The private sector has also played a notable role in our development. Inflows of Foreign Direct Investment (FDI) have helped us in two major ways. Firstly, they have provided much-needed capital, leading to capital deepening. Secondly, they have enhanced Total Factor Productivity through the transfer of technology, management skills, and know-how that are indispensable for modern economies.

Moreover, the establishment of strong institutions has been paramount. We have embraced models, legal frameworks, and knowledge systems developed in Western European countries.

Europe, the cradle of Western civilization, has a rich tradition of advancing human development for centuries. From the democratic foundations laid in ancient Greece and the legal systems developed in Rome to the intellectual revolutions of the Renaissance and the Enlightenment, Europe’s impact is profound.

It is within the European landscape that countless ideas have been cultivated and innovations have been pioneered, leading to advancements that have shaped the modern world.

The role of strong institutions in economic development cannot be overstated. Nobel laureates Daron Acemoglu, Simon Johnson, and James Robinson have emphasized in their award-winning work that the quality of institutions is a key determinant in a nation's prosperity. Historically, models of economic growth focused on the accumulation of factors of production, labour, capital and, more recently, technology or ideas. The greater the capital stock per worker and the more productive its use, the richer a country would be.

This year’s winners of the Nobel Prize in economics underscore that while the accumulation of labour, capital, and technology is crucial, it is the institutions that foster an environment where these factors can thrive. Europe's rich educational heritage - centuries of providing quality education—is a fundamental reason why European countries enjoy a high standard of living today.

However, to remain competitive, the EU must embrace reforms. Insights from leaders such as Mario Draghi suggest that a more integrated single market is essential. We face challenges such as market frictions, stringent regulations, varying fiscal policies across member states, cultural differences between the North and South, East and West, and a generally higher aversion to risk compared to our American counterparts.

Unlike the United States, which operates under a single fiscal policy and has cultivated a vigorous entrepreneurial spirit—stemming from its history as a nation forged by pioneers and immigrants who embraced risk and innovation - we in Europe face a different set of circumstances. Our continent's rich blend of cultures and multiple fiscal policies presents challenges, but it also offers unique opportunities. To inject dynamism into our economic framework, we must leverage our diversity and find cohesive strategies that encourage entrepreneurship and innovation across all member states.

Despite shifts in global economic balances and the rise of emerging economies like China, the European Union, along with other Western nations, continues to be a cornerstone in the global economy in terms of trade, GDP and wealth.

On that note, to the students and aspiring entrepreneurs among us: the Romanian market is just the beginning. Do not hesitate to dream big. You have access to an extensive European market of around 450 million consumers. Never before in Romania's history have such opportunities been within our grasp. The European Union remains a landmark project that has brought prosperity to its residents and will most likely continue to do so.

As a professor myself, I see students who are proficient in multiple languages and embrace European values, embodying a truly European mindset. These students are globally minded, technologically savvy, and equipped with tools like AI assistants that enhance their capabilities. They possess grand ambitions, a solid knowledge base, and have at their fingertips resources that previous generations could only dream of.

Now is the time for you to broaden your perspective and think on a European scale while building your future here in Romania. By expanding your horizons and not limiting yourselves to the Romanian market alone, you can become more competitive and contribute to the development of both Romania and the European Union. You are living in a unique period of our history, and it's imperative that you seize these opportunities that were not available to those before you.

As we navigate the complexities of the modern world, strong institutions and visionary individuals committed to European values will serve as the pillars that support our continued growth and integration into the global economy.

Allow me to conclude my remarks on this festive occasion by congratulating you once again on this sigificant milestone. The National Bank of Romania remains your committed institutional partner. I eagerly look forward to the valuable discussions that will unfold today as we explore new ways to navigate our current challenges.

Thank you!

București, 25 octombrie 2024