Bulgaria Still Wants to Join Euro, Holds Debt Rules Sacred

The Euro sculpture is seen in front of the European Central Bank (ECB) headquarters in Frankfurt, Germany. Photo by EPA/BGNES

Bulgaria still wants to join the eurozone provided the bloc's members obey its rules on limiting debt, Traicho Traikov, Bulgaria's Economy Minister, said in an interview for German media.

"Provided all other eurozone states stick to the debt rules in future...entry to the currency union remains a medium-term goal for us," Minister Traikov told German newspaper Frankfurter Allgemeine Zeitung.

Bulgaria wants to join the bloc to help reduce financing costs for local companies, which currently pay interest rates of up to 10%, as well as for the government, Traikov said.

But the minister warned that Bulgarians are likely to vehemently oppose supplying funds to aid wealthier nations through the European Stability Mechanism.

"It is difficult to justify why Bulgaria should provide funds for a rescue facility that is needed by countries with a considerably richer population," he said.

Pensions in Greece are five times as high as those in Bulgaria, the minister added.

In 2011 Bulgaria's center-right government continued, even though with varying degrees of zeal, to pursue European integration and made clear that the single currency woes and doomsayers' warnings of a possible crack-up will not give it a pause.

Minister Traikov has been one of the most ardent supporters of Bulgaria's accession to the eurozone.

"I know now it's fashionable to predict the end of the monetary union, but I think common sense will still dominate and it is going to survive. Of course, in the end we want to be a part of it," Traicho Traikov, Bulgaria's Economy Minister, told CNBC on the first day of December.

The government in Sofia has remained firmly opposed to the introduction of a single tax rate in the eurozone even as Germany has proposed greater fiscal integration in order to avoid a situation where prudent countries end up paying for the profligate.

Bulgarians suffered for years in order to bring their economy in order and ensure that the country has low debt and a narrow budget deficit, he added.

"It didn't fall from the sky overnight; we paid for it with years and years of austerity and fiscal discipline," Traikov said.

The country has repeatedly changed the time frame for adopting the euro. Ambitiously scheduled initially for 2010, the country's entry into the eurozone was first set back for some time around 2012 with experts saying it is conditional on continued fiscal prudence and lower inflation.

The center-right government, which swept to power in the summer of 2009, was very enthusiastic about adopting the single currency only to be forced to put off plans after the country's 2009 revised budget gap exceeded the three percent EU threshold.

The failure of previous governments to take that step earlier is often attributed in Bulgaria to behind-the-curtain maneuvers by European officials - Eurozone President Juncker and European Central Bank President Trichet in particular – who allegedly created their own tools for managing the EU.

Bulgaria is the poorest EU member state but tight fiscal policy helped it achieve one of the smallest debt to gross domestic product ratios in the European Union and a budget deficit of around the Maastricht-agreed 3% of GDP ceiling.

Finance Minister Simeon Djankov's belt-tightening policy however has drawn criticism of creating the illusion of a healthy economy on the back of the people, who are three times poorer than the average EU citizen and are just getting poorer.

Unlike the government's enthusiasm, public support for Bulgaria's eurozone membership was seriously dented in the second half of 2011 following the troubling developments in the monetary union.

The Currency Board regime in which Bulgaria operates enjoys has proved to be one of the most trusted institutions. Bulgarians prefer to use the lev instead of switching to the euro, even though the local currency is pegged to the euro, analysts commented.

According to them Europe is obviously falling short of providing Bulgarians with confidence that it can handle the crisis stemming from unsupportable debt loads in countries like Greece, Portugal and Ireland and the crisis in Italy.

Indicatively the highest levels of support for adopting the single currency were seen as far back as in 2008-2009.

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