Bulgaria Set to Apply for ERM 2 in November

Bulgaria's Finance Minister Simeon Djankov, a World Bank economist, said negotiations for applying for ERM-2 will be launched in September. Photo by BGNES

Bulgaria will apply in November to join the exchange-rate mechanism, the European Union's two-year currency stability test before the country can drop the lev and adopt the euro, the finance minister said.

Talking to reporters on Monday, Simeon Djankov, a World Bank economist, said the negotiations will be launched in September, when a delegation, led by Prime Minister Boyko Borisov, will visit Brussels to discuss important topics concerning Bulgaria.

Joining the exchange-rate mechanism would bring Bulgaria closer to the umbrella of the euro region and the protection of the European Central Bank. Bulgaria has had to resist pressure to devalue their currencies as the recession takes its toll.

The lev is already linked to the euro in a currency board that keeps the Bulgarian currency at 1.9558 to the euro. Joining the exchange-rate mechanism may allow the lev to fluctuate by as much as 15 percent around a central band, though the central bank has said it will leave the lev tightly pegged to the euro through the duration of the two years.

Bulgaria's entry in the eurozone, initially scheduled for 2010, has been set back for some time around 2012-2013. Experts say it is conditional on continued fiscal prudence and lower inflation.

Meanwhile it emerged that a group of experts from the International Monetary Fund is expected to visit Bulgaria within a month and a half to monitor the execution of the budget for 2009 and the forecasts for the next year.

The center-right GERB party, which won the general elections on July 5, has given indication that it is likely to turn the IMF for help, something the previous government has resisted and most economists would applaud.

A final decision is expected to be taken in February, when the budget parameters and the impact of the public spending cuts the party plans to undertake will be clear.

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