Bulgaria's ERM II Dreams 'Dimmed'

Countries must be members of ERM II for two years before they can formally join the eurozone. Bulgaria believes that it could be ready for euro entry by 2013. Photo by EPA/BGNES

Bulgaria is weakening its chances for joining the bloc's exchange-rate mechanism, the so-called Eurozone waiting room, and can adopt the single currency no earlier than 2015, an analyst says.

“Bulgaria may easily slide into a trend of piling up deficit in the budget, which will increase the risks that it faces and impact negatively the level of the banks' interest rates,” Bozhidar Danev, Bulgarian Industrial Association (BIA) Chairman, told Darik radio.

Asked about the possible repeat of the Greek crisis in Bulgaria Danev said a critical point will be reached if the budget deficit exceeds 6 percent.

The Greek crisis has also triggered fears about the stability of the eurozone and concerns that it may end up foiling Bulgaria's aspirations to join the euro in three years, despite the country's budgetary rigor.

Bulgaria is believed to be among the countries most at risk from potential spillovers from Greece after banks invested in central and eastern Europe. The country is more susceptible to contagion risk from than neighboring Romania or Turkey, because Greek banks control 28 percent of the Balkan country’s market.

After months of speculation over when the former communist state would formally apply to the bloc's exchange-rate mechanism, the so-called Eurozone waiting room, the finance minister has set the deadline at the end of June, when the Spanish Presidency of the European Union ends.

Countries must be members of ERM II for two years before they can formally join the eurozone. Bulgaria believes that it could be ready for euro entry by 2013.

Bulgaria, which joined the EU in 2007, posted the smallest budget deficit among the 27 member states last year, according to the finance ministry. It is expected to be the only EU nation to balance its budget in 2010.

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