Bulgaria Decides on Euro Ambitions End-Week

Bulgaria so far believed that it could be ready for euro entry by 2013. Photo by BGNES

Bulgaria will decide how long it will have to keep on hold plans to join the eurozone after the meeting of EU finance ministers later this week, which will consider and assess the country's convergence program.

“Bulgaria will apply for ERM II, there is no doubt about that. The timing will be decided after we hear the assessment of Bulgaria's convergence program at the European Union finance ministers summit, due on Thursday and Friday,” Finance Minister Simeon Djankov told a news conference on Monday.

The Bulgarian center-right government submitted to the European Commission at the end of January its convergence program until 2012, which outlines the preparations for joining the ERM II mechanism and the adoption of the euro.

“Provided that we receive a positive evaluation of the program, we will immediately begin to consider what is the best time for ERM II application,” Minister Djankov added, referring to the the pre-euro ERM II waiting room.

The comment came just two days after Bulgaria's center-right government announced it has abandoned plans to apply to join the bloc's exchange-rate mechanism over a larger than expected 2009 deficit caused by unaccounted procurement deals, signed by the previous Socialist-led cabinet.

“It would be insolent to apply for ERM II and the eurozone given the high levels of the deficit”, Prime Minister Boyko Borisov told a news conference on Friday. "We have in fact lied to our (EU) colleagues about our readiness for the euro zone being unaware of this trap."

Bulgaria's Finance Minister Simeon Djankov told the same press conference that the country's aspirations to join ERM II will not be rewarded this year.

"Bulgaria’s hidden budget deficit has ruined its dreams of joining the eurozone due to financially unaccounted procurement deals, which increased the 2009 gap to 3.7% of gross domestic product (GDP) from an initial 1.9%," Minister Djankov said.

The finance minister stressed that the revision of the budgets from the last two years will not reflect on the budget for 2010 and the government will do its best to keep the deficit under 3% in line with the Maastricht criteria.

"This year, there is no risk for the fiscal stability, the currency board and the banking system thanks to our tight fiscal policy," Djankov said.

Joining the exchange-rate mechanism was assigned top priority for this year by the new Bulgarian center-right government, which was the reason why it stuck to tight financial policy at the end of 2009 and delayed payments to businesses in a bid to keep low the budget deficit.

Minister Djankov, a World Bank economist, hoped to offset a possible reluctance to admit Bulgaria into the ERM, stemming from the global crisis, by garnishing the application with a targeted balanced 2010 budget, small 2009 deficit and laws overhauling the inefficient health-care and social-security systems.

Entry into the so-called Eurozone waiting room would have brought Bulgaria closer to the umbrella of the euro region and the protection of the European Central Bank and was conditional on whether the new government would succeed to restore Brussels trust and the budget deficit that the country has posted.

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

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