Bulgaria Says Goodbye to Early Euro AccessionViews on BG | April 24, 2010, Saturday // 12:25| views
Photo by EPA/BGNES
By Vesselin Zhelev
Bulgaria has to put off plans to join the euro area entry mechanism after its 2009 revised budget gap exceeded the thee percent EU threshold.
Instead the European Commission is to target the new member state with an excessive deficit procedure.
Bulgaria's deficit last year was 3.9% of gross domestic product (GDP) up from 0.8% reported earlier by the government, Eurostat reported.
Prime Minister Boiko Borisov has blamed the increase on extra spending stemming from annexes to public procurement deals the previous government had signed with some 150 contractors at the end of its term around eight months ago. Mr Borisov said his ministers were not immediately aware of the additional costs to the treasury.
He had earlier touted plans for Bulgaria to join the euro-zone entry mechanism ERM II no later than next year with adoption of the single currency slated for 2012.
Bulgaria looked like a rare isle of stability amidst economically ailing Europe in 2008 when it posted a budget surplus of 1.8% of GDP. Unlike neighbouring Greece, the Black Sea state has had no problems with tampered statistics. Its public debt equals less than 15 percent of the GDP, while Greece's accounts for 115 percent of GDP.
Bulgaria also has a 13 year-old currency board, a panel at the central bank that ties its local money supply with foreign currency reserves through a fixed exchange rate of the national currency, the lev, to the euro of €1=1.95 levs. The board bans the bank from printing bailout money.
But the unexpected deficit means that Bulgaria fails to fulfil a key requirement for joining the euro. It is also expected to suffer from the crisis in Greece, which is one of its key trade partners and foreign investors. A third of Bulgaria's banks are Greek-owned.
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