Bulgaria Likely to Renew Euro Bid in 2011

Views on BG | November 19, 2010, Friday // 14:25|  views

Photo by EPA/BGNES

By Vesselin Zhelev


Bulgaria is still keen to join the eurozone despite the trouble other participating states have been through, the country's finance minister Simeon Djankov said on Wednesday.

The Black Sea state hopes to be able to resume discussions on joining the single currency entry mechanism (ERM II) in the second half of 2011, he said.

"We remain resolute as ever. . .to enter the eurozone as soon as we can," said Mr Djankov. "I think the eurozone needs very much countries like Estonia and Bulgaria, which have shown over the years – and especially during the crisis – that they have conservative fiscal policies, low deficits compared to the average in the EU [and] low levels of debt."

Estonia became the 16th country to adopt the euro earlier this year. However, Bulgaria's ERM II candidacy crashed as its budget deficits for 2009 and 2010 were revised and soared by 0.9 percent over the 3 percent EU GDP threshold. The centre-right government blamed this on its Socialist Party predecessors.

Mr Djankov said the government planned to narrow the deficit to 2.5 percent next year and projected an economic growth of 3.6 percent up from 0.7 percent expected this year. The IMF and the World Bank have forecast a two to 2.5 percent growth rate.

Bulgaria may resume discussions on being admitted into the ERM II as early as the second half of next year, provided the government establishes a credible track record of financial discipline and the country matches the macroeconomic criteria, Mr Djankov said.

He said the eurozone needs new member states like Bulgaria to boost the power of austerity proponents. "Bulgaria is one of the countries, together with Germany, Finland and the Netherlands, pushing for much stronger penalties for countries that have lax fiscal policies," said Mr Djankov, who used to work for the World Bank in Washington before joining prime minister Boiko Borisov's government in mid-2009.

Following a financial crash in 1997, Bulgaria introduced a currency board, a panel at the central bank that ties foreign currency reserves to local money supply by a fixed exchange rate of the national currency to the euro.

One Bulgarian lev (BGN) has been equivalent to ?1.95 for more than 13 years now. The board, like the EU Growth and Stability Pact, bans the central bank from printing money to bail out debtors and requires strict scrutiny of public spending.

Mr Djankov spoke in support of a Swedish proposal asking that contributions to a future permanent European bailout fund be proportional to the financial risk rates of member states, that is, proportional to their debt/GDP ratios and public deficits. At 14 percent, Bulgaria boasts the second lowest ratio of debt to GDP in the EU.

If adopted, such an approach would exempt countries such as Bulgaria, the Czech Republic, Estonia, Finland, Slovakia and Sweden from contributions, said Mr Djankov.

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Tags: Djankov, finance minister, Simeon Djankov, ERM 2, ERM II, euro, Buzek, gas transit, natural gas, Bulgaria President, Georgi Parvanov, Jose Manuel Barroso, EC, EC President, Eurozone, greece, exchange-rate mechanism


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