Djankov for CNN: Eurozone Needs Countries Like BulgariaFinance | November 23, 2010, Tuesday // 15:47| views
"I frankly think the eurozone needs countries like Bulgaria with tight fiscal policies more than these countries need it," Simeon Djankov said in an interview for CNN. Photo by CNN
Bulgaria's finance minister has confirmed the government's revamped euro bid plans, saying in an interview for CNN that the eurozone needs countries with tight fiscal policies like Bulgaria.
"The Bulgarian currency the lev has been tied to the euro since 1999, so in a way we are already in a situation where it is as if we have the euro. I frankly think the eurozone needs countries like Bulgaria with tight fiscal policies more than these countries need it," Djankov said in an interview for CNN.
He agreed that the euro will undoubtedly survive the current crisis but said it is unjustifiably perceived as damaged goods.
"The euro will survive for sure. The current crisis and the resolution of the crisis shows not so much that the euro is in trouble, but rather that the European institutions were not ready to deal with this crisis. I think the focus is on the European Commission and the European Central Bank and how they can be improved, not the currency itself."
According to Djankov Estonia's entry into the eurozone from next January is going to bring one more responsible member.
"There aren't that many fiscally responsible members right now. Any additional ones may help the eurozone itself," he said.
The events in Ireland, considered and widely advertised until recently as an economic dream of the whole of Europe, put a question mark over the economic future of Europe and how it can compete not only with the United States, but with the Asian countries, according to Djankov.
"This question mark is unanswered for now."
"Everybody is watching Portugal now, that's why it was so important for Ireland to be resolved fairly quickly. The EU finance ministers succeeded in that, but the worry is now about Portugal and Spain," he said.
Bulgaria's finance minister said he was in favour of looking at places like Portugal even before things get going and working out what would have to be done.
"What the quick Irish plan showed is that it can be done in a week to ten days, but some sort of pre-planning is a very good idea so that the markets are calmer, especially having in mind that the holidays are coming in a month, a period, when some of the biggest crises have occurred," Djankov said.
He stressed that in the current situation the markets think there is something still to come.
Earlier this month Bulgaria's center-right government revived its plans to apply to join the bloc's exchange-rate mechanism, the so-called Eurozone waiting room, after it was forced to drop the euro bid in April this year over a larger than expected 2009 deficit.
"Bulgaria is likely to apply to join ERM II in the second half of 2011 after it has demonstrated that next year's budget deficit will fall below the European Union's ceiling of 3% of gross domestic product in line with the Maastricht criteria," Finance Minister Simeon Djankov said on the sidelines of the Ecofin council meeting in Brussels.
Earlier this year the government touted plans for the country to join the euro-zone entry mechanism ERM II no later than next year with adoption of the single currency slated for 2012. It had to put off plans to join the euro area entry mechanism after its 2009 revised budget gap exceeded the 3% EU threshold.
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.
The lev is already linked to the euro in a currency board that keeps the Bulgarian currency at 1.9558 to the euro.
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