Djankov Slams EU on BBC, Says Euro Zone to Benefit from Bulgaria

Bulgaria's Finance Minister Simeon Djankov, speaking on the BBC, has criticized the European Commission, and the European Central Bank for failing to prevent the crisis of the euro zone.

His criticism for the key EU bodies emerged after Ireland recently became the second Euro Area country after Greece to seek an EU-IMF bailout.

"Once you design a new currency you need the institutions to go with it and the recent troubles showed we don't have the institutions. Nobody is daring to ask what happened to the current institutions," he told BBC World Service's Business Daily.

He also slammed Eurostat, the EU statistics office, for failing to raise alarm over the state finances of struggling euro zone members.

"Didn't they know about Greece's problems, the Irish problems? They seem to not have bothered doing as much analysis as they should. The institutions themselves need some health checks and then some changes," he declared in a rather categorical manner.

At the same time, however, Djankov, a former senior World Bank expert and a globally renowned economist, confirmed Bulgaria's course to seek accession to the euro zone, making it clear he believed this would actually benefit the Euro Area because of the fiscally conservative policies that the Bulgarian government follows under his guidance.

"After we've seen all the recent troubles of the eurozone, they may need some fiscally responsible members and Bulgaria will be one. The more votes they have for more fiscally conservative policies, the better for the eurozone. Currently it does not sound like this is a very fiscally responsible club and it could benefit from new members," he told the BBC.

The BBC points out that "Bulgaria has the smallest budget deficit among the 27 members of the EU - though the recession has hit public finances and the government expects its 2010 deficit to expand to 4.6% of GDP."

Djankov emphasized that the Bulgarian government had made it clear the tough economic times would require belt-tightening measures so that Bulgaria can avoid troubled scenarios witnessed in its neighbors Greece and Romania.

"We said we were going to be different (from other countries), and tighten our belts," Mr Djankov said. We knew it was going to be difficult for a couple of years, but so far this path has proven to be the right path. No pain, no gain is a good proverb. We have gone through some pain but the belief in the government has not fallen too much and we still have a lot of support. People see what's happening in Europe overall, especially with some of our neighbours and certainly we want to escape that," explained the Bulgarian Finance Minister.

The BBC points out that there have been street protests in Sofia in the recent weeks against government policies and austerity measures.

Upon taking over as part of the Borisov government in 2009 Djankov originally hoped to get Bulgaria into the euro zone waiting room, the ERM II, within 1-2 years. However, in the spring of 2010, the Borisov government revised Bulgaria's 2009 financial data to double the deficit figure saying this was the result of secret and hidden annexes for public procurement signed by the former government.

In June, the center-right Bulgarian cabinet revised the state budget increasing its 2010 target for deficit to 4.8% of GDP on a cash basis and 3.9% of GDP under EU accounting rules, far wider than initial estimates.

Final Eurostat data released recently showed that in 2009, Bulgaria's budget deficit actually was 4.7%.

The 2011 state budget provides for a deficit of 2.5%, to bring it below the 3% threshold required by the EU Stability and Growth Pact. The Borisov government has even gone as far as recently starting an initiative to ask the EU not to factor in its future budget deficits any loans and contributions to the construction of the Nabucco gas transit pipeline, for whose construction Bulgaria will have to provide 1/6th of the funds, or about EUR 1.3 B over the next five years.

MORE about Djankov's interview for BBC READ HERE

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