BNB Head: Bulgaria's Finances Stable despite Doomsayers' Slander Campaign since 2008

BNB Governor Iskrov has advised cautious over doomsday scenarios about Bulgarian state finances and banks saying those could be inspired by speculators. Photo by BGNES

Not a single one of the dozens of doomsday scenarios forecast for Bulgaria's economy and state finances by foreign and Bulgarian observers has materialized, central bank head Ivan Iskrov has declared.

Iskrov, Governor of the Bulgarian National Bank, presented during a seminar in Sofia Friday a ranking of the top 30 bad forecasts for Bulgaria's financial stability that failed materialize in spite of what he described as slander in international media.

"Professional "traders of fear" have been deliberately vilifying Bulgaria before the world, and have been forecasting apocalyptic scenarios for the Bulgarian economy. Since the end of 2008, there have been certain Bulgarian and foreign analysts claiming that Bulgaria's economy will implode because of inflation, the currency board will collapse, Bulgaria will go bankrupt, the Bulgarian currency is unstable, etc," the BNB Governor said as cited by the Trud Daily.

He pointed as an example to a story in The Business Insider saying that Bulgaria threatened the stability of EU banks. According to Iskrov, such a scenario is impossible and ridiculous since the Bulgarian economy is only 0.25% of the EU economy.

Iskrov believes there has been a deliberate smear campaign against Bulgaria, the Eastern European states, and even euro zone countries because speculators and financial intermediaries have ways of benefiting from the consequences of increased fear among investors.

He did underscore, however, that none of the black scenarios voiced with respect to Bulgaria by prestigious financial observers, media, credit rating agencies, etc, has occurred in reality.

"In the field of financial systems' regulation the post communist countries have adopted the best practices of the developed Western economies precisely because of the fact that we started from scratch," Iskrov said urging the Bulgarian media to be cautious with respect to reiterating some of the "speculative" stories (as he described them) on Bulgaria's finances and banks because this could affect the well-being of the Bulgarian citizens.

As an example for a speculative and dangerous forecast, he mentioned the claims by Western analysts dating back to the spring of 2009 that the Central and Eastern European countries were especially threatened by the global economic crisis.

"Back then we sent out a special declaration to the large credit rating agencies urging them to cautious and not to present the economic crisis to the world as a development that started in Central and Eastern Europe because it did not begin here, and did even materialize here," he said pointing out that there have been cases, including of European banks, trying to speculate with interest benchmarks and lev debts. "These are traders of state debt on the stock market who profit from starting rumors about the collapse of the Bulgarian lev," he explained.

Iskrov further declared explicitly that neither the Bulgarian National Bank, nor the Bulgarian government have given up on their long-standing bid to join the euro zone despite the crises in Greece and Ireland, which affected the single European currency, an aspiration confirmed in principle last week by Bulgarian Finance Minister Simeon Djankov.

The BNB head, however, also said that the present moment is not the right time to apply for full membership in the euro zone.

"If your sister invites you to dinner but shortly before the dinner she falls out with her husband, and pots and pans are being thrown in the house, would you still insist on being their guest for dinner," Iskrov explained metaphorically Bulgaria's present situation as an Euro Area candidate using.

Yet, in his words, it will be very important for Bulgaria to learn from Estonia's experience in that regard as on January 1, 2011, Estonia will become the first country to complete the transition from having its currency pegged to the euro with a currency board to adopting the euro.

"Bulgaria's euro zone accession is not a privilege, it is an obligation, and it will happen. At the present moment, however, there are transformations of the regulatory processes in it," he stated.

Iskrov's statements came a day after the Bulgarian Parliament approved the 2011 state budget, which provides for an economic growth of 3.6%, and a budget deficit of about 2.75% of the GDP, barely below the 3% threshold of the EU Stability and Growth Pact, which is also required for ERM II and euro zone accession.

Final Eurostat data showed that Bulgaria ended 2009 with a deficit of 4.7%, while the 2010 projections are for a deficit of 4.8%. The efforts of the Bulgarian government to bring down the deficit are also the result of the EU setting Bulgaria under the so called excessive deficit procedure - for EU countries with deficits above 3%.

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