Bulgaria Fit to Join Euro Zone - Deputy Finance Minister

Finance | April 18, 2011, Monday // 17:33|  views

Even though the government's enthusiasm for the euro zone seems undimmed, public support for adoption of the single currency has been seriously dented. Photo by EPA/BGNES

Bulgaria's government has assured fiscal indicators look good in terms of euro-adoption criteria, although entry into the euro zone is no longer dubbed top priority.

"Our indicators look good in terms of the euro-adoption criteria," Deputy Finance Minister Boryana Pencheva said in an interview for Bloomberg agency.

According to her efforts to adopt the euro will get a boost from joining Europe's Competitiveness Pact.

"The program ensures we work toward meeting all of the technical criteria. Then it is very much a political decision," the deputy minister said.

Pencheva spoke a day before Bulgaria's three-year fiscal plan was submitted to the European Commission at the end of last week.

The plan aims to cut the budget deficit and boost economic growth to move toward euro adoption, Deputy Finance Minister Boryana Pencheva said.

The plan estimates gross domestic product growing 4.1 percent in 2012, 4.4 percent in 2013 and 4.2 percent in 2014. The government seeks to narrow the deficit to 0.5 percent of GDP by 2014, keeping corporate and personal income taxes unchanged.

Even though the government's enthusiasm for the euro zone seems undimmed, public support for adoption of the single currency has been seriously dented following the troubling developments in the monetary union, analysts say.

While several months before the end of last year the Bulgarian society was cut in two over calls for immediate introduction of the European single currency, a recent survey by the Open Society Institute has found out that those who oppose euro adoption now are majority.

The Currency Board regime in which Bulgaria operates enjoys great public support. People's confidence in the banking sector remains stable despite the financial crisis, polls show.

Bulgaria's Finance Minister Simeon Djankov recently said that proposed constitutional amendments designed to bolster and guarantee Bulgaria's financial stability will pave the way to the euro adoption.

He conceded however that euro adoption is no longer on top of his agenda and all efforts will be focused on maintaining the country's financial stability.

Bulgaria's center-right government revived at the end of last year 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 over a larger than expected 2009 deficit.

The government hopes 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.

Joining the exchange-rate mechanism was assigned top priority for 2010 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.

Countries must be members of ERM II for two years before they can formally join the eurozone.

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