Common Sense Will Prevail, Euro Will Survive: Minister

From CNBC

By Antonia Oprita

Bulgaria still wants to join the euro zone despite recent predictions that the single currency will collapse, but does not agree with a single tax rate in the currency area, Traicho Traikov, minister of economy for Bulgaria, told CNBC on Thursday.

The Black Sea country of 7.5 million people is the poorest in the European Union, with disposable income of households per capita at only around 30 percent of the EU average.

But the country has introduced tough reforms to ensure that its budget is in check and in order to attract foreign investment.

It currently has one of the smallest debt to gross domestic product ratios in the European Union and a budget deficit of around the Maastricht-agreed 3 percent of GDP ceiling.

"I know now it's fashionable to predict the end of the monetary union, but I think common sense will still dominate and it is going to survive. Of course, in the end we want to be a part of it," Traikov said.

"Ever since we introduced a currency board in 1997, our focus has been on keeping the fundamentals right, so we ran government surpluses for most of these years," he explained.

After a deep banking and economic crisis in the mid-1990s, Bulgaria fixed its exchange rate, with foreign exchange reserves matching the amount of levas — the national currency — in circulation, in order to rebuild foreign investors' confidence.

"For us, being a part of the euro zone means lower interest rates on credits for business," Traikov said.

At 10 percent, Bulgaria has the lowest corporate tax in the EU. "We guarantee to businesses that it is going to stay this low, because of the low budget deficits," the economy minister said.

Germany has proposed greater fiscal integration within the euro zone going forward, in order to avoid a situation where prudent countries end up paying for the profligate.

But countries that use their low tax rates to attract foreign investors, such as Ireland or Slovakia, have already said they would oppose such a move.

"For us, coordinated fiscal policy does not include coordinated tax policy," Traikov said.

Bulgarians suffered for years in order to bring their economy in order and ensure that the country has low debt and a narrow budget deficit, he added.

"It didn't fall from the sky overnight; we paid for it with years and years of austerity and fiscal discipline," Traikov said.

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