Bulgaria's Eurozone Dream Delayed: No Euro Until 2027?

Finance | June 7, 2024, Friday // 18:17|  views

Simeon Dyankov, former Minister of Finance from GERB, predicts that Bulgaria is not yet ready for the Eurozone and will most likely adopt the euro on January 1, 2027. He explained to "Nova News" that the convergent report on the adoption of the euro will be released next week. "We will know the Eurozone report next week. We know the results now - we are not ready yet. The budget was focused on that, and major adjustments were made, with less money allocated. The new government should consider not only the euro but also important aspects of social life in Bulgaria," Dyankov stated.

Dyankov mentioned that every second year, there is a regular report on the Eurozone, which Bulgaria should request. He explained that the programs are scheduled to ensure the country meets all criteria for at least two months. "At the earliest, next April we may apply for an extraordinary convergence report to the EC. So next July, we may get a report to determine if we meet the criteria. If we do, a decision will be made on when to adopt the euro. It could be by the end of 2025, but it does not automatically mean that we will have the euro from January 1, 2026. Our more likely entry is January 1, 2027," he added.

According to Dyankov, Bulgaria will not meet the inflation criterion by the end of the year, making it unreasonable to ask for a report then. He highlighted that requesting two reports in the same year is exceptional, citing Slovakia's example. However, Bulgaria has not met the inflation criterion since September 2021, nearly three years ago, leaving no tolerance. Dyankov also pointed out that record loans are planned for this year, nearly 11 billion leva, and due to political upheavals, they have yet to be taken. He explained that an update is also needed but doesn't see the necessity for another loan beyond this 11 billion.

Dyankov emphasized that Bulgaria is far from a debt crisis, with debt levels at 24% of GDP, well below the 60% criterion. He noted that the interest rates on government debt have risen significantly, currently around 6.5-7%, with over a billion leva in interest payments annually. "We should not always look at the deficit, which in recent years has been around 2.8 and 2.9%. A more serious calculation is needed. There is a way for it to be around 1.5%, but this cannot be done in one year," he added.

He also mentioned that while the European Central Bank has started lowering interest rates, the Bulgarian National Bank (BNB) has been raising them to optimize mortgage loans. "The BNB belatedly increased the main interest rate, the bank always acts sluggishly, until recently they did not want us to enter the Eurozone. We still have a long way to go," he commented.

Dyankov believes that by January 2025, under a regular government, Bulgaria will be able to achieve inflation according to the Maastricht criteria. He stressed the need for an explanatory campaign about the benefits of the euro, which neither the Ministry of Finance nor the BNB has conducted effectively so far. "Even this morning when landing at the airport and in the taxi, I was immediately asked this question - will we enter the Eurozone, when will it be, and what will be the benefit? The biggest plus of accepting us is, for example, if a person has assets, then they will rise between 20 and 30% in the first year. I don't know why neither the finance minister nor the BNB explains it. The prices of all apartments and other things are going up. Apart from that, the interest rates in general are falling," he commented.

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Tags: Bulgaria, Eurozone, euro, dyankov

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