Macroeconomist Warns Bulgaria's Rush to the Eurozone Could Spark Crisis Like Greece's

Macroeconomist Stoyan Panchev, an analyst from the Expert Club for Economics and Politics, warned that Bulgaria could face significant challenges if it rushes into joining the eurozone, particularly concerning the budget deficit. Speaking to Bulgarian National Radio, Panchev stated that while inflation might seem manageable, the real issue could arise from the deficit once Bulgaria meets the necessary criteria for eurozone entry, which could happen as early as next year.

He criticized what he referred to as "statistical theater" in the process of meeting Maastricht criteria, suggesting that the country is focusing on meeting technical requirements rather than ensuring economic stability. "Rushing into the eurozone now would be a mistake with negative consequences for everyone," he said in his interview for BNR.

Panchev noted that although Bulgaria is likely to receive a positive assessment in the convergence report, he believes the country should wait until its income reaches the European average before considering eurozone membership. He estimated that this might take another decade if Bulgaria continues on its current trajectory.

On the issue of inflation, Panchev pointed out that while the country has recently met the Maastricht inflation criterion for the first time in years, the numbers may be skewed. He argued that the current reduction in administrative fees is a temporary measure to ensure compliance with Maastricht criteria and doesn't reflect the real economic situation. "What we're seeing is statistical manipulation, not an accurate portrayal of price changes," he remarked.

Drawing comparisons with Croatia, Panchev highlighted that heavy administrative measures to control inflation can have unintended consequences, much like a beach ball pushed underwater, only to resurface more forcefully later. He criticized the inflation rate of 4% annually, calling it not as low as it appears, and emphasized that the larger issue lies in the deficit.

Panchev expressed concern over the potential for Bulgaria to make the same mistakes that Greece made when it entered the eurozone by manipulating data to meet entry criteria. He warned that such an approach could lead Bulgaria into a fiscal crisis similar to Greece's, with consequences for all of Europe. "These criteria exist for a reason," he cautioned.

The economist also expressed fears that Bulgaria's push for eurozone entry could lead to a situation where the country’s public finances deteriorate, echoing the financial instability seen in the period before the 1997 Currency Board. He concluded that entering the eurozone under these conditions lacks sound economic logic.

Source: BNR interview