Bulgaria Set to Apply for ERM II by July
18 February 2010, Novinite Ltd.
Amid growing fears that Bulgaria's aspirations to join the euro soon may be foiled, the country's finance minister has * officials from the International Monetary Fund that membership in the Eurozone waiting room remains top priority.
“Bulgaria will aim to apply to the bloc's exchange-rate mechanism, the so-called Eurozone waiting room, by the end of the Spanish Presidency of the European Union,” Minister Simeon Djankov said on Thursday.
Representatives from the global lender arrived in Bulgaria February 18 to examine the country’s readiness to join ERM II, a currency stability test for euro hopefuls. They are expected to be joined by officials from the European Commission (EC) and the European Central Bank (ECB).
The experts visit Sofia at the invitation of Bulgaria's Minister of Finance Simeon Djankov who has discussed the issue during his formal trip to Germany and Luxembourg at the beginning of February.
During the meeting with the experts at the Finance Ministry, Minister Djankov stressed on the reforms, which have been implemented in the revenues agency and the tight fiscal policy, which is a top priority for the government.
There have been months of speculation over when the former communist state would formally apply to the bloc's exchange-rate mechanism, the so-called Eurozone waiting room.
Countries must be members of ERM II for two years before they can formally join the eurozone. Bulgaria believes that it could be ready for euro entry by 2013.
The Greek crisis has triggered fears about the stability of the eurozone and concerns that it may end up foiling Bulgaria's aspirations to join the euro in three years, despite the country's budgetary rigor.
Bulgaria is believed to be among the countries most at risk from potential spillovers from Greece after banks invested in central and eastern Europe. The country is more susceptible to contagion risk from than neighboring Romania or Turkey, because Greek banks control 28 percent of the Balkan country’s market.
According to Minister Djankov now is "exactly the right time" for Bulgaria to take the next step toward joining the eurozone as the country is meeting the Maastricht criteria.
Bulgaria initially planned to apply to join the exchange-rate mechanism in November, but delayed it for the beginning of 2010 after all member states submit their convergence programs, which contains the mid-term goals of the fiscal policy.
Bulgaria, which joined the EU in 2007, posted the smallest budget deficit among the 27 member states last year, according to the finance ministry. It is expected to be the only EU nation to balance its budget in 2010.
Minister Djankov, a World Bank economist, hopes to offset a possible reluctance to admit Bulgaria into the ERM, stemming from the global crisis, by garnishing the application with a targeted balanced 2010 budget, the smallest 2009 deficit in the EU and laws overhauling the inefficient health-care and social-security systems.
Joining the exchange-rate mechanism would bring Bulgaria closer to the umbrella of the euro region and the protection of the European Central Bank and is conditional on whether the new government will succeed to restore Brussels trust.
The lev is already linked to the euro in a currency board that keeps the Bulgarian currency at 1.9558 to the euro. Joining the exchange-rate mechanism may allow the lev to fluctuate by as much as 15 % around a central band, though the central bank has said it will leave the lev tightly pegged to the euro through the duration of the two years.