AFT

In 1997 Bulgaria, on the verge of hyperinflation, introduced a currency board, a system that linked the Bulgarian currency, the lev, to the German mark in a one-to-one exchange parity, on the advice of the IMF. The lev was then linked to the euro at the same rate as the mark, at 1,95583 leva to the euro. IMF economists cited Argentina, which linked the peso to the dollar in 1991, as a successful example.

Angelov says there are striking similarities between the Bulgarian and Argentinian situations. Just like Argentina before the crisis, Bulgaria currently shows reasonable economic growth and weak inflation, but at the price of record jobless rates (17% of the active population) and a declining commercial deficit. Keeping parity with the German currency has required austerity measures. The central bank has banned the printing of money to meet the country's financial needs.

The currency board has allowed Bulgaria to reach macroeconomic stability, but the rate of poverty has remained dramatically high. Bulgarians have shown their frustration in their volatile voting habits. Voters who swept their former king to victory in the general elections turned their back on him six months later to elect a former communist as president.

Former child-king Simeon II's government, advised by numerous economic experts trained in the west, promised to improve the country's economy within 800 days. It plans to keep the currency board until Bulgaria enters the European Monetary Union, one of its principal foreign-policy objectives.

"Keeping the currency board for several more years is very dangerous," said Angelov. "In the first years it helped stabilise the economy, and I supported it, but it has become harmful as it stops growth." But numerous economic analysts still support the currency board. Georgy Ganev of the Liberal Strategies Centre said Estonia and Lithuania had introduced currency boards 10 and eight years ago, respectively, without seeing any problems.

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