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Commenting article: NYU Professor Roubini: Bulgaria May Weaken Currency Control over Crisis

The New York University Professor, Nouriel Roubini, has stated that the Baltic countries and Bulgaria might weaken their currency controls as the global financial crisis hits Eastern Europe, the Baltic Business News reported citing an interview Roubini gave for Bloomberg in Moscow.

"If fundamentals are out of line you cannot maintain a fixed exchange rate, you're going to eventually have a currency crisis. The Baltics are under pressure and Bulgaria's currency board is under pressure", Roubini is quoted as saying.
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#1
countryhick - 5 Feb 2009 // 21:55:29

The article reminds that Bulgaria's lev is pegged at 1.95583 per euro. The country drained 16 percent of its reserves to $16.8 billion in the second half of last year, according to International Monetary Fund data.

Then we will see what the Leva is really worth against the Pound sterling.
I'm glad I have kept my money in Sterling in the UK :-)

#2
resipsaloquitur - 5 Feb 2009 // 23:47:43

Countryhick,

It seems you do not read "The Economist",Business Week or Time magazine,do you?


Every financier in this world is saying:"GET OUT OF THE BRITISH POUND!"

And you are happy that you keep your money in Sterling,in the UK!


IT IS NOT STERLING ANYMORE,MY DEAR!


The BPound is almost at parity to the Euro...it lost a lot in value since the financial crisis started

as we al know at the strongest industry in UK are the finances...


Now...as the BG Lev is pegged( FIRMLY fixed) to the EURO ,it will not loose any

value ONCE the Lev is converted to €.


I read the financial statements of REIFEISENBANK(Austrian bank) and they

suggest to the EU Commission ,that BG joins the Euro in 2010.


You still could wait a little bit,Countryhik, as investors predict futher fall of the Pound.

Then I shall recommend you cross the Channel and open an acount at a bank in

France or Germany.

If you are citizen of EU this shall be not a problem.


BG lev will not loose value but probably the prizes of goods will increase as it's happened in Germany when the ,e was introduced.

#3
Kolegialen - 6 Feb 2009 // 01:46:08

UK will be dragged down in the whirlpool of financial mismanagement and will join their master the US in the trash bin of have-been's....

#4
mrposhrat - 6 Feb 2009 // 02:06:49

The European economy is falling off a cliff at this moment, and German banks are insolvent because of lending to Eastern Europe. Cars sales are not coming back anytime soon, and car production is 1/5th of the German economy.

If German, Irish, British and Russian FDI into Bulgaria falls close to zero, the only option is for BG to devalue the Lev, because it becomes impossible to import 25% more than you export without using up all the reserves for the Currency Board.

#5
pk - 6 Feb 2009 // 06:02:09

Resip is right and Roubini is not GOD just becuase he called the crash of last year.

Typical in trading - Make 1 great call and NOW you think your perfect.

I follow and respect the professor as his theories are brilliant- but NOBODY is right even 75% of the time.

Pegging the Lev to the Euro was the Smartest thing Bg has done or for sure they would have devalued their currency.. just like they did in Hungary.

People in the uK got what they deserve -they resisted all these years to switch to the euro and now their currency has taken a major hit and will take years to recover.

and i think Kolg is going to be proven right: The dollar is next...

#6
pk - 6 Feb 2009 // 06:27:13

I correct myself- Hungary and the other EAstern euro countries that are memebrs of the EU and did not switch have had their currencys trade much lower. but not a true "devaluation" performed by the government...

#7
Uchak - 6 Feb 2009 // 08:08:36

hickster, keeping your cash in sterling, my you dropped at least 30% vs BG leva with Gordo promising to trash sterling into the NU Peso!!

EU Will bail out BG so 0% chance leva devalue....Poland and Hungary currencies have declined but BG's grey economy /international money laundeing center always brings in plenty of euros.....

#8
countryhick - 6 Feb 2009 // 08:14:40

Resip

From Wiki

Bulgaria meets three and fails on two criteria in order to join the eurozone. It derogates on the price stability criterion, which envisages that its inflation does not exceed that of the three EU member states with the lowest inflation (Malta, the Netherlands and Denmark) by 1.5%. Bulgaria’s inflation in the 12 months to March 2008 reached 9.4%, well above the reference value of 3.2%, the report said. Also Bulgaria has not yet joined ERM II.[citation needed]
On the upside, Bulgaria fulfills the state budget criterion, which foresees that the deficit does not exceed 3% of the country’s gross domestic product (GDP).[citation needed] Over the past few years, the report said, the country has consistently improved its budget fundamentals and since 2003, a break-even point, the budget ran surpluses and in 2007 was at 3.4% of GDP.[citation needed] The EC forecasts that it will remain at 3.2% of GDP in both 2008 and 2009.[citation needed]
In regard to public debt, Bulgaria has also been within the prescribed cap of 60% of GDP. Government debt has also been declining consistently, from 50% of GDP to 18% in 2007. The expectation are to reach 11% of GDP in 2009.[12] Some recent analysis says that Bulgaria will not be able to join the Eurozone earlier than 2015, due to their inflation problems and the impact of the global financial crisis of 2008.[13]. Some members of Bulgarian government, notably economy minister Petar Dimitrov, have speculated recently about unilaterally introducing the euro, which was not well-met by the European Commission.

Bulgaria news Novinite.com (Sofia News Agency - www.sofianewsagency.com) is unique with being a real time news provider in English that informs its readers about the latest Bulgarian news. The editorial staff also publishes a daily online newspaper "Sofia Morning News." Novinite.com (Sofia News Agency - www.sofianewsagency.com) and Sofia Morning News publish the latest economic, political and cultural news that take place in Bulgaria. Foreign media analysis on Bulgaria and World News in Brief are also part of the web site and the online newspaper. News Bulgaria