Euromoney: Analysts Say KTB Woes to Hit Bulgaria Standing in Brussels
The crisis at Corporate Commercial Bank (KTB) is likely to delay Bulgaria’s intention to join the Eurozone event further, Euromoney magazine has reported, quoting analysts.
The bank run on Bulgaria’s fourth-largest lender has brought “allegations of corruption and political instability to the fore”, adding up to a conclusion in this year’s convergence report by the European Commission that Bulgaria still does not meet all the Eurozone membership criteria. The EC cited cited ‘incompatibilities and imperfections’ with regard to the independence of Bulgaria’s central bank (BNB) for its conclusion.
Making a brief overview of the KTB crisis, Euromoney author Farah Khalique quotes the opinion of Gunter Deuber, head of CEE research at Raiffeisen Bank International, that the banking scandal is not adding to Bulgaria’s chances of joining the eurozone and “[…] will certainly, at least from a short-term perspective, create a more cautious view of Bulgaria’s standing in Brussels."
According to Antonio Timoner-Salva, senior economist at business information and analytics company HIS, “last month’s announcement that Bulgaria will aim to “voluntarily join the European banking union” even though the country is not a Eurozone member was “a smart move” signaling that the Bulgarian authorities “are committed to achieve much better standards of banking supervision, " the Euromoney article says.
But while the authorities are trying to put Bulgaria on track for Eurozone membership despite the odds, the public in the EU’s poorest member state still needs convincing, with the European debt crisis having “made Bulgarians more cautious about adopting the euro”.
And those Bulgarians are not the only ones to be sceptical about the benefits of replacing the lev with the euro, to which the Bulgarian currency has been pegged at a fixed exchange rate since 1999 under a rigorous monetary mechanism called currency board system.
According to Steve Hanke, professor of applied economics at the Johns Hopkins University in Baltimore who helped introduce Bulgaria’s currency board in 1997, the country should stick to the lev.
“Just being a member of the EU but not part of the eurozone means they can’t get bailed out, so have to stand on their own two feet and be disciplined," Euromoney quoted Hanke as saying.
You can read the full Euromoney article here.
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