Bulgaria to Restart Eurozone Accession Talks

Business » FINANCE | January 16, 2015, Friday // 09:17
Bulgaria: Bulgaria to Restart Eurozone Accession Talks Bulgaria's Finance Minister Vladislav Goranov, photo by BGNES

Bulgaria’s government is going to restart talks on adopting the euro with the governments of the 19 eurozone countries, according to Finance Minister Vladislav Goranov.

Goranov visited Vilnius Thursday on the occasion of the Lithuania's eurozone accession and the abolition of the local currency, the Lithuanian litas (LTL).

As of midnight on January 15, payments in Lithuania, the 19th member of the euro area, must only be made in euro.

“There is political consensus on the need to adopt the euro as soon as possible,” Goranov said, as cited by the 24 Hours daily.

He did not specify deadlines for Bulgaria’s entry into the Exchange Rate Mechanism (ERM II), seen as the euro zone waiting room, and the subsequent adoption of the euro as the official currency.

Goranov argued that it was possible to join ERM II by 2018, when the term in office of the current government was set to expire.

He suggested that Bulgaria would ask the 19 euro-area countries for a road map of the commitments and the reforms which Bulgaria had to implement in order to join ERM II.

Bulgaria’s Finance Minister suggested that there were no preliminary conditions for participation in ERM II, adding that the candidate had to match the requirements of the eurozone countries for structural reforms and stability.

Goranov said that it was therefore essential to specify what the 19 euro-area countries expected of Bulgaria.

Bulgaria is operating a currency board arrangement, a tight monetary policy system that pegs its lev currency to the euro at a fixed exchange rate, but is not in ERM II, the formal EU mechanism for limiting currency fluctuations. Countries must spend at least two years in ERM II before joining the euro.

Bulgaria said in September 2012 it was putting on hold its plans to adopt the euro due to the debt crisis and the double dip recession facing the eurozone, along with rising public opposition to abandoning the lev.

Gornaov also said that replacing the Bulgarian lev with the euro would have a positive economic impact as the financial resources which the country would be able to borrow would be cheaper, the currency risk would be abolished, and the foreign investments would increase.

Bulgaria’s Finance Minister insisted that there were price control mechanisms that would prevent price spikes due to the adoption of the euro.

The European Commission said in its 2014 Convergence Report issued in June that while Bulgaria meets three of the criteria for the adoption of the common European currency (price stability, public finances and convergence of interest rates), it doesn’t  fulfil the requirements relating to legislation, particularly the Law on the Bulgarian National Bank.

“In the light of its assessment on legal compatibility and on the fulfilment of the convergence criteria, and taking into account additional relevant factors, the Commission considers that Bulgaria does not fulfil the conditions for the adoption of the euro,” the EU’s executive body said.

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Tags: finance minister, Vladislav Goranov, Eurozone, Euro Area, Euro Area, ERM II, Lithuania
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