Amid Brexit and Rising Populism — There’s a European Country that’s Still Desperate to Join the Euro
The eastern European nation of Bulgaria has provided the EU with some much-needed confidence, forging ahead with more integration despite rising anti-euro sentiment across the continent.
Bulgaria, who's been a member of the EU since 2007, wants to move forward with its European integration and join the euro area as soon as possible. The Bulgarian Finance Ministry told CNBC via email: "We work actively to join the ERM II, which is the first step to proceed to a simultaneous membership of the banking union and the euro area." The ERM-II exchange rate mechanism ensures that exchange rates with the euro do not fluctuate significantly. Bulgaria wants to join this before the end of the year, to therefore be one step closer to turning the euro zone into a 20-member club.
"The desire to join the euro area is both a political and economic aspiration," Alfonso Velasco Tamames, Bulgaria analyst at the Economist Intelligence Unit (EIU), told CNBC via email.
Sixty-one percent of Bulgarians also said they are optimistic about the future of the EU.
According to Macron, the euro zone needs to integrate further to become better prepared for future crises. He has defended those countries willing and ready to integrate now and believes they should move ahead even if other European countries aren't convinced — potentially creating varying levels of integration within the socio-economic bloc.
Is Bulgaria ready to accept the euro?
Economically, yes. The public accounts of Bulgaria are in a much healthier shape than many other euro zone countries.
Bulgaria has reportedly ended 2017 with a budget surplus of 0.9 percent and a growth rate above 3 percent. The European statistics agency, Eurostat, will confirm the final figures at the end of this month.
In the latest Convergence Report from 2016 — where the European Commission examined how close member states are to join the euro area — Bulgaria fulfilled three out of the five criteria. It still needs to change some laws affecting its central bank and be a member of the exchange rate mechanism ERM-2. The latter aspect, as previously mentioned, is something that Bulgaria wants to conclude this year.
A spokesperson for the European Commission told CNBC via email that "the EU has strict convergence criteria which need to be fulfilled before a Member State can join the euro area."
"Progress towards these criteria is assessed every two years by the Commission and the ECB (European Central Bank) in a so-called convergence reports. The next such report will be published in May 2018."
European Commission President Jean-Claude Juncker openly supported Bulgaria's accession to the euro area last November. After a meeting with the Bulgarian prime minister, Juncker said: "I have to say bluntly that Bulgaria is ready (to join the euro area). And if Bulgaria is applying I support this heartily."
At a time when the European Union is facing challenges with populism, more recently in Italy, and negotiating the first ever exit from the member bloc, with the United Kingdom; any voices supporting the Union's ideals are more than welcome.
More than an economic exercise
However, a country needs to be more than financially sound to join the euro. More conservative countries like Germany believe that being part of the euro zone is more than an economic exercise.
At a time when the euro zone tries to find a balance for risk-sharing (countries with better finances don't want to integrate further without guarantees they won't have to use their taxpayers' money to save indebted member states), adding new members could be tricky.
Furthermore, many in Europe argue that the most recent expansion for European membership, back in 2007, was too rapid. And recently-added countries, such as Poland, are creating problems with the EU by challenging its values.
"Despite meeting most of the technical criteria, accession to the euro area, however, will require Bulgaria to make significant efforts to further strengthen its institutions. Even then, it is not clear those efforts will be enough to persuade some of the most skeptical countries," Tamames from the EIU warned.
He cited issues with the judiciary system, financial supervision and corruption as a few examples where Bulgaria will have to so some work before entering the euro area.
Bulgaria is, according to Transparency International, the most corrupt country in what it describes as Western Europe. In the 2017 index, Bulgaria scored 43 in a range between 0 and 100, where 0 stands for highly corrupt.
But Bulgaria seems determined to join the euro area and be part of what it perceives as a prosperous club.
"We don't think there are any sufficient arguments for us to stay out," the Bulgarian Finance Minister Vladislav Goranov said in January.
- » The Irish Times: Welcome to Bulgaria, the World’s Fastest Shrinking Nation
- » Will this French Company Change the Large-scale Infrastructure Landscape in Bulgaria?
- » EconoTimes: Is Bulgaria a European Success Story or Crisis Waiting to Happen?
- » Apartments in Sofia are so Expensive they Set Records. Is the Property Market Overheated?
- » Bulgaria Inches Closer to Russia, to the West’s Disappointment
- » How Long Can Bulgaria Keep Facing both East and West?