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Commenting article: The Eurozone Enlargement: A Viewpoint from Bulgaria

Georgi Angelov, Senior Economist with the Open Society Institute – Sofia,argues that the ESM and the Pact for the Euro are a real burden for the poorer EU member states and they significantly decrease their incentives to join the Eurozone.

The background

In the first decade of the existence of the euro, there was a very interesting phenomenon. The Eurozone candidate countries had to meet strict criteria, while the Eurozone member states in practice had no such conditions (normatively, such rules existed but were not observed). There was a remarkable case, when a candidate for the Eurozone was not admitted as it had inflation rate just 0,01% above the required level. At the same time, many countries of the Eurozone did not meet the requirements for a government debt for years on end, but no action was taken against them.

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#1
Mihail - 29 Mar 2011 // 04:07:34

The EU is terrible, they try to grab power with every single agreement they pass.

The Lev is stable only because it is tied to the Euro.
Can anyone explain what difference it makes to have the Lev tied and have the Euro?

It seems the first is better, since it doesn't require us to give up anything (example reform taxes, etc.).

#2
Nellieherself - 29 Mar 2011 // 05:47:20

"The EU is terrible, they try to grab power with every single agreement they pass."

That's what happens when you give power to too many bureaucrats. Their priority is self-perpetuation. It is difficult to get a man to understand something, when his salary depends upon his not understanding it.

#3
DrFaust - 31 Mar 2011 // 09:56:49

"It seems the first is better, since it doesn't require us to give up anything."

So giving up an independent monetary policy 'doesn't require us to give up anything'.

Amazing, Professor Einstein. And so intelligent.

But maybe you should better stick to subjects with which you are more familiar, like orthography, lack of humor and pump guns.

LOL

#4
Mihail - 31 Mar 2011 // 15:13:35

DrFaust,

I see a hint of logic here, perhaps I can clarify something for you. You claim the following:

" "It seems the first is better, since it doesn't require us to give up anything."

So giving up an independent monetary policy 'doesn't require us to give up anything'.

Amazing, Professor Einstein. And so intelligent. "

Giving up an independent monetary policy requires us to give up an independent monetary policy... we have a saying in Bulgaria that is literally translated "wooden philosopher" to describe someone that brings up trivially useless observations into an argument, when they can clearly understand what the other person is saying.

I was considering only two alternatives, both of which include giving that up. "it doesn't require us to give up anything" means "anything extra". You can deduce this from the setup of the logical problem. Everyone is giving up something at all times, so logically "giving up something" must have the meaning of "giving up something more that you are already giving up".

You wouldn't be bringing this up if you had some idea of the history of the Bulgarian central bank. Giving up the monetary policy in Bulgaria is considered a good thing by economist, because it takes away the power of Bulgarians to print money and had it out to their friends. History has shown that Bulgarians are irresponsible with the nation's money supply.

You can praise Einstein all you want, that isn't going to help you.

#5
Nellieherself - 31 Mar 2011 // 19:16:50

"Giving up the monetary policy in Bulgaria is considered a good thing by economist, because it takes away the power of Bulgarians to print money and had it out to their friends. History has shown that Bulgarians are irresponsible with the nation's money supply."

But if Bulgaria assumes the euro, it will not be able to devalue the currency, restructure its debt, or to execute a strategic default. Consider Greece. If Greece was not on the euro, it could now default, restructure its debt, and start fresh, like Argentina did a few years ago. I don't know which is worse. Six of one, half a dozen of the other.

#6
Mihail - 1 Apr 2011 // 03:11:06

Nellie,

I totally agree, but the core functions of the BNB need to restricted. No lending of last resort or ability to print money. The bank won't help people if it is allowed to do these things, they'll just give loans to their friends, much like in the US.

Avoiding the EU is impossible, if they want to bail you out, they'll find a way. And that's another reason I am against international agreements where the Bulgarian government borrows any amount of money from foreign source.

As it is right now, Bulgarians don't effectively deal in Levs. People think in terms of Dollars of Euro and I think we should basically just make a bunch of foreign currencies legal, then people can avoid most of the monetary problems.

#7
Nellieherself - 1 Apr 2011 // 03:20:39

Michail

Printing money is overrated. It doesn't help the economy to grow, it just creates fiat money and devalues the currency. The US is printing money and giving it away to its friends, but it can't print jobs, so it is still $14 trillion in the hole. Jobs are what boosts the economy and creates tax revenue for the government parasites.

#8
DrFaust - 1 Apr 2011 // 11:26:51

Hey Mihail,

you can rant as much as you want. Your statement that Bulgaria had to give up nothing is contrary to the truth and it is not a sign of intelligence that you try to cover your quite idiotic statement with such a long diatribe.

#9
Mihail - 2 Apr 2011 // 08:33:59

"you can rant as much as you want. Your statement that Bulgaria had to give up nothing is contrary to the truth and it is not a sign of intelligence that you try to cover your quite idiotic statement with such a long diatribe."

You make a claim, but provide no evidence. Can you please look at the length of your last love poem to me? And "diatribe"? Really? Do you even understand the definition of that?

What I said is logically true and even god can't argue with logic. Why do you assume you can?

#10
Mihail - 2 Apr 2011 // 09:12:30

Nellie,

"Printing money is overrated. It doesn't help the economy to grow, it just creates fiat money and devalues the currency. The US is printing money and giving it away to its friends, but it can't print jobs, so it is still $14 trillion in the hole. Jobs are what boosts the economy and creates tax revenue for the government parasites."

This is something I would say.
What DrFaust accurately points out is that giving up the monetary policy (in a currency board, or similar) is a huge loss for a country.
In my opinion (agreeing with you) the loss comes form the fact that now OTHER COUNTRIES will print money for you and you don't have the ability to stop it in any way.

Like I said, I think the solution is to just use many different currencies and not to invest the system in any one of them.

#11
Mihail - 2 Apr 2011 // 09:21:49

Some clarification in case it is needed,

"OTHER COUNTRIES will print money for you"

This is indirectly done through the trade accounts.

#12
ChiefSealth - 2 Apr 2011 // 21:57:06

its a must if enlargement is the goal http://71-32-92-211.tukw.qwest.net/727b.htm

#13
me4opuh11 - 3 Apr 2011 // 23:28:30

This is a great article. Sadly, reading it is probably the high-point of my day :) I think he's absolutely right with what he's saying. I don't see why Bulgaria should rush into taking up the euro. Will Bulgaria's economy be destroyed if it doesn't take up the euro immediately? Probably not. I think Bulgaria's leadership should think hard about whether to join. BG's balance sheet is pretty good and it still has advantages over other countries. I'm happy I'm learning Bulgarian, even after the recession :)

#14
DrFaust - 13 Apr 2011 // 11:27:25

Hey Mihail,

"You make a claim, but provide no evidence."

The evidence is the statement you posted (as everyone except you understood) - but you are right, how can someone consider your gaymes as "evidence"?

And hey, do you discover the typo?

LOL

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