Bulgaria Eurozone Dreams Wrecked by Hidden Budget Deficit

Politics » BULGARIA IN EU | March 27, 2010, Saturday // 15:54| Views: | Comments: 0
Bulgaria Eurozone Dreams Wrecked by Hidden Budget Deficit: Bulgaria Eurozone Dreams Wrecked by Hidden Budget Deficit Borisov said that Bulgaria’s application to join the eurozone is very important as it gives the country a safety net. Photo by Sofia Photo Agency

Bulgaria’s hidden budget deficit may ruin Bulgaria’s dreams of joining the eurozone, Bulgaria PM Boyko Borisov reported Saturday.

Borisov, speaking at the extraordinary meeting of the Bulgarian Medical Association, said that if the BGN 2,12 B in contracts, including those signed by the previous government for energy projects such as the Belene Nuclear Power Plant and Tsankov Kamak, are not found to be illegal Bulgaria’s eurozone hopes will be dashed.

He added that Bulgaria’s application to join the eurozone is very important as it gives the country a safety net: “Everyone in the eurozone, like in Greece’s case, group together and help you if you are in a crisis or serious situation. If the same happened in Bulgaria currently no one would help us.”

Borisov concluded that since the BGN 2,12 B were not included in the 2008-2009 budget Bulgaria was deemed to have a balanced budget. "This means that firstly, we should immediately go and admit to Brussels that we deceived them, which would automatically remove any hope of us joining the eurozone now.”

The news comes shortly after diplomats and experts have commented that euro zone leaders' decision to strengthen European Union budget rules to avoid a repeat of the Greek debt crisis will toughen the criteria and weaken the chances of single currency candidates, including Bulgaria.

There have been months of speculations over when the former communist state would formally apply to the bloc's exchange-rate mechanism, the so-called Eurozone waiting room. According to the latest plans announced by Finance Minister Simeon Djankov this should happen by July, when the Spanish presidency of the European Union ends.

Minister Djankov, a World Bank economist, hopes to offset a possible reluctance to admit Bulgaria into the ERM, stemming from the Greek crisis, by garnishing the application with a targeted balanced 2010 budget, the smallest 2009 deficit in the EU and laws overhauling the inefficient health-care and social-security systems.

Countries must be members of ERM II for two years before they can formally join the eurozone. Bulgaria believes that it could be ready for euro entry by 2013.

Joining the exchange-rate mechanism would bring Bulgaria closer to the umbrella of the euro region and the protection of the European Central Bank and is conditional on whether the new government will succeed to restore Brussels trust.

The lev is already linked to the euro in a currency board that keeps the Bulgarian currency at 1.9558 to the euro. Joining the exchange-rate mechanism may allow the lev to fluctuate by as much as 15 % around a central band, though the central bank has said it will leave the lev tightly pegged to the euro through the duration of the two years.

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Tags: Eurozone, budget deficit, Boyko Borisov, ERM II
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