Bulgaria will not enter ERM II, seen as the eurozone waiting room, Finance Minister Simeon Djankov announced at a press conference on Friday (9 April).
"We have given up applying for the euro zone because for the moment we don't meet the criteria and it would have been insolent to do so," said Prime Minister Boyko Borissov.
Bulgaria had planned to join ERM II in 2010 and to become a member of the euro zone in 2013.
For a long time, Bulgaria has claimed that it is about to fulfil the Maastricht criteria for eurozone entry (EurActiv 09/03/09).
As part of efforts to meet the target for ERM II, the centre-right government had even delayed VAT refunds for businesses in a bid to keep the budget deficit low.
However, Finance Minister Djankov explained that Bulgaria's hidden budget deficit had ruined its dreams of joining the euro zone. The deficit stems from financially unaccounted procurement deals concluded by the previous socialist government led by Sergey Stanishev.
The minister said the deals had increased the deficit to 3.7% of GDP compared to earlier estimations of 1.9%.
"We were seen as front-runners together with Estonia, but now I will bear the shame in Madrid [where finance ministers will meet informally on 16-18 April] when I tell my colleagues what has happened," Djankov fumed.
"We have in fact lied to our [EU] colleagues about our readiness for the euro zone, being unaware of this trap," Djankov said.
"Europe does not make a distinction between current and former governments. I represent Bulgaria and now it is shameful," he added.
Nevertheless, the minister was quick to stress that the financial stability of the country was not at risk. The IMF has maintained a currency board for Bulgaria since 1997.
"This year, there is no risk to fiscal stability, the currency board or the banking system thanks to our tight fiscal policy," Djankov said.
