Bulgaria has a long way to go before it is ready to adopt the euro, but allowing Sofia into the Exchange Rate Mechanism (ERM-2) will be an acknowledgment of the Balkan country’s reform efforts, its finance minister said today (2 June).
Bulgaria joined the European Union in 2007 and while it meets the nominal criteria to join the eurozone, it needs to reform its small economy and uproot graft to bring its low living standards closer to its wealthier EU peers.
The Bulgarian lev (BGN) was pegged to the Deutsche Mark since 1997, when the country introduced a currency board. The Mark has since disappeared and the lev is now pegged to the euro at a constant rate of 0.511494.
Bulgaria does not have a date in mind for joining the euro but has stepped up its efforts to convince its EU partners it should be allowed to join the ERM-2 currency grid, commonly known as the euro’s “waiting room”.
Finance Minister Vladislav Goranov told an economic forum in Sofia that Bulgaria can only benefit from joining the ERM-2 and the eurozone itself.
“We will strive to convince our partners that we still have a long way to go, but, joining the ERM would be a good assessment of the efforts the Bulgarian society is making and the confidence it has in the common European idea.”
Bulgaria has relatively low inflation, a small fiscal deficit and one of the EU’s lowest public debt levels.
But its living standards are less than half of the EU average, when calculated as gross domestic product per capita and Sofia has yet to prove it is serious about combating graft and putting high level corrupt officials behind bars.
Goranov said countries should not be allowed to adopt the euro on political grounds but stressed that a political debate was needed on how to strengthen and further expand the eurozone in the wake of Brexit.
In a previous cabinet of PM Boyko Borissov more than two years ago, Goranov made similar announcements about the ambition to enter ERM-2.
Speaking at the same forum, European Commission Vice-President Valdis Dombrovskis said the EU executive will support Bulgaria’s efforts towards adopting the common currency but outlined the need for more reforms.
— Valdis Dombrovskis (@VDombrovskis) June 2, 2017
“Member states need to fulfil nominal convergence criteria, to which Bulgaria is actually doing quite well,” said Dombrovskis, who is also the Commissioner in charge of the euro.
“But also there are questions on sustainability of this nominal convergence,” he said.