Bulgarian Finance Minister Plamen Oresharski said yesterday joining the eurozone is not a priority and that Bulgaria will adopt the single currency when it meets the entry criteria.
European Union newcomer Bulgaria hopes to enter the ERM-2 – a two-year waiting room for euro hopefuls – by June but has been flexible about eurozone entry, saying it could happen in 2010 or one or two years later.
“The eurozone entry is not a priority. We will join when we fulfill all the criteria. We ourselves would not want to join before that,” Oresharski told reporters.
“My priority is to maintain the smooth functioning of the currency board regime until we enter the eurozone,” he said.
The Black Sea country pegged its lev to the euro in 1997 and plans to keep its currency board regime and the current peg unchanged until entering the eurozone – possibly in 2010, 2011 or 2012.
Some analysts believe that the lev is overvalued and that its depreciation could help the country become more competitive but both the Socialist-led government and the central bank argue that the current peg is relevant and should be kept.
Bulgaria meets all Maastricht criteria to adopt the single currency, apart from the inflation one, and Oresharski has said he did not favor severe measures to curb it just to enter the eurozone.
Sofia ended 2006 with 6.5 percent annual inflation but sees it slowing to 3.4 percent this year, and to 3 percent in 2008 and 2009, mainly due to expected easing of administrative price hikes and the increased competition on the EU common market.
Oresharski reiterated that Bulgaria will keep its tight fiscal policy till 2009 and will restrain wages to protect the economy from external risks from its current account deficit that reached 16.3 percent of GDP in 2006.
“We are committed to (a) prudent fiscal policy and will aim to achieve a budget surplus that exceeds 2 percent of GDP this year,” Oresharski said. “We will increase public sector wages only in line with productivity to remain competitive.”
With average monthly income of just 200 euros, Bulgaria is among the poorest EU members, but analysts have warned that an abrupt increase in wages could undermine its macroeconomic stability and fuel inflation.
(Reuters, 28/03/2007)