30.01.2019

“The first condition to apply for ERM II is to obtain an assurance from the ECB that they are ready to enter into close cooperation with the BNB on banking supervision. At the time of obtaining this assurance we must have fulfilled the other commitments undertaken by us and then we will have the opportunity – after mid-2019 – to apply for membership of ERM II; I see no substantial reason Bulgaria to be refused membership.” Minister of Finance Vladislav Goranov commented the above in the framework of the 13^th “Meeting of Businesses and Government” forum on “Bulgaria on the path to the euro area: what will be the effects on the economy and how businesses should prepare for it” organised by “Capital”.

The Minister said that there was no reason for any political turbulence and shift in the direction set by the current government with regard to the membership of the euro area. According to him, at the time when we manage to include the Bulgarian lev in the ERM II the process would become largely irreversible. Goranov also mentioned that until recently he had felt that systemic political parties had 100% consensus on the issue of the country’s membership of the euro area, but lately he had heard opinions from the main opposition party that we should not be in a hurry. The Finance Minister responded to this with the argument that “for a state with a fixed exchange rate there is not a single meaningful reason not to be in a hurry to become part of one of the most powerful economic infrastructures, called euro”. According to Minister Goranov, in this situation we are in fact linked to and directly dependent on the ECB’s monetary policy without being part of the decision-making process in any way.

The Minister said to the business representatives that the government, together with the BNB and in consultation with the ECB, had made substantial amendments to the legislation to empower the ECB following the start of the close cooperation on the Banking Union as well as that everything that had been envisaged as measures in the government’s Plan for Accession to the ERM II was on track.

With regard to the commitments made by our country in the summer of last year, Minister Vladislav Goranov said that none of the measures related to the improvement of the banking and non-banking supervision of the financial system as well as of the measures that could be provisionally called “political” were against the Bulgarian society. “Each activity will lead to greater certainty for the financial system, to better quality of the state governance and certainly to better perspectives for the economy because the euro is not a “silver bullet” and it will not solve all structural problems of the Bulgarian economy, but the experience of all the countries that have joined the euro shows that it is a good basis for much more accelerated economic development, at the very least because of the increase in trust and being part of the club of the rich countries,’ Goranov added.

The Finance Minister is firm that there have been few national targets following Bulgaria’s accession to the EU and this sometimes makes us look for our direction and wander; for this reason our perspective and willingness to join the euro area could be such target. 

In reply to businesses’ questions, Minister Goranov commented the potential deadlines for the introduction of the euro, explaining that it was a technical procedure – “if we enter the ERM II in the summer of 2019, we need to stay there for two full years; after that, on the basis of the results after the second year of our stay in ERM II, the Convergence Report will be prepared and only then our readiness to enter the euro area could be evaluated”.

As regards interest rates and euro area, the Finance Minister commented that bankers had been preparing the society for the higher interest rates for a long time but in his opinion that would not happen as quickly as expected – according to him, at least for the next one or two years interest rates would be influenced by the momentum gained from the ECB’s actions over the last few years.