Although Bulgaria’s Finance Minister Vladislav Goranov rejected recommendations from the European Commission and the European Central Bank that it must first enter the banking union in order to join the single currency, the minister has now compromised by claiming that Bulgaria will seek to join both at the same time within the next year.
Marking a slight shift on Bulgaria’s unhappiness of passing across scrutiny of its beleaguered banks to the ECB, Mr Goranov said today: “We’ll insist for both to happen on the same day. The final result, as I see it, is that within a year we will be able to enter simultaneously in close cooperation with the banking union and in the ERM.”
He said: “The commitments that will be made to us need to be definite.” He added the ERM-2 entry should not resemble Bulgaria’s efforts to join Europe’s passport-free Schengen zone.
However, Bulgaria’s hopes of joining the euro had been dashed after the European Commission and European Central Bank said that the country was a long way from “the requirements for central bank independence”.
For years Bulgaria – the EU’s poorest member – has rejected the recommendation of the European Commission and the ECB that it must first enter the banking union and put its top national banks under ECB scrutiny before it can begin the waiting period for membership to the Exchange Rate Mechanism (ERM-2).
Bulgaria is seen as a holding a high degree of risk for eurozone stability despite ticking all the boxes to adopt the euro with its lev currency pegged to the euro, low inflation and healthy public finances.
However, the country remains poor and economic output per capita in Bulgaria is just half the EU average. Meanwhile, revelations of widespread political corruption, or ‘graft’ have raised concern that it may not yet be fit to join the single currency.
Analysts view the move by the EU and the ECB to delay Bulgaria’s path to the euro by insisting on banking union entry – a process that may take at least six months and may prompt a review of potential toxic assets at its banks.
Despite positive backing from German Chancellor Angela Merkel and French President Emmanuel Macron, the ECB has been less enthusiastic over Bulgaria’s journey to the single currency four years after Corpbank, Bulgaria’s forth biggest bank collapsed, prompting the resignation of the governor of the central bank and triggering early elections.
After the collapse, the European Commission and European Central Bank both published reports at the end of May saying that Bulgaria was not ready to adopt the common European currency.
Citing a number of high-profile corruption scandals, the ECB report concluded: “The law on the Bulgarian National Bank, BNB, the law on counter-corruption and the law on credit institutions do not comply with all the requirements for central bank independence, the monetary financing prohibition, and legal integration into the Eurosystem.”
However, following the EU’s Brexit rejection and potential turmoil in Italy, leading European figure have been keen to cite Bulgaria as proof that its institutions remain desirable.
Jean-Claude Juncker, president of the European Commission said that he fully supports the country’s application to adopt the euro.
He said in March: “I have to say bluntly that Bulgaria is ready for euro membership. And if Bulgaria is applying I support this heartily.”