A decade after joining the EU, Bulgaria is stepping up its lobbying efforts to switch to the euro, part of an expansion by the bloc that could help stabilize the volatile Balkan region.
The former communist country is to ask eurozone politicians to back its bid to join the ERM-2 exchange-rate mechanism, the precursor to adopting the common currency, Bulgarian Minister of Finance Vladislav Goranov said in an interview on Monday.
EU enlargement into the western Balkans would benefit everyone by calming ethnic tensions and stemming westward migration, he said.
“I trust eurozone expansion is also a political process,” Goranov said in his office in Sofia, the capital.
“Europe must be bigger and more united to stay competitive, to overcome global challenges coming from Asia, Russia, Latin America. Integration should continue at a quick pace,” he said.
The Black Sea nation of 7 million people is pushing its bid to bind itself to the eurozone at a time when the wider EU is still reeling from shocks including the Greek debt crisis, a surge in refugees and Brexit.
Five of the currency union’s members are from the former Eastern Bloc. The Balkan region endured a spate of bloody conflicts following the breakup of Yugoslavia.
Bulgaria already meets most EU requirements for joining ERM-2. Public debt is 27 percent of GDP, well within the bloc’s 60 percent limit, while a projected budget deficit of 1.4 percent of GDP for this year is less than the half the 3 percent maximum.
Bulgaria’s currency, the lev, is pegged to the euro under a currency board system imposed 20 years ago in the wake of a banking crisis. According to the system, central bank lending is banned and lev in circulation must be fully covered by foreign-exchange reserves.
While the economy is expanding and the Bulgarian government might raise this year’s growth forecast from 3 percent to 3.9 percent, Goranov said that living standards have not improved sufficiently to meet EU requirements and could derail the nation’s ERM-2 aspirations.
Bulgarian Prime Minister Boyko Borissov’s third government in eight years took office this month, pledging to end political upheaval that has brought a spate of elections and held back investment.
Priorities include reforming the judiciary and overhauling the education system.
The country, which relies on low taxes and cheap production costs to retain manufacturers, remains the bloc’s poorest.
“Bulgaria is one of the few countries that’s persistently sought to join the single currency,” Goranov said. “The country meets the formal criteria, with the exception of the cohesion indicator. Unfortunately we’re far below the 70 percent of GDP per capita relative to the euro-area average that other countries had at the time of joining the single currency.”
The government will nevertheless lobby eurozone officials for permission to begin the accession process, said Goranov, who is serving a second stint as finance minister under Borissov.
It has not set a time frame for its ERM-2 application and “will apply when we know we’re ready and won’t be rejected,” he said.
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