Bulgaria has no place in the Eurozone, whether it meets the Maastricht criteria or not. This is the short message of the so-called Convergence Report of the European Central Bank, which was published in early June 2014. It recognizes that Bulgaria fulfills all the requirements of the Maastricht Treaty for entry into the Eurozone. For example, in the country, the inflation is minus 0.8 percent, well below the minimum of 1.7 percent according to the Maastricht criteria. Our budget deficit was 1.5 percent of GDP as against a limit set for entry into the zone of 3 percent. Average long-term interest rate on Bulgarian government bonds is 3.5 percent at the maximum allowable 6.2 percent. The debt of the country is 23 percent of GDP as against a maximum of 60 percent as a threshold. Yet, according to the ECB, and according to the European Commission, Bulgaria is not ready to join the euro area. They are highlighting a number of factors.
First, Sofia does not qualify for participation in the two-year currency mechanism for the Eurozone, known as ERM II. According to its rules for two years in a row the country must maintain a rate of the national currency against the European that does not deviate by more than 25 percent of the amount at which the State has entered into the mechanism. Well, Bulgaria has kept the rate pegged to the euro for 17-years, the exchange rate is fixed and does not give any deviations. Only that the country has not been accepted to ERM II, which is why these nearly two decades have not been counted. Bulgaria has not been accepted, because to get into it, a state has to ask the current member states of the euro area. Not that it is written in the rules for the Eurozone, but de facto this is the case. If the countries that have adopted the European currency do not want you among them, even if you’re perfect regarding the requirements of the Maastricht criteria, you stay out and wait.
In order to keep pesky intruders at bay, which means – Bulgaria outside the euro area
ECB has invented many mechanisms
The Maastricht Treaty does not say that the requirements for inflation, budget deficit, the ratio of government debt to gross domestic product and average long-term interest rate on government bonds should be evaluated within a long period of time. Only that ECB has devised criteria for sustainability, has appropriated the right to assess the sustainable implementation of the Maastricht criteria, considering them retrospectively for a previous period of ten years. On this basis, it makes predictions about future performance. These imaginary rules of course find a flaw in the finances of Bulgaria, which is over-emphasized in the Convergence Report. There is emphasis on the fact that in 2008 the inflation reached 20 percent and that, given its low values in 2013 (when the country had deflation) in the coming years the rate of price increase is expected to grow. An since the capabilities of Bulgaria to lead an independent monetary policy are limited the inflation rate can hardly be influenced by state policies.
Attention is drawn to the fact that despite the low budget deficits there have been countercyclical increases that led to the opening of an excessive deficit procedure against Bulgaria (during the period in office of FinMin Dyankov) in 2010, which was discontinued in 2012. Concern has been expressed that the Government again increased the deficit in 2013, even though even during this situation it was two times lower than the limit of 3 percent of GDP.
To insure against further pushing from countries like Bulgaria to enter the euro area, the ECB has introduced the so-called
indicators of economic imbalances
They estimated inflows, current account deficit, net investment position, nominal labor cost per unit of output, unemployment and numerous other indicators that are not listed in any contract concerning a national adoption of the euro. Not to mention the fact that some of these indicators have not been adjusted for nearly two decades. And when countries like Italy and Spain entered in the Eurozone, no one was checking on them. These countries did not even meet the Maastricht criteria, and were very far away from covering the requirements of those imbalances. Only when it comes to Bulgaria, they are under scrutiny. And poke under our noses as critical for entry into the European Monetary Union.
The Convergence Report also highlights the need of reforming Bulgaria’s labour market, education, the judiciary, and many other sectors. Why? The harsh reality is that when it comes to international politics and making such important decisions, such as the accession of a country into euro-area, any criteria for adherence to principles, transparency and consistency may go into the trash bin.
In their place
what begins to operate are the double standards,
backstage negotiations and decisions in favour of the leaders of the European Union – Germany and France. For them is not so important whether the Maastricht criteria are met or not. Much more important is whether the host country is unquestioningly loyal to the two great forces. This is why nobody takes seriously the prospect of Bulgaria’s becoming part of the Eurozone.
First, the state does not guarantee the interests of foreign capital in the country. Moreover, Brussels and Frankfurt believe that the courts in this country tolerate debtors in bankruptcy cases of and in procedures for collection of outstanding receivables.
Most importantly, however, is that Bulgaria is still seen as a country that has broken its strong relationship with Russia. As some people in the Central Bank say, no one will allow Bulgarians to take decisions about the fate of the euro and the monetary policy of the ECB, if there is a droplet doubt that the country is still under Russian influence.
The BANKER
