Dombrovskis: Adopting the euro is important for small economies

Bulgaria is firmly set on the path of joining the Eurozone, EC Vice President said at the conference in Sofia

Photo: BTA Finance Minister Vladislav Goranov (L), EC Vice President Valdis Dombrovskis (C) and MEP Eva Maydell.

The adoption of the euro is important for small and open economies which rely on exports, like Bulgaria's, EC Vice President Valdis Dombrovskis said in Sofia on Tuesday, adding that this is also important for the Bulgarian tourist industry and noting that 2018 was a boom year for the sector.

He was speaking at the 13th Annual Conference Government Meets the Business, which was also attended by PM Boyko Borissov and Finance Minister Vladislav Goranov. Dombrovskis expressed his satisfaction with the fact that Bulgaria is firmly set on the path of joining the Eurozone. For 20 years now, the single European currency has been strong, stable and convenient to use, he said.

The Commissioner is aware that the majority of Bulgarians favour the adoption of the euro in their country. On the other hand, much work remains to be done in explaining the advantages of the euro to the Bulgarian people, so that they will be really convinced. This was not done, for example, in Latvia before the country joined the Eurozone, but now the Latvian people are convinced of the benefits associated with the euro and welcome its use.

PM Borissov said one of the important effects of Bulgaria's planned accession to the Eurozone will be that its banking system will become more disciplined. Lower loan interest rates, a stable banking system, and the reassurance of knowing that there is someone who can help you in case of crisis, are also among the benefits, Borissov pointed out.

According to the prime minister, Bulgaria is one of few EU Member States whose economic parameters show discipline, and this is recognised. The country's annual tax revenues increased by 50% in 2018 compared with 2014, which shows that the systems are working well and there is transparency. In 2019, Bulgaria's external debt is expected to drop to 18.6% of GDP, one of the lowest ratios in Europe. Investments are increasing and they are flowing into the real economy, noted Borissov.

Finance Minister Goranov said there is no reason to expect that prices will rise substantially after Bulgaria joins the Eurozone. He noted that the situation in Bulgaria is not very different from that in other countries while they were moving towards Eurozone membership.

Bulgaria's accession to the Eurozone will bring advantages regarding the price of financing the national economy and greater security for the financial system, Goranov went on to say. “There is not a single valid reason for a country with a currency peg not to be eager to join one of the most powerful economic infrastructures: the euro,” he argued. According to him, the earliest date on which Bulgaria can adopt the euro is 1 January 2022.

Goranov, EC Vice-President Valdis Dombrovskis and Bulgarian MEP Eva Maydell (GERB/EPP) took part on Monday in a Citizens' Dialogue discussion on Bulgaria's road to the euro.

“If we pass successfully the banks' stress tests and asset review, we can apply for the Eurozone 'waiting room' in early July 2019. The average stay in ERM II is usually two years, and preparations for the introduction of the single European currency take one year after that. This preparatory stage, however, can be done earlier, so we can adopt the euro at the beginning of 2022,” Goranov specified.

Replying to a question, Goranov said he does not think that early parliamentary elections, if any, can appreciably affect the timeframe for Bulgaria's entry into the euro area. “The timeframe can be changed only if the commitments we have assumed to amend legislation and to start close cooperation with the European Central Bank (ECB) in banking supervision are not honoured. If, however, Parliament is dissolved for some time and legislative resolutions cannot be effected, the adoption of the euro may recede after all,” the finance minister admitted.

Maydell singled out Bulgaria's plan for progress to the Eurozone and a roadmap for the adoption of the currency as positive aspects.

Bulgaria has a fixed exchange rate even now but does not benefit from the support of the ECB and the advantages of lower interest rates and financial costs, Dombrovskis pointed out. He said that Bulgaria meets all ERM II criteria with the exception of exchange rate stability. Bulgaria is supposed to join the European Banking Union, for which it has to meet definite requirements, including measures against money laundering. Coordinated progress is being made, and the country can be certain of a positive result in the middle of this year, the EC vice president stressed.

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