ECB: Sofia, Zagreb make strides towards Eurozone

Bulgaria and Croatia must make significant progress in terms of quality of institutions and governance. This was noted in a European Central Bank (ECB) piece on the two countries that last year joined the exchange rate mechanism ERM II, also known as “the Eurozone's waiting room”.

Sofia and Zagreb have made huge strides in getting macroeconomic imbalances under control, but still have a long way to go when it comes to better institutions and governance, is the conclusion of the ECB, as reported by the Bulgarian National Radio. This is the crucial leap that Bulgaria and Croatia need to make so they could be given the greenlight to adopt the euro, especially in the new reality created by the Covid-19 pandemic, which has serious and direct ramifications for the economic activity and has the potential to cause various deviations.

ECB analysts went through the history of all countries that were ever admitted to the Eurozone's waiting room and came to the conclusion that the exchange rate mechanism was beneficial to each and every one of them. Their analysis also notes that Sofia and Zagreb have signed agreements which set a standard range of deviation for the rate at which the local currency is exchanged for the euro, but it firmly stresses that there is consensus for Bulgaria to adopt the single currency at its current exchange rate with the lev under the terms of the country's currency board.  

The ECB analysts also draw attention to the importance of avoiding turning the adoption of the euro into a cause for a spike in prices that could be exploited by some businesses.

A concrete date for the accession of Bulgaria and Croatia to the Eurozone is not mentioned, but Dimitar Radev, governor of the Bulgarian National Bank, has repeatedly stated that this could realistically happen in 2024, even with the impact of the Covid-19 crisis on the country's economy.

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