Bulgaria will apply officially for ERM-II membership only when it receives assurance it will be supported and the ERM-II accession prospects should be known by end-2017, finance minister Vladislav Goranov said in an interview for local media Capital. The government will hold several meetings with ECB and all the Eurozone member states in the upcoming months in an effort to convince them that Bulgaria is ready for such a step, he said. The argument about the still large living standards gap between Bulgaria and the EU average, which is often used to deter Bulgaria’s aspiration for Eurozone membership, is not irrefutable, the minister implied. He said that Bulgaria’s convergence to the average EU GDP actually depends on the country’s integration within the ERM-II.
Goranov admitted Bulgaria’s government still needs to tackle the problematic issues related to the weak institutions, huge administrative burden, lack of trust in the judicial system and corruption. Informal talks with other finance ministers have shown that Bulgaria will need to sustainably decrease its budget deficit, he said. Goranov will propose new amendment of the Social Insurance Code to improve the related parties’ definition in order to address the related-party exposures problem. The minister explained that Bulgaria has started to pursue more actively Eurozone membership in the past months due to improved financial system stability, good economic growth and meeting all the Maastricht criteria required for Eurozone accession.
Bulgaria’s current target is membership in the ERM-II, and once it is fulfilled, the country will not hurry for full Eurozone membership, Goranov added. The prospects of euro adoption would be realistic only once three to five years have passed since Bulgaria’s accession in ERM-II, but the advantages of ERM-II membership in terms of image, prospects and stability will be sufficient for the country, the finance minister said. Bulgaria will need to pay around EUR 85mn per year in the first five years after accession in the Eurozone, the sum will reach some EUR 681mn to EUR 788mn by the end of the 12th year, according to the finance ministry calculations.
Bulgaria will not ask to join the EU’s banking union before full-fledged membership in the Eurozone, Goranov also said. The reason is that Bulgaria will not have access to bail-out funds and liquidity to save its banks in case of necessity, but the central bank will need to cede its monitoring and decision-making right on the three largest banks in the country.