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Political will needed for Bulgaria's euro zone entry in 2024 -central bank governor

Economy Oct 27, 2022 11:56AM ET
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© Reuters. FILE PHOTO: Bulgarian and EU flags flutter at the Bulgarian side of the "Kapitan Andreevo Border Crossing" with Turkey, March 2, 2020. REUTERS/Florion Goga/File Photo

SOFIA (Reuters) - The political instability and lack of a regular government is posing a serious challenge to Bulgaria's prospects to join the euro zone as of Jan. 1, 2024, its central bank governor said on Thursday.

Speaking in parliament, Dimitar Radev said the Balkan country needs a clear political will to make up for the delays prompted by the political turmoil in the past two years if it is to adopt the single currency as planned.

General polls on Oct. 2, the fourth in 18 months, again produced a deadlocked parliament that is struggling to form a working government. New snap polls could not be ruled out.

The European Union's poorest member, which already pegs its lev currency to the euro, pledged to adopt the single currency at its current fixed rate, but has lost momentum after joining the euro zone's "waiting room" along with Croatia in 2020.

Croatia is now set to adopt the euro as of next year.

"There is a serious delay in the process, mainly in taking of political decisions," Radev told deputies. "The only difference with Croatia is that Croatia demonstrated very strong political engagement".

Radev said the lack of a regular government that can take a clear commitment complicates Bulgaria's euro zone prospects.

Asked by lawmakers if the country could realistically join the euro zone in 2024, Radev said: "It depends."

"If we do not have a budget and a clear mid-term fiscal forecast, the condition of meeting the nominal criteria will weigh in the air," he said.

Earlier this week, the caretaker government said it would not propose a 2023 budget draft.

To adopt the euro, Bulgaria has to fulfil criteria of price and exchange rate stability, sound public finances and moderate long-term interest rates, all measured against EU benchmarks.

Radev said Bulgaria at present was not meeting the inflation criterion, but that there are clear indications that this could be open to discussion.

He warned that an eventual delay of the euro zone entry would prompt a decrease in the country's investment-grade credit ratings that will increase its financing costs, already on the rise amid the political impasse.

Political will needed for Bulgaria's euro zone entry in 2024 -central bank governor
 

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