No real threat to Bulgarian economy if EU entry is put off
BRUSSELS – Bulgaria’s fast-growing economy will not suffer much in the unlikely event that the country’s entry into the European Union is delayed by a year to 2008, Bulgarian central bank governor Ivan Iskrov said yesterday. But should the EU decide on the delay, following a recommendation from the European Commission this month, Bulgaria’s target for entry into the eurozone would have to be moved to 2011 from 2010, Iskrov told Reuters. «If we join the EU on January 1, 2007, and I am sure this will happen, we will immediately address the issue of eurozone entry,» he said in an interview after a meeting of senior Bulgarian financial officials with EU finance ministers. «The target is 2010,» he said. The executive Commission will say on May 16 whether it thinks Bulgaria and neighboring Romania can join the EU next January or should have one more year for membership preparations, mainly to fight corruption and organized crime. The final decision will rest with the EU’s 25 governments. «Whether it is 2007 or 2008, I don’t think there will be any major implications for the real economy and investors. All investors and all observers know that Bulgaria will be there (in the EU),» he said. But asked whether as a result of a one-year delay in EU entry, Bulgaria’s plan to join the eurozone would have to moved to 2011 from the current target of 2010, he said, «Of course.» Bulgaria and Romania missed the EU’s first wave of enlargement into the ex-communist Eastern Europe in 2004 because of slow progress in economic and political reforms. But if Bulgaria’s eurozone entry plan is realized, it may adopt the currency ahead of Hungary and Poland, the biggest EU newcomers, which are running large budget deficits. Inflation risk Iskrov confirmed Bulgaria planned to enter the ERM-2 currency exchange system, in which the country must stay for two years to adopt the euro, early next year. «It could be around March, 2007,» he said. He also reiterated that Bulgaria would maintain the currency board straitjacket which keeps its lev pinned at 1.95583 per euro until Bulgaria swaps it for the single currency. «We are more than happy with the peg.» High inflation, partly resulting form fast economic growth, was the main risk for Bulgaria’s euro entry plan, Iskrov said. But the high current inflation rate – it increased to 8.7 percent year-on-year in March from 4.4 percent in the same period of 2004 – was caused by recent hikes of administrative prices and excise taxes and should subside, he said. «We don’t expect pressure on inflation from administrative prices, excise duties. The current government front-loaded harmonization of excise duties, which had been envisaged for 2007-2008,» the central banker said.
