Sofia softens stance on eurozone target date

SOFIA (Reuters) – Inflationary pressures may delay Bulgaria’s entry to the eurozone, frustrating its ambitions to adopt the single currency in 2010, Finance Minister Plamen Oresharski said yesterday. Bulgarian officials have said repeatedly the Balkan country would join the ERM-2 waiting room for euro hopefuls shortly after it entered the European Union on January 1, intending to adopt the single currency at the start of 2010. But Oresharski told the national Nova TV channel Bulgaria may adopt the euro in «two, three, or up to five years,» depending on price movements. «It is difficult to say when, it is not clear, because the country has to meet the Maastricht criteria,» Oresharski told Nova TV in an interview. «Currently the country meets four criteria: About the fifth – inflation – it is yet to be seen how prices will move in the next couple of years.» Inflation is the main risk to Bulgaria’s euro entry bid. It has pegged its lev to the euro and meets requirements on currency stability, public debt, long-term interest rate convergence and budget deficits. Oresharski has said the Socialist-led government would not use excessively strict fiscal policy to curb inflation, suggesting Sofia could delay euro adoption beyond 2010. Bulgaria sees average 2006 inflation a bit below 6.9 percent and expects it to drop to 4.4 percent this year, still well above the euro adoption ceiling which is calculated as the average of the three lowest rates in the EU plus 1.5 percentage points. This puts the current inflation ceiling at 2.6 percent, though analysts believe Bulgaria could reach this level by 2009. Sofia is due to begin talks with Brussels this month on when it will enter the ERM-2, where it would have to stay for at least two full years before adopting the single currency. Of the 10 mostly former communist countries that joined the EU in 2004, only Slovenia adopted the euro as of January 1. Many of the others, such as the Czech Republic, Hungary, Estonia and Latvia, have delayed their plans for eurozone entry.

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