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Bulgaria Euro Prospects More Unclear Than Ever - Expert

Date: 15.12.2009

Bulgaria has turned into the epitome of the mix of economic, political and cultural concerns that hamper the entry into the ERM 2 exchange-rate mechanism, the European Union's two-year currency stability test before the country can the lev and adopt the euro, experts say.

“The country had a poor political image and had set the wrong priorities, which excluded the adoption of the euro,” Rumen Avramov, Program Director of the Center for Liberal Strategies, said at a forum in Sofia dedicated to the economic and political challenges in eurozone accession.

Avramov thus joined a chorus of diplomats and experts, according to whom rampant corruption and organized crime, which the previous Socialist-led government failed to tackle, were also among the reasons for keeping the EU's poorest nation away from the euro along with lack of fiscal prudence and high inflation.

"Bulgaria's optimism from the autumn of 2008, when there was talk about speeding up the euro adoption, is gradually dying down and now it has clearly turned into a political decision", added Avramov.

According to Avramov the main problem that the candidate countries face is the duration of the period they will spend before joining the euro area.

"The longer this period, the more damaging it will be for the countries in and outside the eurozone and for the single currency itself. The prospects for eurozone expansion are more unclear than ever, but certainly this is not a panacea, which will solve all major problems", Avramov said.

Bulgaria planned to apply early next year to join the exchange-rate mechanism, the two-year currency stability test prior to euro adoption, and seek to switch to the common currency in 2013.

Initially the application was planned for November, but it was delayed till February at the earliest, after all member states submit their convergence programs, which contains the mid-term goals of the fiscal policy.

Joining the exchange-rate mechanism would bring Bulgaria closer to the umbrella of the euro region and the protection of the European Central Bank and is conditional on whether the new government will succeed to restore Brussels trust.

The lev is already linked to the euro in a currency board that keeps the Bulgarian currency at 1.9558 to the euro.

Joining the exchange-rate mechanism may allow the lev to fluctuate by as much as 15 % around a central band, though the central bank has said it will leave the lev tightly pegged to the euro through the duration of the two years.

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