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EU Officials to Check Bulgaria's Readiness for ERM II

Date: 10.02.2010

Officials from the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF) will arrive in Bulgaria February 18 to examine the country’s readiness to join ERM II, a currency stability test for euro hopefuls.

The experts will visit Sofia at the invitation of Bulgaria's Minister of Finance Simeon Djankov who has discussed the issue during his formal trip to Germany and Luxembourg last week.

There have been months of speculation over when the former communist state would formally apply to the bloc's exchange-rate mechanism, the so-called Eurozone waiting room.

Countries must be members of ERM II for two years before they can formally join the eurozone. Bulgaria believes that it could be ready for euro entry by 2013.

According to Minister Djankov now is "exactly the right time" for Bulgaria to take the next step toward joining the eurozone as the country is meeting the Maastricht criteria.

Bulgaria initially planned to apply to join the exchange-rate mechanism in November, but delayed it for the beginning of 2010 after all member states submit their convergence programs, which contains the mid-term goals of the fiscal policy.

Bulgaria, which joined the EU in 2007, posted the smallest budget deficit among the 27 member states last year, according to the finance ministry. It is expected to be the only EU nation to balance its budget in 2010.

Minister Djankov, a World Bank economist, hopes to offset a possible reluctance to admit Bulgaria into the ERM, stemming from the global crisis, by garnishing the application with a targeted balanced 2010 budget, the smallest 2009 deficit in the EU and laws overhauling the inefficient health-care and social-security systems.

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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