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Bulgaria to Play It Cool on Euro Zone Bid over Debt Crises - FinMin

Date: 22.07.2011

Bulgaria has not changed its intention to join the euro zone but it does not expect to start specific talks for accession to the ERM-2 before the situation with the euro zone debt crises clears, according to Finance Minister Simeon Djankov.

"We are not going to start preliminary talks (on joining the euro) in the autumn. Our intentions (to join the euro) are not changed. However, a specific time is not fixed yet" - Djankov told Reuters in an interview provided by the Bulgarian Finance Ministry.

Speaking to Reuters in London, Bulgaria's Finance Minister said Bulgaria wants to see how the euro zone was going to stabilize Greece and what its final stance on the proposed harmonization of members' tax regulation would be.

Reuters reminds that in February, Djankov had said that Bulgaria would begin talks in the fall of 2011 on entry to the ERM-2 mechanism, the so called waiting room of the euro zone.

"The talks are delayed until the general picture... is clearer... We want to know before we join the euro zone what the opportunities are and what the burdens are. The crisis in Greece and other countries has made us wary of the club that we want to join and the implications of joining it" - Djankov is quoted as saying.

In his words, the failure of euro zone leaders to come to grips with the Greek crisis last year had proved costly and any solution for Greece now had to be a comprehensive one that would prevent contagion from spreading further.

"The solution should be more universal than simply another bailout for Greece," he added.

The Bulgarian Finance Minister explicitly made it clear that Bulgaria, which has the lowest taxes in the EU, is opposed to an initiative of France and Germany to harmonize taxes within the EU, as part of the so called Euro-Plus Pact.

"This has been the biggest sticking point for Bulgaria... We think it is badly thought out and will increase disparities in the euro zone. From the economic point of view it doesn't make any sense" - Djankov said.

He also said Bulgaria could reduce its fiscal deficit this year to below the official 2.5 % target. "We think we can do better than that. Possibly 2-2.1 percent," he explained.

Reuters also points out that Bulgaria reduced its fiscal deficit to 0.9 percent of GDP in the first half of the year and its better-than-expected fiscal consolidation meant that it could defer early plans for a Eurobond offering to next year.

"Maybe we'll want to wait until next year simply because we have more fiscal reserves than we anticipated," said Djankov.

Instead, Bulgaria is likely to launch a bond of about EUR 500 M next year with a seven- to eight-year maturity to refinance maturing debt in 2013, he added.

Djankov, a former economist at the World Bank, said he intends to shorten Bulgaria's debt maturity profile to make it "possible to repay debt faster."

Bulgaria has the second lowest government debt to GDP ratio among the 27 EU states, coming in at about 16 % at the end of last year.

But Djankov said he wanted Bulgaria to have a lower debt to GDP level than the least indebted EU member, Estonia.

At the end of April, Bulgaria's public debt stood at EUR 5.64 B or 14.6 % of GDP.

Bulgaria's Finance Minister stressed that a new bond and privatization revenues would help to refinance some EUR 800 EUR from a Eurobond that matures in January 2013.

He said Bulgaria is targeting privatization revenues of some EUR 350 M this year and EUR 600 M in 2012 from the sale of government assets.

Bulgaria is selling its 79.8 % stake in cigarette maker Bulgartabak Holding and also plans to float stakes in power distributors that are majority controlled by Czech CEZ, Germany's E.ON and Austria's EVN.

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