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Central Bank Head Said to Stumble Bulgaria en Route to Euro

Date: 08.09.2009

Bulgaria has yet to join the Exchange Rate Mechanism, the "waiting room" for euro membership, amid concerns about its inflation rates and external trade imbalances

The re-election of Bulgaria's central-bank governor, Ivan Iskrov, poses big risks for the country's efforts to join the euro area in 2015, according to former right-wing Prime Minister Ivan Kostov. "Bulgaria's central-bank governor, Ivan Iskrov, was reinstated due to political reasons. With a governor like him the country faces a huge risk not to make it to the euro zone by the end of his next term," Ivan Kostov, whose government is credited with throwing out the ex-communists who had pushed the country to the brink of financial crisis in the 90s, said in an interview for 24 Hours daily.

In fact, Bulgaria has yet to join the Exchange Rate Mechanism, the "waiting room" for euro membership, amid concerns about its inflation rates and external trade imbalances. Stricter application of membership criteria has also been a factor in the delay.

Bulgaria plans to apply in November to join the exchange-rate mechanism, the European Union's two-year currency stability test before the country can the lev and adopt the euro.

According to Kostov the new government's forecast for a rebound of the Bulgarian economy in April-May 2010 is too optimistic.

"The only chance for recovery lies in the European aid. Yet it is clear that for this year the planned EUR 2,6 B will not be absorbed. This is a par excellence situation for implementing radical reforms."

Talking about his term as prime minister 1997-2001, Kostov said he, similarly to the present center-right GERB government, faced the dilemma whether to bring the guilty to justice or implement radical, but unpopular reforms.

"I chose the second option. In the eyes of the people this was probably the worst option. Because they suffered a lot. But it was a life-saving decision for the Bulgarian economy and society," Kostov said.

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