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Bulgaria Says Euro Bid Top Foreign Policy Priority

Date: 23.01.2010

Bulgaria's application to join the exchange-rate mechanism, the two-year currency stability test prior to euro adoption, is the top priority of its foreign policy for the next six months, the finance minister has said.

Simeon Djankov spoke at a public discussion attended by Spanish Ambassador to Bulgaria Jorje Fuentes, dedicated to the Spanish Presidency of the European Union.

“Our government has assigned top priority to the application to the ERM-2 in the next six months,” Djankov said.

He pointed out that in terms of its economic and fiscal management, Bulgaria has become a role model for the other countries in Europe.

The finance minister refused to confirm that the country will launch its bid to join the euro at the end of January, as recently announced by the prime minister.

There have been months of speculation over when the former communist state would formally apply to the bloc's exchange-rate mechanism – a currency stability test for euro hopefuls.

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

Simeon 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.

Bulgaria's entry in the eurozone, initially scheduled for 2010, has been set back as it is conditional on continued fiscal prudence and lower inflation.

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