site.btaUPDATED National Bank Governor: Political Decision on the Eurozone Will Have a Price and It Will Not Be Small

Bulgarian National Bank (BNB) Governor Dimitar Radev Thursday said the political decision about the Eurozone would have a price and it would not be small. He was given a hearing in Parliament initiated by BSP for Bulgaria about Bulgaria's preparedness for Eurozone membership.

The debate today [Thursday] is about the pros and cons of the euro as a symbol of the European project and Bulgaria's commitment to it, said Radev. Eurozone membership is above all a political matter, not an expert one, and the answer must be given by the National Assembly. The question is whether Bulgaria will stay indefinitely in Europe's deep periphery characterized by poverty, corruption, weak institutions and foreign dependencies, or a common effort will be made to change this by accelerating the much-delayed process of joining the Eurozone, he said, adding that this was his personal opinion.

January 1, 2024 is set as the target date for Bulgaria's adoption of the euro.

The political decision comes at a price: in recent weeks the price of Bulgaria's debt has been rising at an unprecedented rate, which leads to a huge financial burden in the medium term. The key factor to an upgrade of Bulgaria's credit rating is a successful implementation of the Eurozone accession process, said Radev.

There is a serious delay of 18 months, mainly in terms of making political decisions. Without a budget, a macroeconomic framework and a medium-term programme with clear parameters, the Maastricht criteria requirements will hang in the air, Radev said.

Radev urged the MPs to focus on dealing with the political crisis and answer the pending questions with a direct bearing on the matter at hand: if and when there will be a regular government, a working parliament capable of adopting the huge number of laws needed for joining the Eurozone, a budget for 2023, a macroeconomic forecast and a medium-term fiscal programme. He asked when a decision would be made about the term of the central bank's governor and management, because a caretaker cabinet and an acting leadership of the BNB cannot take Bulgaria into the Eurozone.

Radev's term expired in 2021 but he will stay in office until Parliament elects a new governor.

The lack of a regular government and a clear political commitment to Eurozone accession are a serious obstacle to its progress, the BNB Governor said. The signing of a memorandum of understanding with the European Commission and the Eurozone Member States is a precondition for Bulgaria to receive the documents on the practicalities of producing euro bills and coins. It is still possible to sign the memorandum but this will require at least two things: firm political support and a clear mandate of the central bank governor.

Eurozone membership has important financial benefits, said Radev. Bulgarian banks pay fees for Banking Union membership, but the financial benefits are considerably greater. The Single Resolution Mechanism alone saves Bulgarian banks at least BGN 160 million a year and they get a much greater protection at a much lower cost.

Radev said provisions had been made to issue monthly reports on progress and the outstanding challenges. Six such reports have been drawn up and submitted to the Coordination Council for Preparation of the Republic of Bulgaria for Euro Area Membership, headed by the Finance Minister and the BNB Governor. Contact groups have been set up, with representatives of the BNB and the European Central Bank working on specific matters.

Earlier on Thursday, BSP for Bulgaria floor leader Korneliya Ninova asked Radev if it was true that to meet the Eurozone requirements, Bulgaria must reduce inflation to 6-7% and have a deficit of 3% of GDP, which could lead to sharp cuts in wages and social benefits and to recession.

Ninova also asked if a report on the pros and cons of joining the Eurozone was forthcoming. She said Parliament needs to see the report to decide if the euro will be adopted in 2024. She said the aim of the hearing was to tell people the truth, adding that Bulgaria cannot enter the Eurozone at present.