site.btaUPDATED Sofia Conference Focuses on Advantages and Opportunities that Eurozone Will Bring for Bulgaria

A Sofia conference Friday discussed the advantages and opportunities that the Eurozone will bring for Bulgaria. Organized by Dir.bg, the Confederation of Employers and Industrialists in Bulgaria and the Small and Medium Enterprise Promotion Agency, the forum was opened by Vice President Iliana Iotova and among the speakers were Finance Minister Rositza Velkova, Deputy Prime Minister in charge of the management of EU funding Atanas Pekanov, the central bank governors of Croatia, Slovenia, the Netherlands, an IMF official, MPs, former finance ministers, union representatives, employers and experts.

There was tension at the start of the second panel of the forum, when the moderator of the second panel proposed that the discussions be held in English so as to better include the foreign participants, and that angered representatives of the nationalist party Vazrazhdane, who insisted that the Bulgarian language be used. Vazrazhdane were holding an anti-euro protest outside the conference venue.

Bulgarian National Bank (BNB) Governor Dimitar Radev said that on the surface the changeover may look like a technical process but it is to a large extent connected to the the overall development and modernization of the country.

The BNB Governor said that the euro changeover will lead to normalization and improvement of Bulgaria's currency regime, will step up real convergence and improve the quality and efficiency of the Bulgarian institutions.

Radev said during the conference that there is no good alternative to stepping up real convergence and the question is whether this acceleration can happen before or after the changeover. He pointed out that along with modernizing the economy and bringing it closer to the structure of the euro zone economy, the process also means increasing incomes to the average European ones.

He also said: "Being outside the eurozone, Bulgaria is seeing a very slow process of income convergence and incomes reman the EU's lowest. Remaining in this situation poses growing risks, the most serious of which is opposition to the goals of financial stability and increasing incomes and improving people's welfare. Recent developments, including the ongoing budget debates and the disproportionate increase of budget expenditure and debt, show that such attitudes are becoming more wide spread. Experience, including our own experience, shows that this road leads to nowhere. The end result will be loss of financial stability - an advantage that our country has internationally - and also a real deterioration in people's well-being."

He went on to argue that joining the euro area would resolve this potential conflict by accelerating the process of real convergence.

Radev also said that the currency board, introduced in the pursuit of financial stability, has served its purpose in the best possible way, and argued that the only good sensible way out of the currency board is the introduction of the euro.

"Joining the euro area has the potential to become a catalyst for the process of improving the quality and efficiency of institutions in Bulgaria," Radev added. He used as an example the reforms carried out in the BNB and the banking sector after 2014, which led to their integration into the European financial infrastructure and institutions. The capital adequacy, profitability and liquidity of the banking sector in Bulgaria are above the EU average, Radev pointed out. He added that this institutional example could be multipled in other sectors when the country joins the euro zone.

Finance Minister Rositza Velkova said that the preparation for the changeover occupies an increasingly expanding space in the public and political life in Bulgaria. She argued that Parliament's decision of October 27, 2022 to declare the introduction of the euro from the start of 2024 was "a very strong and needed message to the Bulgarian people and European partners". That decision mandated the Bulgarian governments from then on to step up the talks with the European institutions and the Eurozone members, and set up the important stages of the preparation for the changeover so as to meet the target date, said the Minister.

"At the moment we don't have a right to participate [in decision making] but what happens is that when we are in a currency board, the monetary policy of the European Central Bank is directly reflected in us," she added.

The changeover will bring better interest rates and better income on the foreign debt, on bonds. In addition, people's incomes and the country's development will improve at a much faster pace, Minister Velkova pointed out.

She does not expect a repeat of what happened with Bulgaria's aspiration to join the Schengen area – it was rejected by the EU Justice and Home Affairs Council on December 8 – with the aspirations for membership in the euro zone. "In this case there are absolutely strict criteria that Bulgaria has to fulfil. If it meets them, there is no reason not to be admitted to the eurozone," Velkova argued.

She said she is aware of the fears in the public - how the national currency will be converted into euro, where they will be able to exchange them, how much time they will have for this. She said that these fears will be dispelled by clear answers to eliminate all uncertainty.

There is no reason for the changeover to cause a spike in inflation, said also the Minister.

Deputy Prime Minister Atanas Pekanov does not accept claims that Bulgaria will lose national sovereignty with the changeover and argued, just like Velkova, that the exact opposite will happen because so far Bulgaria has accepted decisions that are taken by the European Central Bank because of the currency board without being able to participate in decision-making - and soon it will participate.

He also argued that increases in the prices of staple foods have not been observed in any of the countries that have already joined the euro zone; that inflation has not increased significantly in those countries either. Pekanov admitted that there is a risk of speculative pricing by some traders and said this is something that needs to be curbed.

Regarding the legislative changes to be adopted, the concept of the future euro law has been prepared and will be adopted after Bulgaria has the consent of the European institutions to join the euro zone from a specific date. However, according to Pekanov, it is important to develop the concept so that banks and commercial establishments can have predictability about how the changeover will happen.

He added that Bulgaria is working on the three important laws that need to be adopted before it enters the euro area. These include anti-money laundering measures, which was adopted by the government two days ago. Work is also underway to improve the BNB law, as well as make some improvements to the Insurance Code. In the coming days, the government will come up with a decision and a proposal to Parliament on these issues.

Approached by the press after the conference, Pekanov said that Bulgaria continues its active work on the changeover. The advantages for Bulgaria prevail over the possible risks, and the advantages will come because there will be more confidence in this country, increased investment, busier economic activity, reduced transaction costs, institutional convergence and coming to light of incomes, he said. "The topmost goal is faster convergence of Bulgarian incomes with the average European incomes," he added.