Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Economic and Political Challenges of Acceding to the Euro area BULGARIA Georgi Angelov, OSI-Sofia 1990s: Dollar rules USD DEM other Currency structure of export, 1999 Unofficial dollarization of economy, especially 1996-1997 Currency board: Choice of currency USD or DM? Strategic decision – Deutschemark (to be changed to Euro when introduced) willingness of Bulgaria to enter and integrate with the EU and Euroarea (as early as 1997) Currency board currency board - step toward entry in the euro area the entry into the euro area - the only exit strategy from the currency board Negotiations with the EU Chapter 11 “Economic and Monetary Union” membership in the EMU as early as possible Priority of the government Negotiations with the EU Agreement between the Council of Ministers and the Bulgarian National Bank on the introduction of the Euro in the Republic of Bulgaria, 25 November 2004 “strategy for the fastest possible accession” Maintain balanced budget Budget Balance, % of GDP More than balanced budget 4 3 2 1 0 -1 -2 2002 2003 2004 2005 2006 2007 2008 Government Debt, % of GDP Well within criteria for years 60 50 40 30 20 10 0 2002 2003 2004 2005 2006 2007 2008 Long-term interest rates Most Maastricht criteria fulfilled even before ERMII Euro preference 60 Share of Euro deposits in banks increasing 50 40 30 20 10 0 2003 2004 2005 Euro 2006 Leva 2007 2008 Inflation Inflation since 2007 Budget balance 2009, by month ECB fears ECB was worried because of the current account deficit and inflation in Bulgaria Risk of adjustment Unofficial criteria for ERMII? Bulgaria – not in ERMII Current Account, by month 400 200 0 -200 -400 -600 -800 -1000 -1200 -1400 декемв ри 2008 април 2009 ав густ 2009 октомв ри 2008 фев руари 2009 юни 2009 ECB fears rejected by reality Official Reserves 16000.0 14000.0 12000.0 10000.0 8000.0 6000.0 4000.0 2000.0 0.0 II IV VI VIII X XII II IV VI VIII X 2008 I IIІ V VII IX XI 2009 I III V VII IX Bulgaria survived the financial crisis No support from ECB, Federal Reserve – unlike West Europe Why Bulgaria should be allowed to enter ERMII? Bulgaria survived with no external help – no risk for Eurozone ECB warries proven imaginary Bulgaria fulfils criteria even before ERMII entry The only country Frankfurter Allgemeine Zeitung, 16.11.2009 EC: In 2010 only one country in EU will fulfill the Stability and Growth Pact requirements. Bulgaria. If delayed? Violation of treaty In 10 years the willingness to enter Euro may disapper (new Sweden, UK?) People will not like to abandon lev Unilateral euroization? Options Big bang enlargement of Eurozone Free ERMII entry and reform in criteria (inflation) Unilateral Euroization Stay out