The eastward expansion of the single European currency has hit a setback because Bulgaria and Romania did not meet the economic criteria needed to switch to the euro, Radar Radio Romania reported.
The decision, announced Wednesday by the European Central Bank (ECB) and the European Commission, means that Bulgaria’s ambition to join the euro zone in January 2025 will not be fulfilled. Their study also confirms that Romania’s hopes of joining the Eurozone are as remote as ever.
The ECB and the Commission say the two Black Sea countries – and the EU’s poorest countries – have high inflation compared to other regions, and have expressed doubts that their institutions are strong enough to tackle corruption and money laundering.
Both countries want to follow Croatia’s example, becoming the 20th country to adopt the euro currency from 2023.
Bulgaria is the closest to the euro zone, but for years it has pegged its currency, the leva, to the euro, allowing the ECB to oversee the biggest banks and keeping its debt and deficit relatively low. Low values. Bulgaria could join the euro in 2025 if all conditions are met.
In the Commission’s assessment of the readiness of the six non-euro EU countries to transition to the single currency, Bulgaria meets all criteria except for reducing inflation at the EU level.
Bulgaria’s average inflation was 5.1% in May, up from 5.9% a year earlier, but above the 3.3% ceiling calculated when compared to other EU members, according to the ECB.
While the outcome of the assessment is awaited, Bulgaria’s previous government expects leniency from the commission as Sofia is on track to meet price stability benchmarks this year.
Instead, the commission agreed to carry out a new assessment at Bulgaria’s request, rather than wait another two years for the next scheduled assessment, EU and Bulgarian officials said.
Bulgarians are divided about adopting the euro, with recent polls showing 49% in favor and a similar percentage against.
The ECB added that Sofia was still “working” on implementing pledges, including “strengthening anti-money laundering legislation,” and expressed concern over a constitutional amendment that would allow the president to appoint the central bank’s governor — a governor or deputy prime minister.
The quality of institutions and governance in Bulgaria, Romania and Hungary is improving but still remains “relatively weak”, the ECB said. He highlights “damages to the business environment, inefficient public administration, tax evasion, corruption, lack of social inclusion, lack of transparency, lack of judicial independence and/or dangerous access to online services”.
Former Bulgarian Prime Minister Nikolai Tenkov recently told the Financial Times that another negative aspect of the scandal is that it gives Russia a way to exert influence in Bulgaria, a major cause for concern among Western allies.
The country has been plagued by persistent political instability, while corruption and organized crime have hindered better integration with other EU countries, so it was only partially able to enter the Schengen area this year.
Sofia has had six elections in three years following the ouster of former dictator Boyko Borisov in 2021 amid anti-corruption protests. A repeat election this year is likely after a referendum in June failed to produce a stable government. Bulgaria remains the poorest country in the EU, with GDP per capita a third lower than the group average.
In Romania, inflation in 2023 was 7.6% above the maximum permissible ceiling. The country is also not doing well in the ECB’s fiscal assessment, with a deficit of 6.6% last year due to a breach of EU debt legislation from 2020 – above the EU’s 3% ceiling – and is unlikely. Indicators will return to normal this year as well.
Overall, the ECB says, non-euro countries have made “limited progress” in meeting the criteria for adopting the single currency, including the “difficult economic conditions” caused by the Russian invasion of Ukraine.
All four other countries assessed – Poland, the Czech Republic, Hungary and Sweden – had inflation above the level required to adopt the euro, and all but Sweden have breached EU fiscal rules. However, none of them want to join the Eurozone.
Romania aims to adopt the euro in 2023 by 2029, although President Klaus Ihanis has expressed doubts that such a fixed date would be appropriate.
Source: Financial times / Rador Radio Romania / Translation: Andrei Suba
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