EUROPE
Bulgaria’s eurozone accession debate split along Macedonian veto lines

Bulgaria’s four-party ruling coalition is not united on the issue of the country’s accession to the eurozone in early 2024, splitting along the same lines as with the unrelated issue of vetoing the start of neighbouring North Macedonia’s EU accession talks.

There is a fragile political consensus on the issue in parliament, with the leading parties in the coalition, ‘Change continues’ and ‘Democratic Bulgaria’, declaring the adoption of the euro as one of their primary political goals.

“If we adopt the euro, Bulgarians will have a place in the room where decisions are made, we will have a voice on what the EU’s financial policy should be. This is extremely important in these severe crises and difficult situations,” said Deputy Prime Minister and Finance Minister Asen Vassilev from Change Continues.

However, the Bulgarian socialist and the populist party “There is such a people” (ITN) stands in the way and calls for a more measured approach, as evidenced by comments from Lubomir Karimanski, chairman of the parliamentary finance committee.

“We strongly support the introduction of the euro. But before that, there must be a large-scale information campaign, certain criteria must be met, the benefits and risks must be defined.”

This may push Prime Minister Kiril Petkov to seek support from the opposition – former conservative ruling party GERB and the Turkish minority party DPS. Both declare support for Bulgaria’s entry into the eurozone. Before that, a much more serious economic issue must be solved- inflation.

The Macedonian matter

The same parties that firmly insist on the euro are the same that also support dropping the veto against North Macedonia’s EU accession talks.

Sofia said it would not vote in favour of opening the accession process until Skopje includes the rights of Bulgarians in its constitution and addresses other disputes regarding language, history, and culture.

Skopje, whose accession process is tied to Albania, says it has already made many concessions, and such matters should be addressed through the opening of chapters.

Euro no-go

The European Central Bank (ECB) announced on Wednesday (1 June) that the country still does not meet all the criteria for joining the eurozone. Meanwhile, the ECB and the European Commission gave the green light to Croatia to adopt the euro in 2023.

Bulgaria’s main problem is high inflation, which rose to 5.9% in the last year, one percentage point more than the allowed 4.9%, with the rate expected to continue rising over the next few months.

The ECB recommends that Bulgaria pursue stabilising economic policies and structural reforms. It calls for a reduction in corruption in the public sector, judicial and educational reform, and a fight against money laundering.

Bulgaria does have one advantage- its low government debt, which is considerably below the recommended 60% of GDP.

Ideologising the euro

The debate on the euro in Bulgaria is most actively used by the pro-Russian nationalist ‘Vazrazhdane’ party, which is increasing in popularity.

According to party leader Kostadin Kostadinov, “the euro adoption in Bulgaria from the beginning of 2024 will be a death sentence for the Bulgarian economy, salaries, incomes, pensions, savings. Its introduction will lead to double-digit inflation.”

His party is actively campaigning for the country’s exit from the EU and NATO, garnering the support of 10-12% of voters.

Kostadinov said Vazrazhdane would try to hold a referendum on the euro, although, by law, this is not possible as it was resolved with the ratification of an EU Treaty. Only the date of joining the eurozone could be decided through a referendum.

The position of the newly formed party of the former caretaker Prime Minister Stefan Yanev – “Bulgarian Rise” is more moderate. Last year, when he was still prime minister, the government drew up a plan to introduce the euro in 2024.

Now Yanev says the single currency is detrimental to Bulgaria’s sovereignty. After this statement, the investigative media BIRD showed that the savings of Yanev and several MPs from “Vazrazhdane” are in euros.

Pro-European parties in parliament see the euro as part of Bulgaria’s irreversible accession to the European mainstream.

Political games

The position of ITN is less clear as it seems to be using the debate on the euro to benefit itself within the ruling coalition.

ITN announced that it favoured the country’s entry into the eurozone, but there are doubts whether this should happen in 2024. The official explanation is that the introduction of the euro could hit incomes, which are already well below the European average.

Bulgaria currently has one of the highest inflation rates in the EU (14.1%), while average inflation in the euro area is almost half. Leading ITN economist Lubomir Karimanski is trying to gain political support to be elected governor of the Bulgarian National Bank, which he tried and failed in April.

The party may try to trade its support for the eurozone, sources from the ruling coalition told EURACTIV Bulgaria.

2024

Bulgarian National Bank Governor Dimitar Radev explained this week that Bulgaria still has a chance to adopt the euro on 1 January 2024.

“We are yet to see what Bulgaria’s treatment will be in terms of inflation. I do not rule out better treatment – it depends on good policies and good negotiators,” Radev said.

He emphasised that the decision to adopt the euro was a political one. “The process depends on the political will of the Bulgarian parliament. It must decide whether Bulgaria should join the core of the EU or stay on its edge,” Radev said.

Source: Euractiv.com

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