Bulgaria renews euro accession push in hope for crisis funds

Bloomberg

Bulgaria is renewing efforts to join the euro area’s waiting room in the hope for easier access to financial aid in the coronavirus crisis.
The European Union’s poorest country has been pushing to join the currency zone since 2016 to boost living standards and avoid being sidelined in the bloc’s decision-making. After numerous setbacks, the central bank has signaled that joining the pre-euro exchange rate mechanism, or ERM-2, may be delayed until 2021 as the virus’s spread slows economies across Europe.
Prime Minister Boyko Borissov said, however, that Bulgaria is preparing to apply for the ERM by the end of April.
“This crisis showed us that those that are in the euro zone and its waiting room will have access to billions of euros for recovery while those who aren’t will take on debt, and with huge interest,” Borissov told reporters.
The government has already discussed its membership with European Central Bank President Christine Lagarde, as well as with the European Commission, Borissov said.
The EU’s finance ministers have agreed on a 540 billion-euro ($590 billion) package of measures to combat the economic fallout from the pandemic. Bulgaria, which has been in a currency board since 1997 and doesn’t have independent monetary policy, has limited options to react to the crisis. With one of the EU’s lowest levels of indebtedness and running balanced budgets and surpluses for years, the government is planning to raise as much as 9 billion lev ($5 billion) this year in domestic and international bonds and in borrowing from international institutions.
Banking sector weakness, as well as fears among Bulgarians that the ERM-2 membership may devalue the Bulgarian currency, had earlier forced Borissov to slow down the application process. The country’s fifth-largest lender, First Investment Bank AD, is still working to fulfill capital requirements after a thorough assessment by the ECB last year.
“I shouldn’t have yielded when we were moving so confidently toward the waiting room,” Borissov said. “We now have only one requirement waiting and we’re working to fulfill it.”