In theory, a different lev to euro exchange rate is possible at the time of our admission to the eurozone. But we realize that we are at an extremely advanced stage of negotiations with the ECB and the EC and in these talks the question of joining at a different exchange rate than the current one has never been raised, at least as far as I know. The topic has not been raised. This was stated by the member of the Governing Council of the Bulgarian National Bank Lyubomir Karimanski in the program "ReVizia" on NOVA NEWS.
He commented on some of the most serious concerns of citizens before our country's transition to the eurozone and the adoption of the euro as the official payment unit.
The ECB and the EC are expected to officially present the so-called convergence reports on June 4, which will recommend to the member states whether or not to accept Bulgaria. Currently, Sofia meets all the numerical criteria and the authorities' expectations are that we will receive a positive response, and weeks ago, Finance Minister Temenuzhka Petkova announced that "Bulgaria has never been so close to membership in the eurozone".
"No one can say categorically whether we will receive "YES", but we still expect the assessment from both the ECB and the EC to be positive," confirmed Lyubomir Karimanski.
In his words, everything that is needed in terms of numbers can be dismissed as "done". However, a problem may arise, he warns:
"The question is how sustainable the deficit criterion is. Because if the story about the deficit is told convincingly by the Ministry of Finance and the minister, then we will probably have a positive response. But this is still unclear and there is a risk regarding the deficit," said Karimanski.
We recall that one of the requirements for membership is a maximum budget deficit of 3% of GDP. Bulgaria met the criterion for 2024 and on paper must meet it for this year as well, but many experts warn that the expenses are too large and the revenues are uncertain. This raises doubts that the hole in the treasury may turn out to be larger. It is precisely that we need to convince Brussels and Frankfurt that this will not happen.
One of the important questions that the member of the BNB Governing Council answered is what will happen to interest rates on loans after our admission to the eurozone - will they increase or will they remain the same? According to him, the goal of the authorities is to ensure that they will be preserved, and even if there is a change, it will be minimal.
"Interest rates will be preserved, if there are deviations, they will be in the second or third sign, that is, more than minimal. In addition, in this transitional period, the Central Bank will meet the inflation target of 2%, so along with this fact, interest rates will fall further", he said.
Karimanski is categorical that people's funds cannot be lost with the adoption of the euro. He explained that citizens should not give in to manipulation and that financial literacy is important in order to avoid panic created by people who do not understand the processes.
We also come to another important issue - that of inflation. In theory, the new currency itself cannot create additional inflation, but the details are important. And in this case, they are the following: in Bulgaria, the so-called banks' required minimum reserves - simply put, the buffer they keep for troubled days - is 12% of their borrowed funds. In the eurozone, it is 1%. Releasing the 11% difference could pour into the economy as an additional mass of money and create inflation. Karimanski answers why this will not happen:
"The BNB has standard and non-standard instruments to keep money from entering the market. One standard instrument for retention is the "deposit facility" - The Central Bank has counterparties in the form of commercial banking institutions. These counterparties can receive interest on their funds - 2.25% - and leave them with the BNB. Yes, with a loan they will earn more, so some of it will go into loans, the rest will be in the central bank at interest, from which they will earn".
He recalled that Bulgaria experienced serious moments of high inflation even without the eurozone.
"It depends on the way in which we guarantee price stability. It is as much the job of the BNB as it is the government. Because when things unfold there, they affect inflation", the expert explained.
Karimanski was categorical that Bulgaria will not repay the debts of other eurozone members in trouble, whatever the claim is. He explained that there is an institutional mechanism for dealing with such situations and it has never been used so far, because it simply has not been necessary.
"In Europe there is the so-called European Stability Mechanism, it was founded in 2012 and since then the purpose of this mechanism is to guarantee the stability of the euro and to take care as a fund that nothing will happen to the euro. One of the things that is envisaged is that when a country has a problem, it can stabilize itself through this fund in the form of bonds. To seek credit from the markets. Why it? Because its authority before the markets is of much higher value and it will take cheap loans. Yes, the countries make a contribution to it, but it is capital that is invested and redistributed to the countries at a profit".
Currently, Bulgaria meets all the criteria for membership in the eurozone. We are waiting for the reports of the ECB and the EC on June 4. There will be a recommendation there on whether or not to accept us into the Club of the Rich.
The final word will be with the eurozone member states. However, so far there has been no case in which the two reports have recommended adoption and then it has been refused, which is why it is so important what the ECB and the EC will tell us. In this case, Finance Minister Temenuzhka Petkova is absolutely right - Bulgaria has never been so close to being accepted into the eurozone.
The monetary union includes 20 countries - for now - out of the 27 members of the European Union. The so-called countries with a derogation or countries that have not yet adopted the common currency are Bulgaria, Romania, Poland, the Czech Republic, Sweden, Denmark and Hungary. Denmark is the only one in the EU that is not contractually obliged to adopt the euro.
The curious thing is that there are also countries outside the European Union that use this currency. These are Andorra, Kosovo, Monaco, Montenegro and San Marino. That is - they use the euro, but they have no right to participate in decisions that are important for the euro. Decisions in which Bulgaria will participate.
They affect 20 countries or a total of over 350 million people across the continent. Why is the eurozone called the club of the rich? Probably because the member states in the eurozone generate a GDP per capita on average per year of 32,000 euros. It is the second largest exporter in the world and is always among the top 3 richest societies in the world by GDP.