Interview with "Focus" with former finance minister Simeon Dyankov
Mr. Dyankov, why will the goal of adopting the euro on January 1 next year not be met and we will not enter the eurozone as planned?
First, we need to remind our listeners that the original plan was January this year, 2024, by the previous regular government. This did not work because there was high inflation and a series of caretaker governments. And although recently January 2025 has indeed been shown as a target, especially by the former "Denkov" government, it was not realistic anyway. In a sense, it is not a question of disinformation, it is not a question of changing the government, it is a question of our inflation still being well above the values that are necessary to enter the Eurozone. And therefore a real date is January 2027, if a new regular government is formed quickly and that government moves quickly to work on this topic, January 2026 is possible. But January 2025 was never possible, it was political chewing gum.
And is the inflation criterion for admission to the eurozone, according to which inflation must be at most 1.5 percentage points higher than that of the best performing countries, appropriate at the moment? Some described it as absurd.
No, it's not absurd. In my opinion, this criterion is very good, as well as the other criteria. This, in fact, the inflation criterion, I would say, is also the most important for entering the Eurozone, not just for entry, but for our enterprises, our production, to be competitive. And the connection is as follows: if our inflation is higher than the average for entry into the Eurozone, or in this case the criterion, which is "the three countries with the lowest inflation", if ours is higher and for some reason they accept us, this means that whatever percentage we are above that inflation, by that percentage we automatically enter as uncompetitive. In a sense - our labor and material prices will be such a percentage more expensive than those in the Eurozone. So this criterion is very well thought out and in no way should we play with it, try to convince some in Brussels or in Frankfurt that they should accept us without it. Fortunately, they won't accept us without having fulfilled it, we just have to do our job.
Is there a risk that certain parties will "ride the wave" and use public discontent to their advantage on the subject of the Eurozone?
Our society is basically divided on this topic. Somewhere around 60% want to enter the eurozone quickly, another 40% are hesitant. This already really depends on the mood in some parties that are against joining the Eurozone. But the fact is that all Bulgarian businesses understand that our entry is useful for them – it will be much easier to regulate the prices of exports and imports from the European Union, there will be more tourism for some of our cities on the Black Sea, Plovdiv, which have more tourists, some of our small towns... The economy will definitely strengthen with the entry. And therefore, in general, I think that this will not be any particular political chewing gum, that anyway, whoever is next in power in a regular government will try to get us in quickly.
And why are people worried about the adoption of the euro?
Because neither the BNB, our central bank, nor so far a series of finance ministers have explained what the benefits are. Rather, some of the fears are explained - such as an increase in the prices of some products after we enter the Eurozone. This is not real, it is unlikely to happen, and the advantages are not explained. The main pluses are two: one is that, generally speaking, for the assets that Bulgarians have, we are talking about land, apartments, houses, real estate, we see in other countries that are entering the Eurozone that prices are increasing significantly even more the first year – somewhere between 20 and 30% if you own agricultural land, if you own apartments and other such assets - houses, their price, their value rather increases quite quickly, which makes it possible to do more things with these assets. And the other thing, as I mentioned, Bulgaria depends a lot on tourism – it becomes much easier if we are part of the Eurozone to attract tourists to these cities, and also to some of our other settlements. So this needs to be explained, not just people's fears and saying, "No, it won't be like that” without particular details.
Okay, why doesn't someone come along to explain it and let people think their wages are going to be cut in half, that prices are going to double in the shops?
Everything is a matter of interests. Until very recently, the BNB was actually against our entry into the Eurozone, because there is also such a fear that if we enter the Eurozone, the tasks of the BNB, the Central Bank, will be greatly reduced. In the sense of their power - they no longer manage our monetary resource, it is managed by Frankfurt, including, for example, the inflationary process. So they weren't particularly enthusiastic, especially the previous leadership until last year, about us entering the Eurozone. And until recently, Finance Minister Asen Vassilev, at least in his previous incarnation as finance minister in caretaker governments, in the "Petkov" government, was also not a supporter of the euro zone. Now somehow in a new face we saw him in recent months. But when those in charge of entry are not sure, then it becomes such a lackluster campaign, or no campaign at all. And because of that, people's fears were actually well-founded.
You talked about Asen Vassilev – "Even under the first official government, in which he was an official minister, inflation broke out". Why? You said that in another interview.
Yes, indeed, if you check in time when we last fulfilled the inflation criteria, it was September 2021, so about two and a half years ago. This is literally two or three months after the fall of the "Borisov 3" government. and our first of a series of caretaker governments, the most recent, so to speak, when Asen Vassilev was the first minister of finance. And then a policy supposedly in the name of social welfare, of equality, but sharply, sharply, many prices rose. Some additional social benefits were given and the main – large subsidies were given to absolutely undeserving large companies, such as "Lukoil” for example, you know this thread, and then inflation skyrocketed. And so far, as I mentioned, we're somewhere around 2.5 percentage points above where we should be.
Did the politics of Asen Vassilev push us?
This was definitely the reason why we haven't been (note ed. in the Eurozone) so far. And that's why we hear lately, as you mentioned at the beginning of our conversation, that this is part of disinformation from outside forces, it's just that if we had met the criteria, we would have been in the Eurozone. We haven't met our criteria, let's get on and do it. By the way, there is a serious political overtone here and for the future. I am convinced that if we manage to organize the next regular government relatively quickly and do not enter into a series of caretaker governments - this government has a great chance to go down in history as the government that entered both the Eurozone and the final Schengen. In this way, it will become a historic government. For me, this is an additional chance and reason to create a regular government.
And what do you think about the 3% deficit in question, which Asen Vassilev constantly brags about? Is it artificially maintained, are certain areas exposed so that it can be maintained? And I mean everything that happened around the Energy Security Fund.
Yes, indeed, more than 6 billion were taken from the Energy Security Fund, in general from the state energy sector, it is about BEH, NEK, NPP “Kozloduy" had created thanks to high electricity prices in the last two years. A big buffer was created there, there was a lot of money that came in. This money was seized last year by former minister Asen Vassilev in order to save the budget deficit. And it really fell below 3% last year and the year before, but the fact is that we are dangerously close to this criterion.
Meanwhile, those buffers that existed, especially in state-owned enterprises, not only in energy, but also in many other state-owned enterprises, were seized at 100% of the dividend, which has never happened before. A maximum of 50% is levied for the state budget. And therefore the next regular minister, as well as the current minister Ludmila Petkova, will find it much more difficult to go below that 3% threshold without having to cut capital expenditure, as is usually the case, which means that she will not there is money for the ring road in Plovdiv, there will be no money for the highway “Hemus" again, etc.
Is there a risk that Bulgaria will not prepare well enough for entering the Eurozone, that we will enter unprepared? And in fact, the inclusion of such an insufficiently well-prepared country in the Eurozone, what risks does it entail?
There are such risks in principle, but I hasten to say that Bulgaria is not one of those countries. If the business, and especially the banking sector, which needs to prepare the most, if anything can be said about them, it is that they are already preparing every year, because the politicians promise them 2023, 2024, 2025, and they are constantly prepared . This, by the way, costs them a lot of money, because there are software systems that they have to load again with each passing year. So in the banking business, in the banking sector, from our not entering the Eurozone for one year, anywhere from 300 to 400 million euros is lost every year, just from the preparations that are then not carried out.
This is a lot of money for Bulgaria.
And this is only in the banking sector, we exclude the tourism sector, the logistics sector, which also depends on this. So we, if nothing else, I'd say we're overprepared. And I fear the opposite, that when we finally manage to enter, no one will believe because the politicians set such different thresholds. From my experience in other countries that have entered in the last 10-15 years, recently Croatia, before that Latvia, Lithuania, Estonia - you do it quietly, and the moment you have already submitted the documents and know that you will enter, only then you announce it. And here it was the opposite.
We trumpet a lot here, yes.
Here we have been trumpeting constantly for the last 3-4 months, especially not only the Minister of Finance Asen Vassilev, but surprisingly also the Prime Minister Denkov, who is far from this topic, started talking, as if this is coming next week . They almost brought political figures from Brussels here, who out of nowhere said, “yes, maybe it will happen", but they always said: “If you meet your criteria," which we have not met. So no, for me there is no fear that people or especially businesses will be unprepared, on the contrary, as I say we are too, too prepared and finally someone will do their job in the government.
Yes, but the political skirmishes continue. According to Boyko Borisov, the Eurozone was ready, but PP-DB failed it with their reckless spending of money?
In this case it is a fact, indeed the data shows that by September 2021, and notice, for over 15 years. So the first time we covered this criterion, by the way, it has to be covered in three consecutive months, so it's not just the first month to enter. Let's say we're ready, pick us up. Because they still monitor if this is a one-time process. But the first time we entered this process so stably was at the beginning of 2008, during the time of Mr. Oresharski, who was then Minister of Finance, Sergey Stanishev. And in fact, for nearly 15 years, Bulgaria has covered this and other criteria every month, every year, through various crises.
In fact, between 2008 and 2021, we met all the criteria for joining the Eurozone year after year. The problem was the political instability, although it is not a real, official factor for the entry, I tried 2-3 times as finance minister to have this conversation when covering, I emphasize all the criteria. They say: “And how do we know that your next government will not do something to prevent entry?". And in reality, you have no way to answer this well, unless you are in the next government, and that, of course, is not known. So this thread will come up too. But only 2021, in fact, for 2.5 years we do not cover this criterion, but God willing, if it turns out that the criterion of 3% deficit that you mentioned, we will be able to cover it for the next year. Because this, if it doesn't happen, separates us from the Eurozone for at least another 2-3 years.
And a bit on a political topic. How do you see the development of events at the moment with the upcoming parliamentary elections?
I think that these parliamentary elections are more interesting from the point of view that, unlike the previous 4-5 parliamentary elections, where it was somewhat known that the first and second political forces would not have enough preparation, enough opportunity to create a government with different political forces. I think that now for the first time they will have some options, in the sense that it will not be only GERB, they need PP-DB, or PP-DB need GERB, otherwise they cannot do with others. I think that this will be the configuration, in the sense that GERB will pull forward significantly, the sociological data show. I believe them, by the way, unlike some. They will move forward enough, I am convinced that they will again offer PP-DB to work together, because some things have been completed in the last 9-10 months.
There was a relatively new calm that we hadn't seen in the last 2-3 years. But if this does not happen, and this is the new thing in the upcoming elections, they will have another option, for example a coalition with ITN and DPS, which, by the way, are the parties that, on the subject of the Eurozone, are, I would say, the most stable, speak most confidently for our benefits from entering the Eurozone more than PP definitely. So there is not only simple arithmetic that this can be done, but it also makes sense for it to be done in order to enter the Eurozone, to enter Schengen. In other words, there are now alternatives that weren't there before, simply either way or new official elections.
Will GERB and PP-DB forgive each other because they parted rather violently?
I know both countries to some extent, most of the leaders and I talk to them from time to time about this topic, the Eurozone that you mentioned is close to me. And I think so. They will have to talk to each other under duress, if nothing else. That will happen after the election, not next month. But the most meaningful configuration continues to be GERB and PP-DB together in the next government, perhaps with an even wider coalition. And let's not say that it's not a coalition, but an assembly, but actually it was a coalition in which DPS participated until now, in the last 9-10 months. And if they are afraid that it is only DPS with them, to attract others, there is a possibility, I mentioned ITN, on the left, as far as we can see, a new political formation is emerging with Maya Manolov and Vanya Grigorova. If it really shapes up like that for the election, I think there's a good chance they'll get into parliament as well, and it'll get more interesting, there'll be more options.
And finally, let's close the frame, how do they see us in Europe, in relation to policies, parties, coalitions? What are the sentiments towards Bulgaria at the moment, against the background of the difficult situation in which we find ourselves purely politically?
Europe is heading towards the next European elections, the European Parliament elections, and from that point of view, we are a bit out of the concrete range at the moment. In a sense, we are not as much on the agenda as we were in previous years. But to the extent that it has a view on us, it is a surprise that already so many consecutive choices have to be made to arrive at any meaningful configuration. They are not used to this happening not only in Bulgaria, but in Eastern Europe in general. And it is actually an interesting fact that if you look at the last 1-2 years what is happening in Central and Eastern Europe, countries like us, there is some very serious political stability. In a sense, the leaders who were previously in power are returning to power, the example is Donald Tusk in Poland, a third term has already started. Robert Fico in Slovakia, some time ago he started his fourth term, Orban is of course, a different category, but also a fourth term.
In Croatia last week there were elections, the third consecutive term of the HZS, this is the party that is related to the GERB from the EPP. In a sense around us it's the opposite, there's actually a lot more stability in the last 10 years literally than there was before. Why is there such stability? Because I think in a period of uncertainty that you said - crises, COVID, then the energy crisis, lately the war is of course very essential. People are looking for stability, more or less the same as the euro is looking for stability with entry, and they find this stability in serious leaders, leaders who have already proven themselves in the past, to give them a dose of stability.
That's why I actually think that the results of the upcoming elections will be much more decisive in favor of GERB. Because no matter what we say, Boyko Borisov has already been the leader of several cabinets and has generally been known as a leader for over 15 years. Somehow people instinctively, not just what they hope to do, but just psychologically go there. The Croatian elections a week ago were very interesting from this point of view. Those who were in power were re-elected to power with the theme of security. And I think that's where it's going.
Are we already returning to the old familiar and past the period of the new messiah?
That's right, because the new messiah turned out to be partly an amateur and didn't know what he was doing, he was learning, which is good for a new generation of politicians to learn, but when there is uncertainty around us, you still look at who is the leader, who you may not like from time to time, but whom you trust because he has been a leader before. And that around us, talking about other countries around us, Serbia in the same way, Vucic, so he was re-elected significantly. And that's why I think that the next elections, as I mentioned a little while ago, are much more decisive, in the sense that a government will be reached much faster and there won't be these long, painful talks, in which, by the way, we lose momentum for Schengen as well , we are also losing momentum for the eurozone, external things. But we're also losing momentum for our internal, painful topics - infrastructure, I'm from Loveshko, this highway “Hemus", all kinds of weeds are already walking on it. The weekend I was in Plovdiv, it is easier to get from Sofia to Plovdiv than to get to Plovdiv from the intersection there on the highway, just...
Yes, as a matter of fact, bad infrastructure.
The lack of the Ring Road, which is being talked about everywhere, these are actually the things that are most important to people, to the average person. Schengen and the Eurozone are interesting, but less so.