A group of euro activists has signed a petition addressed to the Prime Minister and the Speaker of the National Assembly, in which they insist that Bulgaria request extraordinary convergence reports from the European Central Bank and the European Commission to assess whether we meet the Maastricht criteria and for admission to the eurozone as early as January 2026. They claim that if this does not happen, a new wave of social demands and demagogy will rise in Bulgaria, which could bring down the currency board and cause a new Videnova winter.
This is what Stefan Antonov commented on for "Voices".
„As a logical consequence, we see a high probability of a subsequent political decision to abandon the fixed exchange rate of the lev to the euro, which will suspend the functioning of the currency board and existentially threaten the stability of the monetary-financial and social system.
We emphasize that the postponement of the request for an extraordinary convergence report for an indefinite period, combined with an escalation of political demagogy, will have catastrophic consequences for the macroeconomic, financial and social stability in our country and will not remain hidden from investors: local and foreign.
In social and "In terms of macroeconomic effect, we would compare such a step to the decision to declare a moratorium on payments on the foreign debt by the Lukanov government in 1990 and the decisions of the Zhan Videnov government, which led to unprecedented hyperinflation, a currency and banking crisis in 1996-1997, which collapsed salaries and pensions to single-digit values and devalued all the savings of an entire generation," the signatories also warn.
The petition is complete nonsense because it scares society with risks that some of the authors of the petition itself have created, incite and try to extrapolate, to the point of creating panic in society.
First, a currency board cannot collapse under the pressure of social demands. It can collapse if the state is unable to finance its deficits with debts. It may also fall due to the accumulation of significant volumes of domestic debt, which will be devalued through inflation and a decrease in the exchange rate of the lev against the euro.
In retrospect, the second hypothesis is impossible, because the main part of Bulgarian debts is in euros and the fall of the board does not help their depreciation. On the contrary, it will make it more difficult, because it will require more levs to service the same nominal euro debt. Regarding the inability of Bulgaria to finance its deficits, it is caused by the management of “We continue the change“ and the Minister of Finance in the last four years, Assen Vassilev, under whom Bulgaria reported several years of a budget deficit of 3% of GDP. Due to subsequent revaluations of GDP in the direction of the ore, the ratio for 2023 and 2022. is shrinking, but ex post facto and this would not be captured and assessed by convergent reports.
From 2021, the first year in which Asen Vassilev and Kiril Petkov took office, until the end of 2023, according to official reporting data, the state debt grew by 13 billion leva - from 27 billion to 40 billion. Last year, for which comprehensive statistics have not yet been published, current reports show new debt of 10.4 billion leva. If about 3 billion of old debts paid off that matured last year are deducted from it, it will turn out that the new debt last year increased by 7 billion, added to the 13 billion for 2021-2023, it turns out that over the four years of PP-DB's rule, the state debt has increased by three quarters (74%).
The only expert explanation, which implies no less hypocrisy and demagogy for the signatories of the petition, is that they assess over-indebtedness as a problem and want us to enter the eurozone so that the European Central Bank can finance the purchases of Bulgarian debt from banks, and our country becomes another bad example of over-indebtedness after joining the single currency. Except that, since we are in the eurozone, there will be a lender of last resort, a role that the Bulgarian National Bank is forbidden to play as long as we have a currency board.
The funniest thing is that the petition was signed by Georgi Ganev, an economist who was a member of parliament from the PP-DB when the 2024 budget was being voted on. What comes out of it is that while he is in government and in power, he has no problem voting for deficits, the structure of which implies chronic deficits for the foreseeable period of the next three years, as is the forecast for the macro framework of the voted budget. And when he leaves power, he is already worried about the same budget deficit and indebtedness that he himself approved as a member of parliament.
What is happening? When did you realize there was a problem? What was different in December 2023, when you were adopting the 2024 budget, compared to today?
And the rest? Krasen Stanchev, who in 2010, in an interview with me, when I worked at “Dnevnik“, said “The current policy of GERB is leading us to cancel the IMF board or program“. In the fall of 2013, when Plamen Oresharski's government was preparing a budget for 2014, the same Krasen Stanchev said: “Such a type of policy could lead to the dismantling of the currency board“. Apparently the lantern has the same song with the same clichés, but where was it during the three years when Vassilev was running deficits and accumulating debts?
Since the night of the white bus, when ministers and MPs from the BSP and DPS were almost killed between the National Assembly and “St. Alexander Nevsky“ for a billion leva of new state loan, the same interest group has been using the budget as a scarecrow for the poor urban right and a pretext to incite it against political opponents when it falls off the table.
This time, the audacity has gone so far as to scare with the currency board and the security of citizens' savings.
Bulgaria's entry into the eurozone is a long-term commitment, the consequences of which are impossible to predict with absolute certainty. The Bulgarian National Bank itself took upon itself the disgrace of producing an analytical report that synthesizes the benefits and risks of the single currency and has been refusing to publish it for three years now, practically silencing the opinion of its analytical unit for political reasons and driven by servility to the executive branch. After that, the BNB governor even pointed out that this report was not the only one, and that economists from the Faculty of Economics of the “Sofia University“ had also produced a report, but it did not point out the concerns of the economists at the BNB. Radev conveniently failed to note that the report by the economists from the Sofia University did not examine the consequences of releasing the minimum mandatory reserves that commercial banks set aside in the BNB and which are 12 times higher than those in the eurozone.
Nevertheless, its representatives have regularly pointed out the risks of introducing the euro at this stage of the economic development of Bulgaria and the eurozone. The latest examples of this are the advisor to the governor of the Bulgarian National Bank - Marinela Petrova and the member of the governing board Lyubomir Karimanski. A week ago, Petrova pointed out that convergence reports should not be requested lightly and expressed doubt that in addition to failing to meet the inflation criterion, Bulgaria may also fail to meet the budget deficit criterion. The strangest (and funniest) thing is that she is also among the signatories of the petition.
Just a few hours ago, Karimanski stated to BNT that there is an accumulation of macroeconomic imbalances in Bulgaria and their impact on the economy and competitiveness needs to be examined. In translation - a macroeconomic imbalance is an unsustainable increase in the market price of factors that may subsequently cause a crisis when their price returns to normal levels. This may be an increase in the price of labor through wages, of securities through the stock exchange, or of real estate. The presence of macroeconomic imbalances is also one of the reasons why the European Central Bank is requesting asset reviews and stress tests among banks in a country, or the entire eurozone, precisely to assess how financial institutions would suffer when imbalances begin to be corrected under market pressure.
Over the 26-year history of the eurozone, total debt has reached 100% of the collective GDP of the participating countries. Countries like Italy and France have not had a single year with a balanced budget, let alone a surplus. Greece, Spain, and Italy went through financial crises due to chronic deficits. Ireland's problem was related to bubbles in the financial sector, to which eurozone policies also contributed.
Over these 26 years, Bulgaria survived the global financial crisis, the bankruptcy of Corpbank, the corona crisis, and never reached a financial crisis – whether it was caused by the budget or the banking sector.
And now for people who contributed to the formation of deficits and indebtedness in recent years to come out and scare us that without the eurozone we risk falling into an abyss is, to put it mildly, frivolous. It is as if they were aware that their policy was disastrous and today they are trying to shift the blame onto someone else. Lovers of double standards make it easier for themselves when they instill fear, selectively, according to who is in power.