Bulgaria's euro entry will be smooth, says central bank governor

SOFIA: Bulgaria's conversion to the euro will be smooth, will accelerate its convergence with the economies of richer Western peers and will not reduce competitiveness, central bank governor Dimitar Radev said on Thursday.

Bulgaria, one of the European Union poorest member states, was admitted together with Croatia to the ERM-2 mechanism, a mandatory stage for joining the euro, in July. It plans to adopt the single currency as of 2024.

Addressing a virtual Euromoney conference on central and eastern Europe, Radev said he did not expect the economic pressure caused by the COVID-19 pandemic to slow Bulgaria's path towards the single currency.

"We expect it (adopting the euro) would help further accelerate the convergence process and improve the financing conditions," Radev told a virtual Euromoney conference on central and Eastern Europe.

"The very process of preparation for the euro, following the ERM-2 should motivate discipline and catalyse sound domestic policies," he said.

Radev said Bulgaria has been meeting the nominal criteria and expects to be compliant when the euro is adopted, despite eventual inflationary pressures as it converges with the richer euro zone economies.

Bulgaria is one of the least indebted EU states. Its fiscal deficit was only 3% of economic output last year, despite increased spending to reduce the impact of the novel coronavirus on jobs and businesses.

One of the biggest problems countries face when joining the euro is that countries can no longer use the exchange rate as a cushion from any economic shock, but Bulgaria already pegs its lev currency to the euro and plans to adopt the single currency at its current fixed rate.

"It would be a smooth process with no losses in terms of our competitiveness or policy flexibility," Radev said.