Bulgaria to apply to join euro zone's 'waiting room' by end April

Bulgaria will speed up its plans to join the euro zone and apply for membership by the end of April in a process that should help the Balkan country recover from the coronavirus pandemic, Prime Minister Boyko Borissov said on Friday, reported Reuters.

Borissov said he had discussed the plan with the president of the European Central Bank, Christine Lagarde, senior officials at the European Commission and his colleagues in the 27-member EU.

Borissov said he was convinced that both Bulgaria and Croatia will be allowed to join the euro zone’s obligatory two-year “waiting room”, the ERM-2 mechanism. Membership should allow Sofia access to ECB financing, he said.

The country plans to join both the ERM-2 and the EU’s banking union simultaneously.

“This (coronavirus) crisis has shown us that those who are in the euro zone and in its ‘waiting room’ will have billions of euros for recovery. Those who are not will have to take on debt at high interest rates,” he told reporters.

Bulgaria, one of the poorest but also least indebted EU members, maintains tight fiscal discipline, but the government expects that the effect of stringent measures across the globe to contain the coronavirus will shrink Bulgaria’s small and open economy by 3% this year and boost its fiscal gap to 3% of economic output.

Bulgaria has pegged its lev currency to the euro.

Borissov said the government would have enough funds to weather the coronavirus pandemic, but would need billions to restart the economy afterwards.

“It will be important for the European Union that disciplined countries can then recover faster using the enormous resources of the European Central Bank,” he said. “I want to guarantee that period.”

Sofia has met most of the requirements for entry except for the successful recapitalisation of two locally owned banks at which the ECB found capital shortfalls during a health-check last year.

One of the banks, small lender Investbank, has said it has already bolstered its capital. Borissov said he expected that all conditions will be met very soon.

Borissov said he now regrets earlier this year seeking to delay ERM-2 entry to July. Bulgaria had previously planned to join both the ERM-2 and the bloc’s banking union at the end of April.