site.btaBulgaria's ESC: Country's Entry in ERM II, Eurozone Should Become Immediate National Goal

Sofia, January 5 (BTA) - According to Bulgaria's Economic and Social Council (ESC), the country's entry in the Exchange Rate Mechanism (ERM II) and the Eurozone should be set as an immediate national goal and a leading strategic priority of the Bulgarian economic policy. The ESC Friday published a position on acceleration of the preparation for Bulgaria's entry in the Eurozone, elaborated on the ESC's own initiative, the Bulgarian Industrial Association reported.

The position was discussed and adopted at an ESC meeting on December 21, 2017. Among the main rapporteurs was Dimiter Brankov, Vice President of the Bulgarian Industrial Association and ESC member from the employers' group.

According to the ESC, all necessary strategic actions should be taken to ensure the shortest stay possible in the ERM II, known as the Eurozone waiting room. The ESC calls for the speeding up of long-postponed key reforms in education, the judicial system, health care, pension insurance, the labour market, the business environment and regulations, as well as for the effective counteraction of crime in the country.

The ESC lists the following expected benefits of Bulgaria's entry in the euro area, as confirmed by the experience of the Baltic countries, Slovakia and Slovenia as new Eurozone countries: reduction of transaction expenses and the general system risk for the banking system; easier re-financing of the banking sector; inclusion of the European Central Bank (ECB) as as lender of last resort; use of additional guarantees for bank deposits; more effective external regulatory pressure and supervision, which will increase the general trust in the banking sector in Bulgaria; lower general level of interest rates on loans (to the government, enterprises and households) and of the government debt; easier access to funding for SMEs; introduction of lower minimum required reserves of banks; and creation of opportunities for re-financing of accumulated debts. Another benefit mentioned by the ESC is the freeing of some 46 billion leva of foreign exchange reserves serving as assets of the Bulgarian National Bank's Issue Department from their fundamental role of providing coverage of the monetary base in the conditions of a currency board.

Also expected is an increase of direct foreign investment and the general investment activity in Bulgaria as a result of the creation of conditions for greater stability of the national economy and reduction of the investment risk.

ESC also expects: the provision of an additional secure buffer; opportunities for financial assistance from the Eurozone countries and the ECB, including within the European Stability Mechanism, in case of possible problems at the level of public finances or system risks in the financial system; increased competitiveness; easier structural changes in the economy and increased innovative potential of the business organizations; and improved opportunities for greater nominal and real convergence supported by the trend towards a sharper increase of labour productivity and incomes.