site.btaJoining Euro Area in 2025 Remains Realistic, Bulgaria Needs to Contain Fiscal Expansion - BNB Governor

Bulgaria's accession to the euro area in 2025 remains realistic, Bulgarian National Bank (BNB) Governor Dimitar Radev said in an exclusive interview with BTA on Wednesday. The convergence reports by the European Central Bank and the European Commission on the degree of convergence between the non-eurozone countries and those in the currency bloc were published earlier on Wednesday. The report says that Bulgaria only fails to meet the price stability criterion because the inflation in May, according to Eurostat's harmonized methodology, of 5.1% does not correspond to the reference level of 3.3%.   

In Radev's words, the main prerequisites to be able to adopt the euro in 2025 are two: "a reduction of the fiscal expansion and containment of the budget deficit this year by 1%", as well as "a pro-European government with a sufficiently broad support and horizon of action".  

The BNB governor also told BTA that compared to the other assessed countries, Bulgaria is at the most advanced stage of preparation for euro area membership.  

Radev also commented on the recent changes to the Constitution, which are reflected in the Convergence Report. According to them, the President, when appointing a caretaker prime minister, has the right to choose from among ten people holding senior state positions, including the governor and the deputy governors of the BNB. 

The ECB report notes that a conflict of interest would arise in the appointment of some of these persons, and therefore it is necessary for the governor or the deputy governor who has assumed the responsibility of being the caretaker prime minister to resign. Dimitar Radev said that these interpretations coincide with his "public position that if the governor or the deputy governor, agrees to take the position of caretaker Prime Minister, they should leave the position they hold at the BNB. This needs to be explicitly regulated in the BNB Act, for which we have already taken steps."    

Asked when Bulgaria could meet the inflation criterion and therefore when it is possible to submit a request for an extraordinary convergence report, Radev replied, "If all goes well, by the end of this year."    

Radev pointed out that "BNB does what has to be done under the specific conditions. Our overall assessment of the close cooperation between the BNB and the ECB since its introduction in 2020 is unequivocally positive and is confirmed by the results achieved in the banking sector."    

Asked whether the scenario of joining the euro area in 2025 remains possible, Radev replied: “Yes, on one condition: a pro-European government with sufficiently broad support and action horizon."