site.btaUPDATED Central Bank's Governing Council Member on Public Finances, Eurozone

Interviewed  by the Bulgarian National Television on Saturday, Lyubomir Karimanski, member of the Governing Council of the Bulgarian National Bank (BNB), said politicians should moderate their rhetoric if they want to help stabilize public finances and improve Bulgaria's progress towards the eurozone. Politicians should demonstrate composure and more trust in financial experts and economists, who can pronounce on the state of the country and how it should develop, he said.

The state budget

Karimanski  said Bulgaria kept focusing on a single goal without having a vision for the broader economic policy in the long term. He emphasized that, from an economic standpoint, it is crucial to monitor all the dynamic geopolitical processes, as they determine economic development. Bulgaria should reduce and minimize systemic risks associated with political risks and stability.

According to Karimanski, the focus should not be on the budget alone, but on the direction in which the country is headed. In the past five years, the same pattern has been observed: everyone is fixated on the budget without having a clear programme setting the government's political objectives, he said.

The expert recalled that in economic theory, price stability requires fiscal and monetary policies to be aligned. At present, the fiscal policy appears to be lagging behind or failing both the public and businesses. It is crucial to acknowledge that the economy should be driven by synchronized fiscal and monetary policies.

When systemic risk is minimized and political risk is avoided, the synchronization between these two components is reliable. When only one component functions effectively - in this case monetary policy, which follows the European Central Bank (ECB) directives, with Bulgaria being a member of the Banking Union - fiscal policy should also be brought in line.

Karimanski stressed the importance of establishing and adhering to fiscal principles. He insisted that economic policies must be based on clear fiscal rules. One essential principle that needs to be developed is the efficiency of resources. When there is a clear vision for resource efficiency in both revenue and expenditure, and when each government adheres to expenditure caps, the direction of the state's policy becomes clear through the budget.

Entry in the eurozone

Asked if Bulgaria could join the eurozone on January 1, 2026, Karimanski said this is achievable.

"We can see all the prerequisites are in place. From now on, everything depends on political will and how public finances and fiscal policy can be structured," he said.

He emphasized the importance of closely following the statements of the ECB and the recent response by ECB President Christine Lagarde to a BTA question. Karimanski said that ultimately, the decision is political: "Assuming that the central bank and the banking system have done their job, it is now the politicians' turn to do theirs."

According to Karimanski, the banking system is prepared and ready for eurozone accession. "Financially, from the banking system's perspective, we are stable and ready. While monetary policy is well-defined, fiscal policy remains ambiguous and needs greater clarity," he said.

Karimanski said financial literacy in Bulgaria is severely lacking. "People can be either in favour of or against the eurozone, but their stance should be based on adequate knowledge and arguments. Right now, critics of the eurozone are exploiting people's ignorance to manipulate them," he added.

When asked about the public's savings in Bulgarian leva once the euro is adopted, Karimanski said savings would be more affected by inflation than by the euro changeover. "Let us not perceive the eurozone as some huge entity where everything revolves around a central hub," he said. "Economic stability, economic growth and institutional integrity are what matters because, without integrity, there is no control."

In his view, Bulgaria's fixed exchange rate will not be altered upon entry in the eurozone. "I believe that just as the BNB and the financial system are fulfilling their duties responsibly, European institutions such as the ECB and the European Commission are also clear about maintaining this fixed rate," Karimanski said.

He concluded by saying that Bulgaria faces more significant issues than eurozone entry, namely, macroeconomic imbalances. He emphasized the importance of enhancing Bulgaria's competitiveness, which depends on addressing those imbalances and investing in the economy. "I keep hearing demands that capital expenditures be used as a buffer, but doing so would only hinder Bulgaria's further development," he said.