[size=75:1hr2en6y]novinite 11 January 2010

Bulgaria to Begin Euro Bid

Bulgaria, the European Union's newest and poorest member state, will launch its bid to join the euro at the end of January, but is increasingly fearful that the debt crisis erupting across the currency bloc could harm its application, Prime Minister Boyko Borisov said in an interview Sunday.

The center-right leaning prime minister also stressed that Bulgaria will no longer need to tap the International Monetary Fund or international bond markets for emergency financing to plug its budget gap.

Separate documents seen by Dow Jones Newswires Sunday showed the country's finance ministry will upgrade its forecasts for 2010 gross domestic product to tip a 0.2% expansion from the previous estimate of a 2% contraction.

"
We have everything in order and we're ready to start the road to the euro zone by the end of the month. It is now the first foreign policy priority of my government to enter the euro zone,"
Mr. Borisov said in Sofia ahead of his governing GERB party's first conference since sweeping to power in July elections.

His declaration ends months of speculation over when the former communist state would formally apply to the bloc's exchange-rate mechanism -- a two-year currency stability test for euro hopefuls.

A successful application -- which tests candidates on currency stability, public debt, interest rates and inflation, and must be approved by euro-zone heads of government and European Central Bank President Jean-Claude Trichet -- would boost confidence and foreign investment in Bulgaria, setting it on course to adopt the single currency in 2013, ahead of nearby Romania and Hungary.

In terms of its economic and fiscal management, Bulgaria has become a role model for the other countries in Europe. "
Bulgaria's experience has a lot to teach other economies preparing to cut spending,"
said Nigel Rendell, emerging markets economist at RBC Capital Markets.

But Mr. Borisov, a former Sofia mayor who has drawn international accolades for cutting spending 15% while maintaining high levels of public support, said Bulgaria's fiscal performance, which outshines each of the 16 countries in the euro zone, doesn't make them a shoo-in to enter the currency club.

His fear is that a debt recession and intensifying debt crisis may set the bar higher for new entrants into the single currency, as nervy euro-zone policy makers opt to consolidate existing borders rather than expanding the bloc.

"
I am afraid that the debt crisis in newer euro-zone countries will negatively affect us,"
he said. "
We hope that the authorities respect the admission criteria as we've worked hard to get here."


Government fears that Bulgaria's candidacy could be vetoed by policy makers anxious to avoid further expansion of the euro zone are shared by business leaders here. "
It makes sense for Bulgaria to apply, but I worry that at a time of crisis the European Central Bank could postpone the application on a technical point because they want to consolidate,"
said Ivo Prokopiev, chairman of industry group the Confederation of Bulgarian Employers and Industrialists.

In a separate move likely to be welcome by markets, Mr. Borisov said he would extend the powers of Finance Minister Simeon Djankov, adding increased supervision of the real economy to his treasury portfolio. Mr. Djankov, a former World Bank economist whose appointment steadied investor nerves about Mr. Borisov's incoming administration, has spearheaded efforts to bear down on the bulging budget deficit.

However, Mr. Borisov, whose polling numbers have dipped modestly in recent months, indicated his government's efforts to guarantee fiscal discipline were not limitless. "
If fiscal discipline is still hitting people really hard in the years ahead, then we'll have to reconsider our approach,"
he said.



What are your thought's of Bulgaria and the Euro ?