The Bulgarian government has approved an Action Plan of reforms needed for the country to progress further on its path to joining the eurozone. Bulgaria is looking to adopt the euro by July 2019 and, to do so, it needs to join the Exchange Rate Mechanism (ERM-II), known as the waiting room for the eurozone, and the EU’s banking union.
Earlier this year, European Commission Vice President Valdis Dombrovskis, who is also responsible for the Euro and Social Dialogue, voiced his approval for Bulgaria joining ERM-II, which was set up on January 1, 1999 to ensure that exchange rate fluctuations between the euro and other EU currencies do not disrupt economic stability within the single market, and to help non-eurozone countries prepare themselves for at least two years in the ‘waiting room’ before adopting the euro.
In July of this year, the Eurogroup, the group of finance ministers of eurozone countries, gave Bulgaria the green light to embark upon its path to join the eurozone: “We welcome the intention of the Bulgarian authorities to put in place the necessary elements for a successful entry into ERM II,” an official Eurogroup statement read.
Bulgaria is the first non-eurozone member to seek to join the banking union, which will allow the European Central Bank to monitor its top lenders. The country’s national currency, the lev, has long been pegged to the euro via a currency board. Sofia must improve its macrofinancial framework, strengthen supervision of the non-banking financial sector, including pension funds and insurance firms, as well introducing tougher measures against money laundering. Improvements are also required in the bankruptcy legal framework.
On August 22, the Bulgarian Council of Ministers adopted an Action Plan for joining ERM-II and the EU’s banking union. In parallel to the Action Plan, the finance ministry has initiated amendments in legislation governing the Bulgarian National Bank, which are in spirit of the changes required to join the banking union and eurozone, but not formally part of it.
The Action Plan provides detailed measures to each of the seven points in the official letter sent to the Bulgarian government. In responses to concerns expressed in Brussels, approximately one third of the Plan includes measures for improving the supervision of the non-banking financial sector. In addition, the plan includes changes in the management of state enterprises and their finances, as per EU norms and standards.