Transcript 10 година валутен борд

Economic and Political Challenges of
Acceding to the Euro area
BULGARIA
Georgi Angelov, OSI-Sofia
1990s: Dollar rules

USD
DEM
other

Currency
structure of
export, 1999
Unofficial
dollarization
of economy,
especially
1996-1997
Currency board: Choice of
currency



USD or DM?
Strategic decision – Deutschemark (to be
changed to Euro when introduced)
willingness of Bulgaria to enter and
integrate with the EU and Euroarea (as
early as 1997)
Currency board


currency board - step toward entry in the
euro area
the entry into the euro area - the only exit
strategy from the currency board
Negotiations with the EU
Chapter 11 “Economic and Monetary Union”


membership in the EMU as early as
possible
Priority of the government
Negotiations with the EU
Agreement between the Council of Ministers
and the Bulgarian National Bank on the
introduction of the Euro in the Republic of
Bulgaria, 25 November 2004


“strategy for the fastest possible
accession”
Maintain balanced budget
Budget Balance, % of GDP
More than balanced
budget
4
3
2
1
0
-1
-2
2002
2003
2004
2005
2006
2007
2008
Government Debt, % of GDP
Well within criteria
for years
60
50
40
30
20
10
0
2002
2003
2004
2005
2006
2007
2008
Long-term interest rates

Most Maastricht
criteria fulfilled
even before
ERMII
Euro preference
60
Share of Euro
deposits in banks
increasing
50
40
30
20
10
0
2003
2004
2005
Euro
2006
Leva
2007
2008
Inflation

Inflation since
2007
Budget balance 2009, by month
ECB fears




ECB was worried because of the
current account deficit and inflation
in Bulgaria
Risk of adjustment
Unofficial criteria for ERMII?
Bulgaria – not in ERMII
Current Account, by month
400
200
0
-200
-400
-600
-800
-1000
-1200
-1400
декемв ри 2008
април 2009
ав густ 2009
октомв ри 2008
фев руари 2009
юни 2009

ECB fears
rejected by
reality
Official Reserves
16000.0

14000.0
12000.0
10000.0

8000.0
6000.0
4000.0
2000.0
0.0
II
IV
VI VIII X
XII
II
IV
VI VIII X
2008 I IIІ
V
VII
IX
XI 2009 I III
V
VII
IX
Bulgaria survived
the financial
crisis
No support from
ECB, Federal
Reserve – unlike
West Europe
Why Bulgaria should be allowed
to enter ERMII?



Bulgaria survived with no external help
– no risk for Eurozone
ECB warries proven imaginary
Bulgaria fulfils criteria even before
ERMII entry
The only country
Frankfurter Allgemeine Zeitung,
16.11.2009

EC: In 2010 only one country in EU
will fulfill the Stability and Growth Pact
requirements. Bulgaria.
If delayed?




Violation of treaty
In 10 years the willingness to enter
Euro may disapper (new Sweden, UK?)
People will not like to abandon lev
Unilateral euroization?
Options




Big bang enlargement of Eurozone
Free ERMII entry and reform in criteria
(inflation)
Unilateral Euroization
Stay out