In recent years the euro area had to deal with the dual
pressure of effects from the global financial crisis and its
own structural challenges. In response to that, the euro area
needed to design and implement a multitude of institutional
Although Bulgaria is not a member of the euro area yet, its
reforms do matter for us because of both their global impact
and our commitment to join the European Monetary Union.
Adopting the euro is an obligation under the EU Accession
Treaty and a long-standing objective for Bulgaria. Further to
the formal part of it, Bulgarian membership of the euro area
may benefit both sides.
On the one hand, Bulgaria may contribute to the strength and
stability of the euro area. The country has displayed an
impressive track record of practically meeting the nominal
Maastricht convergence criteria for many years. For example,
Bulgaria's prudent public financial management produced broadly
balanced budgets for most of the past two decades. As of today,
Bulgaria's debt-to-GDP ratio is the third-lowest in the EU.
Therefore, adding one more voice of common sense in dealing
with the public financial management issues in the euro area
would be a good thing for everybody.
On the other hand, the very process of acceding to the euro
area invigorates the policymaking and mobilises the
institutions in Bulgaria. The related reform efforts are geared
towards speeding up the real euro area convergence of our
Given the upsides of Bulgaria becoming part of the euro
area, is the process taking too long? The answer lies beyond
the assessment of how the various convergence criteria are
being met. Today, Bulgaria's overall preparedness is analysed
from the perspective of the euro area's own lessons from the
recent financial crisis.
The Banking Union is a new key segment of the euro area's
architecture, non-existent only a few years ago. Also, areas
such as institutional quality and governance have been
acknowledged as important factors in the macroeconomic
Nowadays, an applicant aspiring to join the euro area and
its Single Supervisory Mechanism ought to prove, among other
things, the strength of its financial system as well as the
quality and efficiency of its institutions.
That is the rationale behind the recently announced new
approach to be applied in the case of Bulgaria with respect to
the process of the Bulgarian lev's
participation in the Exchange Rate Mechanism II (ERM II).
In line with these new developments, the Bulgarian
authorities undertook various commitments to implement measures
and policies which should ensure a smooth transition to joining
simultaneously the ERM II and the Banking Union.
Bulgaria's new road to full-fledged euro area membership
will lead us through so far uncharted territory, including the
use of the mechanism of "close cooperation". There may be risks
of both external and domestic origin, affecting the progress
towards the euro adoption in Bulgaria. These are concerns which
are well-acknowledged and rather explicable.
Richer in experience and institutionally evolved, the euro
area of today is different from a decade ago. That is why, any
future euro area enlargement will be different from the