Bulgaria's center-right government has revived its plans to apply to join the bloc's exchange-rate mechanism, the so-called Eurozone waiting room, after it was forced to drop the euro bid in April this year over a larger than expected 2009 deficit.
"Bulgaria is likely to apply to join ERM II in the second half of 2011 after it has demonstrated that next year's budget deficit will fall below the European Union's ceiling of 3% of gross domestic product in line with the Maastricht criteria," Finance Minister Simeon Djankov said on the sidelines of the Ecofin council meeting in Brussels.
Earlier this year the government touted plans for the country to join the euro-zone entry mechanism ERM II no later than next year with adoption of the single currency slated for 2012. It had to put off plans to join the euro area entry mechanism after its 2009 revised budget gap exceeded the 3% EU threshold.
Joining the exchange-rate mechanism was assigned top priority for this year by the new Bulgarian center-right government, which was the reason why it stuck to tight financial policy at the end of 2009 and delayed payments to businesses in a bid to keep low the budget deficit.
Minister Djankov, a World Bank economist, hoped to offset a possible reluctance to admit Bulgaria into the ERM, stemming from the global crisis, by garnishing the application with a targeted balanced 2010 budget, small 2009 deficit and laws overhauling the inefficient health-care and social-security systems.
Entry into the so-called Eurozone waiting room would have brought Bulgaria closer to the umbrella of the euro region and the protection of the European Central Bank and was conditional on whether the new government would succeed to restore Brussels trust and the budget deficit that the country has posted.
Countries must be members of ERM II for two years before they can formally join the eurozone.
The lev is already linked to the euro in a currency board that keeps the Bulgarian currency at 1.9558 to the euro.