There is a risk of entering an inflationary spiral, Bulgaria’s central bank Deputy Governor warned

Bulgaria may not be able to join the euro area by the planned deadline - 1 January 2024. This became clear after a round table on the topic, organized by the Budget and Finance Committee of the Parliament on May 31. The main factor that could lead to a delay is high inflation rate.

Bulgaria may not meet the inflation criteria for joining the eurozone, Bulgarian National Bank’s Governor Dimitar Radev hinted. He recalled that when calculating the average inflation, the period from May 1 this year to April 30 next year should be taken into account. As at now, we do not meet the criteria for this indicator. Aggravating factors are the declining labour force as well as the failure to contain price increases. However, it is also true that much of the inflation is imported and it is difficult to bring it down if it remains high in other countries. The Ministry of Finance and the BNB will prepare an analysis of the benefits and drawbacks of joining the euro area. Only then can a political decision be taken.

Bulgaria should join the eurozone at the earliest opportunity, said Bulgarian National Bank Governor Dimitar Radev, who, however, expressed his doubt that the country's entry is loaded with excessive expectations.

The eurozone cannot be a substitute for good macroeconomic policy, if economic and financial policy is bad, it will not save any country, whether it is in or out of the eurozone.

In his words, BNB is fully prepared.

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There are four main criteria that countries have to meet to be accepted into the eurozone:

• first, inflation in the home country must not be more than 1.5 percentage points above inflation rates in the three best-performing countries
• the deficit must not exceed 3 % of GDP and the debt must not exceed 60 %
• there is also a specific requirement for the long-term interest rate

Doubts that the country will be able to meet the criteria were expressed by the chairman of the Budget Committee himself.

Our chances are not great because, after all, if we keep the current criteria we would hardly meet them in terms of inflation, said Lyubomir Karimanski - chairman of the Budget and Finance Committee.

According to the deputy chair of the committee, Bulgaria is not only not prepared for the euro area, but it will not quarantine its security.

The eurozone entry was supported, however, by former ministers of economy and finance Nikolay Vassilev and Milen Velchev.

I don't know how many decades with many people like you we have to explain - is it true that prices will double when we join the eurozone - we will probably explain this thing for the rest of our lives, this is a superstition, a religion that has nothing to do with reality, said Nikolay Vassilev.

In the end, our place is in the euro area, except that we have made a commitment to enter, there is no time commitment, but logically this is where we have to get and the faster we get there, the better for us, said Milen Velchev, former minister of finance.

Former Finance Minister Vladislav Goranov also advised the government not to delay entry by obstructing it.

Don't block the technical process while waiting for the analysis because that means we will not join the euro area in 2024, no matter what we do.

Today's roundtable also discussed anti-inflationary measures. Most experts described them as causing further inflation.

High inflation is stopped with highly positive real interest rates and recession, central bank Deputy Governor Kalin Hristov said. He said that there should be targeted measures for the most vulnerable groups in society, instead of mechanical application of anti-inflationary measures.

Bulgaria is currently a member of the ERM 2 exchange rate mechanism, in which it can remain indefinitely until it joins the eurozone.

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