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Bulgaria: Economy Expects To Meet EMU Criteria

London, 20 May 1998 (RFE/RL) -- Bulgarian Deputy Prime Minister Alexander Bozhkov says his country expects to meet the strict Maastricht criteria for joining the European Monetary Union by the year 2001.

Bozhkov spoke to the London Chamber of Commerce about the advantages of investing in Bulgaria which he says is committed to reform after ousting its "corrupt" government a year ago.

Bozhkov said Bulgaria expects soon to be able to meet the tough Maastricht Treaty rules for joining the single European currency because it took the "bold" step last year of introducing a currency board. He said this had imposed discipline on the economy after seven years of "dubious" reforms by previous administrations.

Bulgaria has lagged far behind other reforming countries of Eastern and Central Europe, notably Poland, the Czech Republic and Hungary.

Bulgaria is one of 10 East and Central European nations seeking to join the EU. If and when it wins accession, it wants to be part of the single currency, to be launched by 11 EU members next year.

The Maastricht Treaty says countries wishing to join the single currency -- the euro -- must reduce their annual budget deficits to less than three percent. They must also bring down inflation and interest rates to converge with the West European countries.

The message put over by Bozhkov to his British audience yesterday:

Bulgaria is on the way to hitting these targets because of the success of its "Bulgaria 2000" reform program. Inflation has fallen, interest rates cut, and the budget deficit reduced.

He said monthly inflation was down to almost zero in April (0.1 percent) from 240 percent in February last year. Interest rates fell to 5.5 percent last month. Growth this year could rebound to four percent (compared with minus 10.9 percent in 1996), hard currency reserves have risen, and foreign investment is picking up.

Bozhkov said by the end of this year, 50 percent of assets will be in private hands, and 85 percent of enterprises under private control.

He said Bulgaria has put its severe banking crisis behind it by closing non-viable banks; it has liberalized all prices except for electricity and gas; and has embarked on financial sector reform.

Bozhkov said foreign investment in Bulgaria last year was almost equal to all foreign investment in the country since 1992. He said the "ambitious" target this year is for more than $1 billion.

He said Belgian investors top the league of foreign investors, followed by Germany. He reproached British firms for not investing enough in Bulgaria, lying at an "east-west" crossroads of Europe with a market of 60 million people in several countries within a 500kms radius of Sofia.

He said Bulgaria offers "huge potential" for investors in the financial sector, tourism, transport and telecommunications.

Bozhkov said Bulgaria offers stability; excellent relations with all its neighbors; and a government strongly committed to reform.

Bulgaria, of course, has been relegated to the second tier of East and Central European countries in the EU accession process (behind Poland, Hungary, the Czech Republic, Estonia and Slovenia). Actual membership could be five, 10, or 15 years in the future.

But Bulgaria is at pains to stress its EU-credentials. Bozhkov said on January 1, the national currency, the lev, now pegged to the deutschmark under the currency board system implemented at the insistence of the International Monetary Fund, will automatically be pegged to the euro.

Noting that Britain has chosen to remain outside the euro zone, at least for now, Bozhkov drew laughter when he told his London audience: "You'll catch up with us."