Bulgaria is “destined” to enter the euro zone despite political deadlock over the past three years that’s hampered the nation’s bid to join Europe’s single currency according to International Monetary Fund (IMF) Managing Director, Kristalina Georgieva. Sofia-born Georgieva told reporters that Bulgaria has commitments, as an EU member nation, and therefore it’s a matter of when, not if, Bulgaria will join the euro area.
Bulgaria, along with Croatia, joined the euro-area’s waiting room, known as ERM-2, in 2020. Though, unlike Croatia, which adopted the euro in January, Bulgaria has experienced political instability in recent years. For that reason, the former socialist nation abandoned its goal of joining the euro zone as early as 2024 in February. However, Georgieva underlined the importance of political stability for a successful monetary integration, citing the more stable situation in Croatia, where Prime Minister Andrej Plenkovic won a second four-year mandate in the 2020 general election.
“The contrast between Croatia and Bulgaria shows that where there’s political will, and where society is united, even in the hardest times, a good outcome can be achieved,” Georgieva said. She added that the currency board Bulgaria has, “has anchored the stability in the country. Nobody wants to see the currency board go away.”
It is significant to note that Bulgaria’s currency is pegged to the euro. Therefore, it is already closely integrated into the euro area. Bulgaria has had a currency board since 1997 which has helped anchor the country in times of economic crisis such as the 2008 global financial recession.
Bulgaria has been through the deep economic shock resulting from the coronavirus pandemic like the rest of Europe. Nevertheless, Georgieva also said that the southeast and central European region has shown a “strong recovery” from economic losses sustained during the pandemic.
The news of Bulgaria joining the eurozone may have an impact on investment decisions. Kristalina Georgieva’s comments suggest that Bulgaria’s accession to the eurozone may seem inevitable, and it could be price-influencing for the currency market. The country’s monetary stability has provided the necessary foundation to foster the more significant investment now required to join the area. Georgia’s message underlines the importance of political unity and stability in ensuring economic growth and allowing a smoother transition into the eurozone. This statement would also give some degree of reassurance to investors that Bulgaria’s transition to the eurozone might be debt-free and that the country is keen to ensure their currency remains stable in the intervening period.
