Bulgaria EconMin Disputes Impact of Eurozone Entry

Bulgaria's Economy Minister has voiced his disagreement with the idea that joining the Eurozone will be a "catastrophe" for the country.

The comment was made by Prof Steve Hanke, a professor of Applied Economics at Johns Hopkins University in Baltimore, known in Bulgaria as the "father of the currency board".

Hanke said on Monday at a conference in Sofia, Bulgaria, that the country risked losing financial discipline by adopting the euro (a step to which Bulgaria aspires) and ditching the currency board system which pegs the lev (BGN) to the euro (EUR) at a fixed echange rate and ties the level of levs in circulation to the level of foreign exchange reserves.

Lukarski, however, argues "the situation in Bulgaria is a little different than in other countries such as [what] the Baltics were like." In his words, even though the lev's exchange rate depends on the euro, the fact that exports and imports constitute a substantial part of GDP means that Bulgaria loses "more than BGN 1 B every year" from difference in exchange rate and from commissions for companies in charge of trading goods out of and into Bulgaria.

Lukarski opined that accession into the Eurozone would help businesses and also that it would enable Bulgarian banks to receive assistance by the ECB.