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Bulgaria economy: ERM II in sight
ERM II in sight
On August 22nd the government approved an action plan for membership to the European exchange-rate mechanism (ERM II)-an institutional arrangement that aims to reduce exchange-rate volatility before entry to the euro zone-and the European banking union. The action plan aims to fulfil the reform commitments that Bulgaria took at the July 12th meeting of euro zone finance ministers and the European Central Bank (ECB). We expect all the measures included in the plan to be implemented by summer 2019, in line with Bulgaria's intention to apply to ERM II by July 2019. The reform programme, which includes measures such as streamlining the slow and inefficient bankruptcy procedure, will be highly beneficial for the Bulgarian economy.
Bulgaria began to prepare to join ERM II in July 2015, when the government established a council to co-ordinate preparations for Bulgaria's entry to the euro zone. In 2016 and 2017 informal meetings were held with the finance ministers of France and Germany, among others. In these years the government eliminated the budget deficit, reduced debt and improved the macroeconomic policy environment. As a result, in March 2018 Bulgaria was removed from the group of countries with excessive economic imbalances, where it had been for three years. In May the ECB and the European Commission convergence reports confirmed that, with the exception of ERM II membership, Bulgaria met the Maastricht criteria for joining the euro zone.
The initial plan was for Bulgaria to apply for ERM II membership in the first half of 2018. However, unofficially, some euro zone member states advised the country first...