The Bulgarian central bank transferred €3.56 mln ($4.7 mln) of its €50.83 mln stake in the European Central Bank as part of the Balkan country's preparations to adopt the euro.
With the nation's accession to the European Union on January 1, the Bulgarian central bank becomes part of the system of European central banks, which requires that 7% of its ECB stake is transferred upon EU entry, while the remaining 93% of the stake is to be transferred upon euro adoption, the central bank in Sofia said today in an e-mail. Bulgaria and Romania will join the eastern European race to widen the euro region to include more former communist countries after Slovenia, once part of Yugoslavia, became the 13th nation to share the common currency on January 1. Bulgaria holds 0.8833% of the total ECB capital, it said. Finance Minister Plamen Oresharski said on December 22 that Bulgaria will declare its intention to join the exchange-rate mechanism, the pre-adoption currency stability test, in the first three months of this year after talks with the ECB and the European Commission, the EU's executive arm.
The nation of 7.8 million runs a currency board system which involves a fixed exchange rate pegged to the euro. This has helped the country meet most of the euro-adoption criteria except inflation. It has lowered public debt to 27% of GDP, below the 60% threshold required for euro adoption. Bulgaria had a budget surplus of 3.5% of GDP in 2006, the fourth in a row, Oresharski said. To adopt the euro, it must maintain a budget deficit that is below 3% of GDP. Reducing inflation, which was 6.1% in November, will Bulgaria's most difficult task in meeting euro-adoption criteria. Estonia and Lithuania, two former Soviet republics, joined the mechanism a month after they entered the EU in 2004, with the intention of being part of the euro zone at the end of 2006. Their plans were foiled after economic growth, among the fastest in the EU, fueled inflation. (Bloomberg)