FX news: ERM II – Maastricht too strict for Bulgaria
Bulgaria’s plan to apply for ERM II entry this year, in doubt for some while, was officially put on hold this week.
Prime minister Boyko Borisov says the intention now is to apply in January 2011.
Borisov’s Citizens for the European Development of Bulgaria party took power in July last year on a platform of fiscal responsibility and the tackling corruption. However, the discovery of accounting irregularities under the previous regime increased its 2009 budget deficit from the previously announced figure of 1.9% to 3.7% of GDP. The Maastricht criterion for new members is that the ratio is no more than 3% (whatever existing members managed to get a way with).
Bulgaria also failed to meet the inflation criterion and is further encumbered by the spillover from Greece’s difficulties: Greek banks have nearly 30% of Bulgaria’s domestic banking market.