The European Commission has published its Convergence Report, in which it assesses the progress made by Bulgaria, the Czech Republic, Hungary, Poland, Romania and Sweden towards joining the Eurozone. The report shows “mixed results”. In fact, “none of these member states currently meets all the criteria for joining the eurozone,” said the message accompanying the report. The financier Lubomir Karimanski spoke to FAKTI on the subject.
- Mr. Karimanski, an important emphasis to which attention should be paid in the ECB report on Bulgaria's readiness to enter the Eurozone is that we do not meet the criterion (standard) for inflation… Expected or not?
- Not only was it expected, but many times in the past year, together with many fellow financiers, we clearly and reasonedly stated that we would not be able to meet the inflation criterion. Several times I had the opportunity to emphasize that the ECB and the EC will not make a compromise with one of the structure-determining criteria, such as inflation, because it is related to many factors that are blatantly ignored by the populism of politicians and rulers. One of these factors shows that “Unit labor costs have grown by 27.4% over the period from 2020 to 2023. – well above the Eurozone level of 9.5%....“ This means that in the policies of the regular governments, wages have been increased without any output corresponding to the rate of increase in wages being produced against them. This, in turn, affects the rate of inflation, and it cannot fall as quickly as we would like.
- And according to the report, we are missing a significant value - it is about 30% of the reference value that we are not achieving. What does this mean?
- First, I would like to point out that in the two reports we have different reference values for inflation, i.e. in the ECB report, the reference value for the average annual inflation is 3.3%, and the one that Bulgaria achieved for the same period is 5.1%. In May 2024, the average 12-month HIPC inflation rate in Bulgaria was 5.1%, i.e. well above the reference value of 3.3% for the price stability criterion. The EC has calculated a reference value for the same period of 4.1%. Of course, the difference with that of the EC is much smaller, but we should not forget that the EC is a politicized body that is influenced by many lobbies, and personally I would trust the ECB's professionalism. The difference of 1.8% between us and the other countries participating in the ECB's calculations shows that in Bulgaria fiscal and monetary policy must be coordinated and fiscal discipline is more than important. This only shows how wrong Asen Vassilev's policy was as finance minister.
- Without political will and policies, is there any way to overcome inflation?
-Naturally, there is no way without policies and political will. You know, I think it is necessary for our country to have an undisputed doctrine of development, with five priorities. Price stability in the country is a function of knowledge and management of the economic and financial processes in the country, the result of policies in individual sectors. It is important to achieve a sustainable level of inflation corresponding to the reference values. What do you mean by sustainable? Here I would like to quote part of the ECB report: “Inflation sustainability implies that the satisfactory performance of inflation should essentially be due to the adequate behavior of input costs and other factors that influence price developments in a structural way, rather than to reflect the influence of cyclical or temporary factors.“
- 2025, 2026…. When will we be ready to accept the euro?
- I don't think the date should be an end in itself. Let us consider our acceptance into the Eurozone as an opportunity to use another financial and monetary instrument, which should contribute to increasing Bulgaria's competitiveness and a higher standard of living. It is better to prepare well and not be like the “note takers” in a school that does not teach for knowledge, but only for facade and flattery.
- Who is to blame that we still do not meet the criteria. What's holding us back?
- We are definitely hampered by the recent fiscal policy of the two regular governments, as well as the impossibility of the institutions in the country to work together, as they did in the Republic of Croatia.
Only 5-6 months ago, the Minister of Finance was saying one thing, and the governor of the BNB was saying another.
This is not a good sign at all, on the contrary. Note that one of the reports draws special attention to the need to strengthen the MoF's expert capacity. A Ministry that was exemplary in terms of high professionalism and availability of expert capacity. Why did the structural changes made by Asen Vasilev not produce any initial results during the regular cabinet meetings, but the exact opposite happened?
- KPCONPI found incompatibility with the deputy governor of the BNB Andrey Gyurov. What is it and why now?
- The Anti-Corruption Commission could have established this during the period in which Mr. Gyurov was in violation of the BNB Law, why did he wait until the “assembly“ and then announce this decision? So he left the mentioned companies 5-6 months after he was elected to the post. His inauguration statement has been available all along in the National Assembly. Why did they wait almost a year to check it... No attention was paid when many of my colleagues and I raised the alarm about violations of the BNB Law. The establishment of the fact that Mr. Gyurov did not inform and seek permission from the Board of the BNB for his side activities (which is the biggest violation) could have become known already half a year ago.
- What kind of signal is this anyway?
- For the last 30 years, I do not remember a similar scandal provoked by a deputy governor of the BNB. There is no way that this will not affect the image of the central bank, as well as make an impression on the ECB and the EC. Moreover, the deputy manager of the “Emission“ he also heads the Currency Council in the country, he is directly responsible for the process of Bulgaria's accession to the Eurozone.
- 64% of Bulgarians believe that the introduction of the euro will increase prices. How real are people's fears?
- Much depends on our preparation, on the actual work done, on undertaking transformational policies and the firmness with which they will be implemented. Structural reforms are needed to improve the business and institutional environment, although reformers have always borne the brunt of the cost. It is the deep reforms with a clearly constructed plan, analyses, processes, secured capacity and control, that are of decisive importance for the attraction of foreign direct investments and the stimulation of Bulgaria's potential growth. The growth of wages in the country must be in line with that of productivity.