Politics Regional

Bulgaria and Romania are moving away from the eurozone, as Croatia gets on track for the single currency

Bulgarian economist Professor Boian Durankev said that the significant budget deficit will prevent Bulgaria from joining the eurozone in the near future. Durankev added that in order to ready the country, the whole of the Bulgarian economy and society must change, writes Cristian Gherasim, Bucharest correspondent.

The Bulgarian government forecasts economic growth of 3.5% this year and inflation of 2.5%. “The inflation rate is officially over 2%”. He added that “forecasts indicate that the economy has the potential for some change, but the country is heading for a significant budget deficit, which will prevent us in the coming years, at least until 2025, from joining the eurozone “, explained Prof. Durankev . He commented that the eurozone has undeniable advantages, including stronger support in the event of crises such as the pandemic.

On the other hand, Croatia is doing much better. Croatia is on track to adopt the euro by 2023, as long as it meets the criteria set by the European Commission, said Valdis Dombrovskis, the European Commission’s executive vice president. “The euro will be a great advantage for Croatia, as it is now for Europe. These developments must be carefully monitored and managed,” said the European official.

Dombrovskis warned Croatia that it should be cautious about the effects of the pandemic on the economy, especially the low level of vaccination, which could lead authorities to adopt new restrictions, although the pace of recovery in the Croatian economy is good.

Croatia will only be able to introduce the euro once all the convergence criteria have been met. If met in 2022, the EU Council will decide whether the state will join the euro on January 1, 2023, said the European Commission’s executive vice president.

The governor of the Central Bank of Croatia, Boris Vujcic, also recently said that Zagreb could meet all the criteria for joining the eurozone sooner than expected. The temporary suspension of the deficit limit for EU member states due to the coronavirus pandemic should help Croatia fulfill, sooner than expected, a key condition for becoming a eurozone member, Boris Vujcic said.

Croatia, a country that relies heavily on tourism more than any other EU member state, has been affected by travel restrictions introduced in the wake of the coronavirus pandemic. “We have a situation this year in which the European Commission has suspended excessive deficit procedures for all Member States. In this context, we need to think about the date of Croatia’s accession to the euro area,” Boris Vujcic said at a meeting of central bank governors. Candidate countries for accession to the euro area must prove the soundness of public finances, that inflation is under control and the exchange rate is stable before they can switch to the single currency.

Euro favorability and readiness in the region

Romanians top the chart of euro currency favorability, with 75% of them wanting the euro switchover, up from 63% last year.

According to the Flash Eurobarometer, Romanians are followed by other eastern and central European nations, with 69% of Hungarians, 61% of Croats and 54% of Bulgarians favoring the single currency.

The survey was carried out in the seven member states that have not adopted the single currency: Bulgaria, the Czech Republic, Croatia, Hungary, Poland, Romania and Sweden.

“Across the seven countries, 57% are in favour of introducing the euro, while 40% are against. There is wide variation at country level: three quarters are in favour of introducing the euro in Romania, but in Czechia and Sweden, a majority of respondents are against the idea of introducing the euro”, the survey points out.

Across all countries, except the Czech Republic, there has been an increase in the proportion of those in favor of introducing the euro compared to 2020.

Yet, most respondents in each country think introducing the euro will increase prices and are concerned about abusive price setting during the changeover.

While Romanians lead in terms of favorability towards the euro they are also much aware of their fiscal unreadiness, with 69% of the population saying that their country is not prepared to join the Eurozone.

In order to become part of the Eurozone a country must meet a set of criteria, with Romania no longer fulfilling the requirements according to last year’s European Commission report on euro convergence.

Romania has moved back and forth on various phases of the accession process over the past 14 years since it became part of the EU, outlining plans and setting numerous deadlines for joining the eurozone. The country lags behind in its readiness to adopt the single currency. Romania previously set 2024 as a deadline to join the Eurozone but the odds are slim for that to happen.

Bulgaria and Croatia have been admitted in the Exchange Rate Mechanism (ERM II), the first step in joining the euro, though Bulgaria is now backtracking on its progress.

Sweden remains one of the most prepared countries in switching to the euro. Yet joining the Exchange Rate Mechanism requires public approval. On 14 September 2003 56% of Swedes voted against adopting the euro in a referendum, with political parties pledging to abide by the result of the referendum.

All member states of the European Union, except Denmark which negotiated opt-outs from the provisions, are obliged to adopt the euro as their sole currency once they meet the criteria.

Source: EUreporter

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