When will #Bulgaria join the eurozone?

On 8 November, Commission President Jean-Claude Juncker expressed his “hearty” support for Bulgaria to become the 20^th member of the eurozone, as the EU leads a drive for all member states to adopt the common currency. “I have to say bluntly that Bulgaria is ready,” said Juncker following a meeting with Boyko Borissov, Bulgaria’s prime minister, in Brussels.

Many EU officials agree with Juncker that Bulgaria is ready to adopt the euro, especially given the fact that the national currency, the lev, has been pegged to the euro since its introduction in 1999. Borissov has said his government will apply to join the ERM-2 exchange rate mechanism, the mandatory two-year “waiting room” by the end of this year.

Juncker’s endorsement was welcomed by Borissov, who has made joining the euro one of the main priorities of his government, a plan that dates back to the country’s accession to the European Union in 2007 and is popular with the local populace. In a 2009 referendum, the country even adopted the motif that will be displayed on the future Bulgarian coins – the Madara river.

But at a time when the European Union is more divided than ever, Bulgaria’s accession to the common currency might be lambasted in some quarters as political posturing from the embattled European Commission and yet more proof of the Union’s overreliance on ill-devised technocratic rules to ram through policies. While Bulgaria checks off all the right economic boxes, its widespread corruption, poor foreign investment climate, and persistent poverty raise serious questions about Bulgaria’s readiness to adopt the common currency.

The main problem is that the euro’s treaty obligations, known as the Maastricht criteria, were drawn up in the mid-1990s and rely almost solely on economic metrics. Thanks in large part to its tight fiscal policy and to the currency board arrangement that pegs the lev to the euro, Bulgaria boasts low inflation rates, a debt-to-GDP ratio less than half of the required level at 29%, and a budget surplus of an impressive 1.6%.

Such a narrow set of criteria is not enough to gauge the readiness of a country to join the eurozone. Most importantly, it fails adequately take into account key issues like corruption, which should be central parameters in an assessment of an aspiring eurozone member state. What this means is that if Sofia wishes to be take a seat at the Euro table without being castigated by international bodies and activists, it should enact more meaningful reforms. Luckily, the government has its work cut out, as most international observers have already listed the policies Bulgaria should adopt in order to strengthen its bid for the Eurozone.

For one thing, Bulgaria ranks worst in the bloc for high-level graft and corruption, according to Transparency International. Bulgarian prosecutors have filed only 26 high-level corruption cases since January 2015 – less than 2% of all charges that the prosecution raised during that time. The underscores the urgent need for a viable anti-corruption body, which both the ruling party and opposition proposed in legislation but is currently stuck in Parliament.

Ten years ago, the Cooperation and Verification Mechanism (CVM) was set up after Romania and Bulgaria joined the EU to help their governments reform their judicial systems, fight corruption, and tackle organized crime in Bulgaria’s case. Yet the latest CVM report showed that Bulgaria is still making only halting progress under a program that was initially intended to last for two years, with persistent delays in areas necessitating legislative reforms, such as the anti-corruption campaign. These lingering issues are among the main reasons why a number of key stakeholders, like the European Central Bank’s chief economist Peter Praet, have balked at the prospect of letting Bulgaria adopt the euro.

According to the World Bank’s most recent Doing Business report, Bulgaria has dropped 11 places from last year to 50^th, showing that the government’s discrimination against foreign investors was not appreciated internationally. Indeed, the US International Trade Commission’s latest assessment of Bulgaria also notes that while the country “generally” affords national treatment to foreign investors, there have been reports of discrimination against American investors by government officials, as well as issues with slow bureaucracy, corruption, a frequently changing legal framework, and weak judicial system that limits investors’ trust in the courts’ ability to resolve disputes.

One example revolves around ANJ Group, whose bid to buy a chemical fertilizer was thwarted by a company owned by Delyan Peevski, a controversial businessman and media mogul. The company alleged that one of Borissov’s counselors asked for a €1 million bribe to arrange the deal in their favor.

Collectively, these issues reveal the measures the government needs to take in order to make sure that the current two-tiered investment climate, with a different set of rules for foreign investors than for domestic ones, becomes a thing of the past. The short-term legislative pain of decoupling obscure interests from the legislative agenda would be well rewarded over the long-term. It’s a known fact that swapping the lev for the euro would lead to robust “catch up growth” rates, as well as more foreign investment. Now that’s a prize worth competing for.

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