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Sep 28, 2007 15:46 EEST
SOFIA (Bulgaria), September 28 (SeeNews) – Fitch Ratings on Friday said it expects Bulgaria to adopt the euro in 2013 and Romania to follow in 2015 as the timetable for European Economic and Monetary Union (EMU) is slipping further in a number of countries in eastern Europe.
“Fitch's forecasts for euro adoption for Bulgaria and Romania are 2013 and 2015, respectively. But these are uncertain as both have a long way to go on real convergence, are showing signs of overheating and will find it hard to meet the inflation criterion for many years,” the rating agency said in a statement.
The two Black Sea neighbours, which joined the European Union in January, should meet EU's Maastricht criteria on inflation, public debt, budget deficit, currency stability and interest rates to qualify for the adoption of the euro. The Maastricht criteria require that the annual inflation should not exceed the average for the three best performing countries in the EU plus 1.5 percentage points. The criterion for public finance calls for a budget deficit lower than three percent of the gross domestic product.
“Bulgaria's failure to join the [Exchange Rate Mechanism] ERM II may point to reservations over its membership by the EU authorities,” Fitch said.
Bulgaria has said it hopes to enter the ERM-II, where it should stay for two years preparing to adopt the euro, later this year. The country meets all of the Maastricht criteria except for inflation which reached an annual 6.5% last year.
Bulgarian consumer price inflation quickened to 12% year-on-year in August from 8.4% in July, mainly due to higher food prices as a result of unfavourable weather conditions.
Bulgaria is operating an IMF-prescribed restrictive currency board system introduced in 1997 to curb rampant inflation by tying the cash in circulation to the level of foreign exchange reserves. The Bulgarian lev currency is pegged at a fixed exchange rate of 1.95583 against the euro under the system. The country plans to keep the currency board system until it joins the eurozone.
Romanian central bank governor Mugur Isarescu said earlier this year the country plans to enter the ERM-II in 2012 and adopt the euro in 2014.
"The prospective timetable for euro adoption is continuing to slip across much of New Europe, owing to rising inflation in the Baltic States, euro-scepticism in the Czech Republic and Poland and the challenge of managing real convergence in Bulgaria and Romania," Edward Parker, head of Fitch's Emerging Europe Sovereign Group, said in the statement.
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