May 25 (SeeNews) - The process of euro area accession, starting with the participation of the national currency in the European Exchange Rate Mechanism (ERM II), will be a catalyst for further improvements, adjustments and reforms in Bulgaria, the country's central bank governor Dimitar Radev said.
"All of this will ultimately be beneficial for the economy, irrespective of whether we are in or still out. The journey is at least as important as reaching the final destination," Radev wrote in a foreword to the 2018 Global Public Investor Report of Official Monetary and Financial Institutions Forum, an independent think tank for central banking, economic policy and public investment.
Bulgaria’s macroeconomic performance is solid, Radev noted, adding that the country's monetary stability has been in place for over two decades and the currency board system that pegs the Bulgarian lev currency to the euro was has been uncompromised.
"Bulgaria keeps a broadly balanced budget and is reputed to have the third-lowest debt-to-GDP ratio in the EU. The banking sector is robust, with capital adequacy and liquidity exceeding the EU averages," he added.
According to Radev, it is logical to expect that a country with such a record should not be blocked, but rather welcomed to start its journey towards joining the euro area through the participation of its national currency, the lev, in the ERM II.
Radev's comments coincided with the release of the opinion of the European Central Bank (ECB), which said on Wednesday that Bulgaria should deal with macroeconomic imbalances, and needs to adopt laws to preserve central bank independence, in order to meet criteria for joining the Eurozone.
"Bulgarian law does not comply with all the requirements for central bank independence, the monetary financing prohibition, and legal integration into the Eurosystem," ECB said in its bi-ennial convergence report assessing the readiness of non-euro EU member states to adopt the single currency.
The actual timing of euro adoption will depend less on the nominal Maastricht convergence criteria, which Bulgaria has been meeting broadly for many years, and more on the real convergence of the economy, Radev opined.
"There are structural and institutional policies that need to be implemented and consistently pursued, in order to speed up real convergence," said Radev.
Also on Wednesday, the European Commission said in its convergence report published together with the ECB's report that Bulgaria does not fulfil the conditions for the adoption of the euro as its legislation, and its law on the central bank in particular, is not fully compatible with the requirements of the treaty on the functioning of the EU.
Bulgaria experiences macroeconomic imbalances, linked to vulnerabilities in the financial sector coupled with high indebtedness and non-performing loans in the corporate sector, the Commission said, adding that persistent structural weaknesses prevent labour market to improve faster.