Should We Wait for the Waiting Room or Go Ahead

Politicians have let the genie of fear of our joining the Eurozone out of the bottle. Bulgarians are hesitant, but experts are not unanimous, either

Снимка: Economy Magazine

- Sooner or later, everything will become clear, everything will fall into place and build a beautiful single circuit as lace. It becomes clear why it was needed, because everything will be right.

- Yes, it will. But sometimes you need a little help in this process, and not simply wait. It is necessary to know and feel how it is, otherwise there is a chance not to understand when everything will fall into place.

- Or is there a chance to spoil everything by doing something too quickly or not at the time.

This conversation from Alice in Wonderland summarises in a good way the debate that did not take place in Bulgaria – Lev or Euro, to hurry up or to wait for the “waiting room”. Politicians believed that they were the only people who hеld the key to the Bulgarian door to the Eurozone. But one clumsy act on their part was enough to set the genie of fears out of the bottle and sweep away the apparent unanimity of giving up the Lev and entering the Eurozone. The strive of the British, who never entered the monetary union of the EU, to Brexit, as well as the wait-and-see policy, undertaken by Poland, the Czech Republic, Hungary and Romania, has shaken the confidence of many Bulgarians that the Euro has no alternative in the near future. Talks about a referendum can be heard, as well as calls for looking before we leap to the ERM II “waiting room”.

Which way should we go and how fast should we walk – here are the opinions of three experts.

Assoc. Prof. Grigoriy Vazov, Rector of VUZF University and member of the Fiscal Council:

Let the Voice of Experts Be Heard

Accessing the Eurozone should not happen the hardest way

I support the accession of Bulgaria to the Eurozone; this is the good future for the country with the better financial perspective for us.

In my arguments “for”, I will include the expectation of a stronger presence of foreign investors in Bulgaria and the positive influence on foreign trade. The transition to the Euro means readjusting the whole economy and is far from being just a mechanical exchange of the Lev and the Euro. The goal of being part of the Eurozone will be an incentive for the state to speed up its development. There will be many inspections from the European Union.

The fears of the people were awakened by the politicians, and they started converting their Levs into Euros. But even good experts began making burdened political commentaries without realising that with the influence they have, they are doing great damage. This creates panic that leads to turmoil. There are fears of a price shock, but on the one side is salary, and on the other – electricity. In order for something to rise in price, there should also be a financial resource. It is likely that there will be slight imbalances and price discrepancies in the first one or two months, but these will be corrected.

The requirement to work in close cooperation with the single banking supervision in joining ERM II will only protect us from a bank crash similar to the one of the Corporate Commercial Bank. Our banks have successfully passed the stress tests and there is nothing to be afraid of now.

We should be careful on our way to the Eurozone, but mostly on expert level. Politicians can calm down because they are sometimes ready to destroy the state in order to win the elections. It is time for the experts to come forward and take the initiative, and for the politicians to bite their tongues. We will join the Eurozone, but let’s not do it the hardest way.

Krasen Stanchev, founder of the Institute for Market Economics and lecturer at Sofia University “St. Kliment Ohridski.”:

It Is Better to Wait for the Eurozone

Currently, Lev is another name for 50 eurocents

My position on Bulgaria’s accession to the Eurozone is to wait. Romania, Poland, Hungary and the Czech Republic are also required under their EU membership treaties to enter the Eurozone, but are waiting for their own reasons.

Some of my arguments: Bulgaria is even in a more favourable position for joining the Zone than those countries, at least from technical point of view. Because the currency board, our system for monetary policy, is better than theirs both in principle and in terms of what microeconomics calls “transition costs”. Waiting is necessary because:

- Nobody can rationally grasp the story with Corporate Commercial Bank. That is why Bulgaria was required to allow supervision over its banks by the European Central Bank. Two banks have to be restructured, they are not ready and it is better to do it in the most cost-effective way for the system.

- The mistake in the calculation of the 2019 balance of payments has to be explained – was it really a mistake, how did it happen – and corrected.

- There are problems in the Eurozone itself, in the policy of ECB.

In fact, we do not “renounce the Lev”. Currently, it is the other name of the 50 eurocents. An agreement was reached that the exchange rate should not be changed – at least not leading to devaluation of the Lev. In this situation, no increase in price should be expected.

The real dangers: The desire to nationalise businesses, redistribute economic influence, and reconsider the experience of the last 30 years is harmful. Externally, it is not a good idea for the ECB to maintain a zero-interest rate policy and deviate from its core mission – price stability, in the name of “saving” countries, banks and industries.

I recommend thinking and measuring before “cutting”.

Stoyan Panchev, President of the Bulgarian Libertarian Society:

Let’s Keep the Lev and the Currency Board

Before heading to the Eurozone, there must be a broad public debate and even a referendum

My position is strongly against Bulgaria’s entry into the Eurozone and the elimination of the Lev. Especially at this stage and in today’s circumstances.

Arguments: The Eurozone is a monetary union that is twisted from its very creation. Because of this, the crisis of 2009 occurred with severe consequences for the economies of Italy, Spain, Portugal, Ireland, and especially neighbouring Greece. This monetary union creates instability, debt escalation, North-South confrontation, refusal to reform. It threatens the future of the EU.

The benefits of our monetary system – the currency board – have provided unprecedented stability and security for 24 years now. Through it, we are Europe’s excellent students in fiscal policy and have completely forgotten the horror of hyperinflation.

The cautiousness, fears and unwillingness in certain circles to switch to the Еuro, I can attribute to the fact that Bulgarians have had hard times relatively soon due to the experiments with the monetary policy. They want to preserve our independence. They have no naive expectations as for the promises of politicians, because they see that they and their speakers cannot offer convincing arguments for replacing the Lev (the board) with the euro.

The dangers that we should avoid: Trusting speakers who tell us that there is consensus on the topic. And we should not allow politicians to make a move, as it happened with the BNB Act in February this year.

My recommendation is to hold a broad public debate with the participation of all institutions and independent experts involved in the topic. To start with a major survey of the Bulgarian National Bank on the topic and, just like the debates on the health system, continue with discussions. I would also like to see a referendum on the topic.

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Етикети: euro | Eorozone | ERM-II | Stoyan Panchev | Prof Grigoriy Vazov | Krasen Stanchev

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