Bulgaria Shifts on Euro Accession Plans After ECB Pressure

(Bloomberg) -- Bowing to pressure from the European Central Bank and the European Union, Bulgaria will seek to join the bloc’s banking union and the precursor for euro-area membership simultaneously within the next year, its finance minister said.

The government in the EU’s poorest member appeared to yield to recommendations from the European Central Bank and the European Commission, which have said Sofia needs to improve governance, the economy and banks.

Finance Minister Vladislav Goranov had insisted earlier this month on joining the bank union only after accession to ERM-2.

“We’ll insist for both to happen on the same day,” he told a conference in Sofia on Tuesday. Bulgarian officials will visit the ECB “in the next few days” to “intensively” discuss accession procedures and time lines for both institutions, he said. He didn’t elaborate whether the government will still keep its plan to apply for ERM entry by end-June.

Bulgaria ticks all the economic boxes for ERM-2 entry, with its national currency, the lev, already pegged to the euro. Public debt is well below the euro-area average and the EU cap, and it runs a budget surplus.

But while its aspirations have received backing from German Chancellor Angela Merkel and French President Emmanuel Macron, the ECB has been less enthusiastic four years after the Black Sea state’s No. 4 bank collapsed, prompting the resignation of the governor of the central bank and triggering early elections.

And this year, Latvia barred its ECB Governing Council member, Ilmars Rimsevics, from attending meetings as he is investigated in a graft probe and shut down its No. 3 lender amid U.S. money-laundering accusations. Rimsevics denies wrongdoing.

Goranov urged euro-area members to refrain from coming up with new demands for Bulgaria, which seeks to be the euro region’s 20th member.

“Within one year, we’ll be able to enter simultaneously into close cooperation with the banking union and into the ERM,” Goranov said. “But we need firm commitments from our partners that we won’t end up in that endless game.”

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