After the IMF session: There will be no compromises for the Eurozone, our membership is postponed indefinitely

Something very important happened at the spring meetings of the International Monetary Fund and the World Bank, which are traditionally held in April and autumn. All messages, except one, indicated that Bulgaria will not enter the Eurozone in the foreseeable future. Optimists can say: we will not enter from January 1, 2025, but it will be possible later that year. They can cling to the words of the governor of the Bulgarian National Bank, Dimitar Radev, who in an interview with the Bulgarian Telegraph Agency indicated that entry at a later stage, but still in 2025, “is a more likely scenario.”

More likely than who? As for January 1, 2025, it is certainly a more likely scenario, and is actually the only one possible between these two alternatives. In “Voices” we wrote back in December of last year that January 2025 is an unattainable goal, and from the beginning of this year “We continue the change” began to prepare society for the failure of the strategic goal of January 2025. The new pivot is, “well, it’s not going to be in January, but it’s going to be a few months later.”

As far as this is realistic, the statements that BTA gathered in Washington indicate that the chance is a maximum of 50%, and this is by no means a certainty. Quite the opposite – the uncertainty stems both from the work to be done in Bulgaria and from the will of the Eurogroup countries (the eurozone and those in the waiting room). The comments indicate that it is entirely possible that Bulgaria will face the unofficial veto of countries that do not want us for one reason or another. As with the entry into Schengen and the resistance of the Netherlands, Austria and Hungary, which we turned against ourselves by deciding to tax its gas supply.

The director of the International Monetary Fund for Europe, Alfred Kamer, pointed out that for Bulgaria, if inflation is contained this year, entry at some time next year is a possibility.

“It is necessary that the rate of inflation meets the requirements for entering the Eurozone, and Sofia can make a big contribution in terms of fiscal policy. Not to allow an expansionary budget that would create inflationary pressure. So this is an important political action that must be taken by Bulgaria to further reduce inflation,” Alfred Kamer said. Reading between the lines shows that at the very least, it will be necessary to see what kind of budget the state passes for 2024 to be sure that it will not stimulate inflation. That is, not for inflation to fall, for example because of a favorable international situation in some month of this year, and in the fall to adopt a budget with deficit spending again, which will once again accelerate the increase in the cost of living.

To this the bureaucratic language of the European Central Bank and the European Commission say “sustainable fulfillment of the criteria”, not for the snapshot, but with a perspective at least in the medium term of the next three years. Alternatively, the correct eurozone adoption formula would require the 2025 budget to see the deficit shrink below 2% of gross domestic product, and the medium-term budget forecast to promise to keep the deficit below 1% of GDP over the foreseeable horizon to 2027. For reference – in the latest forecast, based on Asen Vassilev’s strategy, the deficit is predicted to be below 3% of GDP from this, up to and including 2026.

In retrospect, and in perspective, it turns out that no one protects us from the Eurozone better than Asen Vasilev with his policies.

As a person who has come to the conclusion that entering the Eurozone in this decade will harm Bulgaria, I can only thank Vassilev for what he has done, if it were not for the concern that he might be pushing us towards something else. For two decades, Bulgaria and Romania have been under pressure from the collective West to raise their taxes, and this pressure became particularly clear in March, when the IMF mission in our country called on us to do so directly. There is no more direct route to high taxes than a steep debt load following five years or a decade of high deficits. But I will address this risk in the next article.

It is the turn of the coldest statements from Washington regarding our entry into the Eurozone. Again in front of the BTA, the governor of the central bank of Ireland, Gabriel Makhlouf, who is rightfully part of the Governing Council of the ECB, said that this depends on the fulfillment of the conditions.

The finance ministers of France and Germany, Bruno Le Maire and Christian Lindner, declined to comment on the subject. The German representative only indicated that a formal procedure is currently underway – preparation and drawing up of convergent reports on the countries that are not members of the eurozone, whether they meet the requirements to become part of the monetary union and that “this process should not be influenced “.

This formal procedure takes place once every two years with the Convergent Reports in question. There is absolutely no guarantee that if this year the report does not recommend that we enter the eurozone (it is expected in June), we will be able to hope for a new extraordinary report in December or, for example, in March next year. The formal procedure for this is formal, and precisely the abstention from extraordinary interventions constitutes the absence of external influence.

Refusal to schedule an extraordinary review with the corresponding convergence report at the time we requested in 2025 will mean that when they come again to draw up a regular convergence report in 2026, the experts of the European Central Bank and the European Commission will not only see the promises , which will be included in the three-year macroeconomic forecast for next year’s budget, and something more. In 2026, it will be seen whether the state has respected the commitments made in 2025 and how their compliance is going after that. This will mean confidence for at least two-thirds of the forecast period, and only then could we talk about sustainability.

Anything different will be a deviation from the pursuit of sustainable implementation of the criteria and political compromises, such as Kiril Petkov said he tried to negotiate with Ursula von der Leyen a year ago, but which we saw did not happen. Whatever the fans of the euro zone, who dream of a compromise with the rules, but who want their understanding of the “rule of law” to be enforced here, experience shows that countries that adopt the euro unprepared end up sadly, and although they are in the so-called club of the rich, they are dragging themselves on their stomachs instead of prospering.