Ivan Panchov is talking
If there is no stable regular government after June 9, we will have to delay the adoption of the euro even until 2026.
The oligarchs do not want the Eurozone, because then they will not be able to steal from the state budget
In the last 10 years, Bulgaria has been a record holder in Europe in terms of income growth, but this does not make us richer
– Mr. Gledachev, to what extent can the political instability in our country delay our entry into the Eurozone?
– The political upheavals will have an impact. In fact, they have been reflected in the past years and will continue to be reflected in the future. Even a few days ago we received a warning that if there is no regular government and parliament, there will be a delay. The probability that we will become part of the Eurozone at the beginning of 2025 is already almost negligible, it is much more likely that this will happen from the middle of next year – in June. But if there is no stable regular government in the months after the June 9 vote, and one is not emerging, the situation becomes completely different and we will have to postpone the adoption of the euro even until 2026.
– Many myths and fears are associated with the euro, which Bulgarians actively discuss.
– On the subject of the euro, every Bulgarian has an opinion, which he usually shares over a cup of tea with friends. People fight and argue. But often their reasoning leads to wrong conclusions. Now it is important to clarify what is true and what is not. First of all – sooner or later we will adopt the single currency. This is part of our treaty on accession to the European Union. Many people see the EU as some kind of boss or even as an analogue of the Soviet Union, which is kicking our ass, but the truth is much different. When the convergence, i.e. the rapprochement of the EU states becomes a fact, we will not only have a single currency, but also a single European army and a single judicial body.
That’s why the oligarchy went crazy in Bulgaria too, because sooner or later the time for legally stealing the state budgets is coming to an end. And part of this process is the entry into the Eurozone. This is the problem of the oligarchs, and that is why they are delaying the introduction of the euro, often by legal means.
– In the end, is it good for Bulgaria to enter the Eurozone or not?
– There are 27 member states in the European Union, 20 of which are part of the Eurozone. We are candidates, and 6 other countries are not, of which only Sweden is a developed country. All the rest are former socialist countries such as Hungary and the Czech Republic. Many people will say that Sweden is often given as an example by Eurocritics. Until a year ago, this country did not even want to be a part of NATO, but under the circumstances and the war in Ukraine, it revised its position.
Developed countries can lead an independent policy, but unfortunately, those of Bulgaria’s caliber cannot. And apparently even the more successful countries can only afford it temporarily.
Perhaps many people do not know that countries such as Kosovo and Montenegro, which, although they will never be part of the Eurozone, now use the Euro as legal tender. It was surprising to me how many signatures the referendum for the preservation of the Bulgarian lev collected. Entire parties in Bulgaria, which have great electoral support, are fighting against the euro and against the European Union.
– The main argument of the opponents of the euro is that with its adoption Bulgaria loses its national identity and independence.
– This is categorically not true. Next year marks the 145th anniversary of the creation of the Bulgarian lev. After the adoption of the currency board 26 years ago, the real years of stability for our currency came. Until then, the lev was stable only in 8 of the previous years.
Perhaps many people have forgotten that there was a time when, as soon as people received their pensions and salaries, they immediately converted them into dollars or marks at exchange offices. For years they did not trust the Bulgarian lev, and the banks were empty of currency, because almost every lev that was saved was exchanged. Many of us remember that 30 years ago there was an exchange office on every corner.
– You predicted that we have almost no chance to enter the Eurozone from January 1, 2025. However, how long will it take us to overcome high inflation? Can we be accepted for political reasons without meeting this requirement?
– They will most likely not accept us for political reasons. Imagine something simple – if you live with poor neighbors, they can’t contribute anything to you, they can only take. When we come in with high inflation, we will increase inflation in the European Union.
The truth is that inflation in Bulgaria is politically generated, i.e. the parties raised it so that we do not enter the eurozone.
For more than 20 years, there have been five Maastricht criteria on the basis of which countries wishing to join the single currency have been assessed. Throughout the years we have followed them. However, the last few acting and full-time Cabinets have broken this discipline as we have generated higher-than-allowable inflation, thanks mainly to increases in pensions and benefits. In the last 10 years, Bulgaria has been a record holder in Europe in terms of income growth.
– However, the Bulgarians are satisfied that their incomes are rising, after all, we are the poorest country in the EU.
– If this is good for people, it is far from the case for our financial system. Because the government cannot raise wages in the private sector, it does so in the public sector.
And from there, on the principle of competition, business also raises wages. The result is a distortion that has led to the fact that in 210 out of all 265 municipalities the salaries of civil servants are higher than those in the private sector. Civil servants do not add value to the economy, but still have higher salaries. A bureaucratic structure is simply created.
Thus, through inflation, the population is hit, and the governments win. It is very easy. Yes, salaries and pensions are increasing, but immediately tax revenues through consumption also increase with them, because prices are also rising – VAT, excise duty and so on.
In practice, power gives with one hand and takes away with the other, and people think they are getting rich. This is how we politically and populistly increased inflation ourselves, and only a few years ago we had long fiscal periods of deflation. Then prices fell and we got richer without our incomes increasing.
– One of the great fears of the people is that entering the Eurozone will lead to an even greater increase in the cost of living. Is this true or is it another myth?
– People are terribly confused, but they are not to blame for this, because they are misleading them with false data. In all of these 20 countries that joined the euro, inflation after entry was lower than before. And this is not for a year, but for a long period of time. If you look at countries like Greece, Lithuania, Latvia, Estonia, their inflation was very high before the euro and has been steadily falling since the adoption of the euro. There is a persistent myth that prices have doubled in Greece. In the year the euro was adopted there, inflation was 2.8%. In previous years, however, it was close to 3 percent.
Let’s bust another myth. We must categorically say that the adoption of the euro does not affect the prices of goods and services in any way. At the beginning, a slight increase is possible, but necessarily, after the situation calms down, they will fall. Commodity prices depend on supply and demand. If a commodity is in demand, it becomes more expensive. You all remember how it suddenly turned out that oil would be in short supply, then from 2-3 BGN it jumped to 6-7 BGN. Then it went back to its previous price again. When we increase the quantity of money, we increase the demand for the commodity.
Imagine that you have a small shop and sell one product for BGN 2. With the introduction of the euro, it will become 1 euro and 2 cents. Will you sell it for exactly one euro, which means lowering the price to below 2 BGN? Most likely not. You are more likely to offer it for 1 euro and 5 cents. Any trader will immediately increase it slightly upwards. This is where inflation comes from in the first year after the Eurozone.
– Tell us about the second big fear you have in relation to the Eurozone, apart from inflation. This is the increase in interest rates on loans. Are these concerns valid?
– Loan interest rates will necessarily increase, regardless of whether we are in the Eurozone. This is a very long topic, but I can say that it is very bad that the interest rates on loans are low. Now everyone will jump up, say it’s not like that. However, the facts say otherwise.
The global inflation that flared up after 2020 happened because before that there were zero or even negative interest rates. It’s the same with interest rates as with inflation – yes, it’s not good, but if it’s too high – it’s also not good. It is optimal to have inflation rates between 2 and 3 percent. It’s the same with interest rates – it’s healthy for them to be between 3 and 5 percent.
Svetozar Gledachev is one of the most popular financial analysts in our country. He graduated from the Mathematical High School in Plovdiv, then the “Karl Marx” Institute of Technology – Sofia, became an assistant and doctoral student at the BAS, specialized and qualified at the University of Delaware and Bank of America. He is a university teacher, a private individual, a consultant and a financier. bank, two holdings and several enterprises.He is the author of six books on personal finance management, over 1200 articles and hosts a TV show.
