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BULGARIA DELAYING EURO ENTRY TALKS DUE TO CRISIS

22.07.2011

Simeon Djankov in an interview for Reuters

(Reuters) - Bulgaria is delaying indefinitely talks on adopting the euro until a clearer picture emerges on the debt crisis currently engulfing weaker economies in the currency union, the country's finance minister said on Thursday.

Bulgarian Finance Minister Simon Djankov told Reuters in London that the Balkan country wanted to see how the euro zone was going to stabilise Greece and what its final stance on the proposed harmonisation of members' tax regulation would be.

"We are not going to start preliminary talks (on joining the euro) in the autumn. Our intentions (to join the euro) are not changed. However, a specific time is not fixed yet," he said.

In February, Djankov had said that Bulgaria would begin talks in autumn on entry to the ERM-2 mechanism where national currencies need to prove their stability before euro adoption.

"The talks are delayed until the general picture...is clearer...We want to know before we join the euro zone what the opportunities are and what the burdens are," said Djankov, who is also the deputy prime minister.

"The crisis in Greece and other countries has made us wary of the club that we want to join and the implications of joining it."

Djankov said the failure of euro zone leaders to come to grips with the Greek crisis last year had proved costly and any solution for Greece now had to be a comprehensive one that would prevent contagion from spreading further.

"The solution should be more universal than simply another bailout for Greece," he added.

Bulgaria, which has among the lowest taxes in the EU, is also opposed to a Franco-German drive to harmonise tax levels within the euro zone.

"This has been the biggest sticking point for Bulgaria...We think it is badly thought out and will increase disparities in the euro zone. From the economic point of view it doesn't make any sense," Djankov said.

Though the poorest member of the European Union, Bulgaria also has one of the smallest budget deficits in the grouping.

The country's lawmakers recently passed legislation committing all governments to keep to the annual fiscal deficit at no more than 2 percent of gross national product and a budget expenditure limit of 40 percent.

Djankov said Bulgaria could reduce its fiscal deficit this year to below the official 2.5 percent target.

"We think we can do better than that. Possibly 2-2.1 percent," he said.

EUROBOND IN 2012?

Bulgaria reduced its fiscal deficit to 0.9 percent of GDP in the first half of the year and its better-than-expected fiscal consolidation meant that it could defer early plans for a Eurobond offering to next year.

"Maybe we'll want to wait until next year simply because we have more fiscal reserves than we anticipated," said Djankov.

Instead, Bulgaria is likely to launch a bond of about 500 million euros (429 million pounds) next year with a seven- to eight-year maturity to refinance maturing debt in 2013, he added.

Djankov, a former economist at the World Bank, said he intends to shorten Bulgaria's debt maturity profile to make it "possible to repay debt faster."

Bulgaria has the second lowest government debt to GDP ratio among the 27 member economies, coming in at about 16 percent at the end of last year.

But Djankov said he wanted Bulgaria to have the lowest debt to GDP level than the least indebted EU member, Estonia.

At the end of April, Bulgaria's public debt stood at 5.64 billion euros or 14.6 percent of GDP.

Djankov said a new bond and privatisation revenues would help to refinance some 800 million euros 12015KCP6=RRPS> from a Eurobond that matures in January 2013.

He said Bulgaria is targeting privatisation revenues of some 350 million euros this year and 600 million euros in 2012 from the sale of government assets.

Bulgaria is selling its 79.8 percent stake in cigarette maker Bulgartabak Holding and also plans to float stakes in power distributors that are majority controlled by Czech CEZ, Germany's E.ON and Austria's EVN.

(Additional by Tsvetelia Tsolova in Sofia; Editing by)