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VLADISLAV GORANOV: OUR ENTRY INTO ERM 2 WOULE BE AN ACKNOWLEDGEMENT OF THE EFFORTS OF THE BULGARIAN SOCIETY AND ITS CONFIDENCE IN THE COMMON EUROPEAN IDEA

02.06.2017

"Our position in principle is that Bulgaria can only benefit from joining the ERM 2 and the euro area itself. We will maintain this focus and will strive to convince our partners that there is still a long way ahead of us but the entry into ERM 2 would be an acknowledgement of the efforts of the Bulgarian society and its confidence in the common European idea". Minister of Finance Vladislav Goranov said the above at the conference for presentation of the Bulgaria-specific recommendations from the Commission report in the framework of the European Semester 2017, which was organised today by the Commission Representation Office to Bulgaria. The meeting was attended by Valdis Dombrovskis, Commission Vice-President for the Euro and Social Dialogue, also in charge of Financial Stability, Financial Services and the Capital Markets Union.

Minister Goranov also commented that in view of the new realities facing the EU in response to Brexit, an analysis should be made of the issue of faster consolidation of the countries which, however, should not be at the expense of the countries that were not yet ready for the euro area. He said that only nominal membership criteria were not enough: our country had been fulfilling those for 2-3 years now; there should be a discussion with policy makers in Europe on whether euro area strengthening and expansion should be set as a priority against the backdrop of the global processes throughout the world.

Vladislav Goranov assured that our country would continue its consultations both with the European Commission and the ECB, and with large euro area Member States, but only a desire on our part was not sufficient for our accession. "I hope that we can comment with the counterparts an accelerated accession to ERM 2. This is what we want and the reaction of these countries remains to be seen", the Minister announced. "The reserves of our partners have always been in relation to real convergence - a criterion from which we are still far despite out progress in the past years. "Most countries which have joined the euro area in the past years did it at a ratio of GDP per capita to the European average of around 70%, and ours is, unfortunately, somewhere around 48 % - 49 %", explained the Minister.

In his presentationValdis Dombrovskis said that Bulgaria was moving towards the euro area as well as that our country needed to join the exchange rate mechanism. "The growth of the Bulgarian economy was 2.9 % for the previous year, which is well above the EU average, and the forecast for the coming year is also high. The momentum that Bulgaria has gained is very good because it would lead to improved standard of living, wages and pensions", added the Vice-President of the European Commission.

The Finance Minister commented that from an excessive deficit, albeit with a one-off effect at the end of 2014, at the end of 2016 Bulgaria had a balanced budget under the European methodology with a huge surplus. "The structural balance has substantially improved and for this reason the Commission recommendation in this part has been dropped", Minister Goranov added but pointed out that improving tax collection continued to be a priority for the government.

The Minister noted that it was not by chance that one of the first bills approved by the Government was the one amending the Tax and Social Insurance Procedure Code. In addition to the harmonisation of EU law, it also sets two new topics related to the further limitation of cash payments as a measure tackling the grey economy and improving tax collection, as well as an addition to that part in the tax legislation that provides the tool kit for government bodies to prevent the companies with sizeable liabilities from easily getting rid of those liabilities by devolving them to people with small or no income or property. "During the debate with the Commission on the imbalances we vowed our position of principle that if using a single standard, some of the imbalances facing our economy could be much more valid for other members, and if the progress made was not taken into account, the impetus would be lost", Vladislav Goranov said at the press conference.  

At a briefing Minister Goranov also said that when he became minister of finance for the first time at the end of 2014, there were even no talks about our membership, whereas now we were communicating with our EU partners. "The Commission's efforts are towards strengthening the euro area and in this sense the recent metaphor of an "irresistible proposal" to the non-euro area members is rather aimed at attracting those countries that certainly meet all the membership criteria but are not in a hurry or are unwilling to join the euro area. And our case is not exactly this", Minister Goranov said. 

With regard to the topical issue of the modernisation of the armed forces, Vladislav Goranov specified that the modernisation programmes were affirmed by the National Assembly and by the Government, and the Ministry of Finance complied with the schedule envisaged therein. Some debates are ongoing as to whether the resources approved for both programmes, i.e. for fighter planes and patrol ships, could accommodate a land force programme by extending the deadlines. "The Ministry of Defence is working in this direction and there will be more talks at the level of the Ministry of Finance and the Ministry of Defence" the Finance Minister said. According to him, assuming that the financial resources now planned for both programmes were spread over time, it was realistic to add the third programme as well.

Before the meeting of the National Tripartite Council Minister Goranov said that it was good to have the minimum wage mechanism discussed within the social dialogue, although he himself had some reserves that it should exist. "The caretaker government prioritised this topic but what they arrived at is pretty naive at this stage. We are still far from any mechanism whatsoever", the Finance Minister said. The creation of a parametric mechanism for automatic setting of the minimum wage does not exist anywhere in Europe, this is exotic, Vladislav Goranov explained.