SIMEON DJANKOV: BULGARIA CONTINUES STRIVING FOR ERM ІІ
Following the positive assessment of the Convergence Program Bulgaria continues striving for ERM II, said Deputy Prime Minister and Minister of Finance Simeon Djankov after the working breakfast of the EPP Group Finance Ministers today. Immediately after the release of the assessment yesterday he continued to lobby for the accession of our country in a series of meetings with his counterparts within the ECOFIN meeting.
„I have already informed almost all my colleagues not to worry about what is happening in Bulgaria. After the positive assessment by the European Commission we are passing to an entirely different stage of talks. Before this, however, representatives of the European Commission are visiting our country in May and it is important to convince them that we are taking the necessary measures\", commented further the Finance Minister.
„To apply for the ERM II is a decision of the Bulgarian government. The Eurozone is not a \"closed shop\" and every European Union country that wishes to join it may do so if it meets the criteria\", said Jean-Claude Juncker, Chairman of the Eurogroup and Prime Minister of Luxembourg after the working breakfast. \"Sofia is to decide whether to submit documents for the waiting room of the Eurozone. I could not advise any government; I have never done it. The Bulgarian Prime Minister is well aware of my conviction that Bulgaria is on the right track, but the decision to enter the ERM II is his\", he said in response to a journalist\'s question.
Within the working breakfast the Ministers also discussed the results of a research on \"How a country is to exit a financial crisis?\" commissioned by the European Commission and ECOFIN to Professor Alberto Alesina from the Harvard University. The research, which covers the past 25 years, was intended to examine whether countries should pursue a restrictive fiscal policy or a not so tight fiscal policy in terms of tax increase. In his statement before ECOFIN Finance Ministers on the actions of governments in Europe and in the world in times of crises Prof. Alesina pointed out that in 70% of the cases where countries successfully exited the crisis and the economy grew more quickly than the average, the governments had pursued a restrictive fiscal policy. They had rather cut expenditures than raised taxes. For two-thirds of the cases it was found that the restrictive fiscal policy had led to growth after the crisis. This was also the main topic of conversation at the working breakfast of the EPP Finance Ministers. Jean-Claude Juncker, Prime Minister of Luxembourg and Chairman of the Eurogroup, confirmed the results of the research, referring to his long political experience.
The second topic of conversation during the breakfast was who won elections according to the type of fiscal policy pursued. To the surprise of almost everyone present, governments which pursued a restrictive fiscal policy, with few exceptions, won the following elections. Discussed was also the topic whether a government should pursue a right policy if the country was in a crisis and what was the price of such right policy. \"According to this research, it appears that the price is not as high as we think,\" said Minister Djankov and added that there was one \"if\" which was a specific subject of consideration. According to Prof. Alesina there was a difference between new democracies and old, well-functioning democracies. In older democracies the population understood that restrictive fiscal policy was needed and a sort of \"rewarded\" the government which was brave enough to lead such policy and that government usually won the following elections. In new democracies there was a higher extent of populism and in more than 50% of the cases the governments pursuing a restrictive fiscal policy lost the following elections. \"We are to ask ourselves the question whether we are already a developed or a new democracy,\" said the Finance Minister.
The third topic of discussion was related to the case whether fiscal policy should be delegated to the European Commission in the same way as the monetary policy. \"The research gave a definite answer - no,\" said Minister Djankov. From an economic perspective the answer is negative because countries are at a different level of development. This means that some of the economies need a higher level of GDP redistribution and other less, explained the professor from Harvard. \"The less developed an economy is, the lower level of redistribution is useful for it,\" explained Finance Minister Djankov. He added that countries like Bulgaria should have lower level of redistribution, and rich countries like Sweden can afford a higher level. \"For this reason, fiscal policy should remain a national task and will remain this way for a long time,\" he added.
Another major topic of discussion of the ECOFIN Ministers was related to the pension reform. \"This is the topic which, from the perspective of public finance, dominates all conversations in addition to Greece,\" said the Finance Minister. According to Simeon Djankov, it affects almost all European countries. During the forum in Madrid it became clear that the Netherlands was to change its pension law and from 1 June it was raising the retirement age from 65 to 67. Similar debates were also held in France. \"This type of reform will also take place in Bulgaria at some point. As all Finance Ministers have stated, this issue cannot be very much delayed and the situation is becoming harder in terms of public finance,\" said Minister Djankov. In one of the next ECOFIN meetings the pension reform will be an item of its own on the agenda of the Ministers with the purpose to seek an overall strategy at European level to solve the problem. This issue will probably become an item of the \"Europe 2020\" strategy.
Supervision was another topic of the discussions in Madrid. The European Commission is drafting a Directive preparing for the transition to a single financial supervision. \"A single supervision means that the European Central Bank will have more powers not only in regard to the banking sector, but also in regard to insurance, investment funds, rating agencies, etc.\", explained Minister Djankov. He pointed out that 7-8 EU Member States have already introduced single supervision.