Euro Zone Entry

Bulgaria will launch its bid to join the euro zone at the end of January, Prime Minister Boiko Borisov told The Wall Street Journal in a January 10, 2010 interview.

The country, however, was increasingly fearful that the debt crisis erupting across the currency bloc could harm its application, Borisov said.

Bulgaria will no longer need to tap the International Monetary Fund or international bond markets for emergency financing to plug its budget gap, he said.

Separate documents seen by Dow Jones Newswires on January 10 showed the country's Finance Ministry will upgrade its forecasts for 2010 gross domestic product to tip a 0.2 per cent expansion from the previous estimate of a two per cent contraction, The Wall Street Journal said.

"We have everything in order and we're ready to start the road to the euro zone by the end of the month. It is now the first foreign policy priority of my government to enter the euro zone," Borisov said.

According to The Wall Street Journal, Borisov's words ended months of speculation over when "the former communist state would formally apply to the bloc's exchange-rate mechanism -- a two-year currency stability test for euro hopefuls".

The paper said that in terms of its economic and fiscal management, "Bulgaria has become a role model for the other countries in Europe". "Bulgaria's experience has a lot to teach other economies preparing to cut spending," said Nigel Rendell, emerging markets economist at RBC Capital Markets.

Borisov's concern, however, was that a debt recession and intensifying debt crisis may set the bar higher for new entrants into the single currency, as nervy euro-zone policy makers opt to consolidate existing borders rather than expanding the bloc.

"I am afraid that the debt crisis in newer euro-zone countries will negatively affect us," he said. "We hope that the authorities respect the admission criteria as we've worked hard to get here."

"It makes sense for Bulgaria to apply, but I worry that at a time of crisis the European Central Bank could postpone the application on a technical point because they want to consolidate," Ivo Prokopiev, chairman of industry group the Confederation of Bulgarian Employers and Industrialists told The Wall Street Journal.

In a separate move likely to be welcomed by markets, Borisov said he would extend the powers of Finance Minister Simeon Dyankov, adding increased supervision of the real economy to his treasury portfolio.