The European Council on Foreign Relations

Sofia view: The draw of the Euro

Date: 6th December 2010  |  Author: Dimitar Bechev,

Categories: Euro Crisis, Wider Europe, Sofia view,
Tags: , eu, euro, germany, bulgaria

These days Bulgaria is trying to stay afloat amidst the deluge sweeping across the Balkans. It is desperately scrambling to stay dry and reach the safe grounds of the EU’s inner sanctum. Several days before the National Assembly passed next year’s budget, Simeon Djankov, the finance minister, toured Western media to showcase the country’s adherence to fiscal prudence (BBC,  Wall Street Journal). Indeed, with a projected deficit at 2.75% of GDP and with a public debt to GDP ratio of 17%, the World Bank’s ex-employee felt confident enough to criticise the EU’s big boys over not letting Bulgaria into ERM2, the euro’s coveted antechamber. Gone were the days of summer 2009 when Eurostat found Bulgaria’s deficit figures to be twice of what had been reported. The Greek scenario is not in sight, Graeca sunt non leguntur, government says. Fair enough, but one should not overlook the fact that Greek banks control one third of Bulgaria’s domestic market. A truly European story of neighbourly intimacy and interdependence. 

Let us see however whether Angela Merkel will one day yield to the courtship of her great aficionado, Prime Minister Boyko Borisov, and open ERM2’s door. Besides Bulgaria has a long way to go.  The respected weekly Capital estimates that if ever VAT fraud is properly tackled Bulgaria would be able to collect enough revenue to fill in its budget gap. Both Athens and Sofia know a thing or two about tax evasion.

While Germany plays the gatekeeper on the euro, France is intent on slowing down the accession of sœur latin Romania and its reluctant Doppelgänger Bulgaria to Schengen, originally planned for March 2011.  The spat over last summer’s Roma expulsions left a bitter taste for Paris. Its argument that Schengen membership needs to be tied with the so-called Mechanism for Cooperation and Verification (MCV) is heartily supported in several other capitals in ‘old’ Europe. Angie was certainly less than supportive last time she dropped over to Sofia in early October.

Yet Schengen enlargement cannot be postponed indefinitely, especially if European Commission says technical requirements have been met. But MCV is there to stay as a concept. Croatia is sure to get one in its forthcoming Accession Treaty, meaning Brussels will continue to monitor its efforts in judicial reform and anti-corruption for years to come. Multiple speed Europe anyone? Or perhaps the usual flow of things …