Bulgarian bid to join the Exchange Rate Mechanism (ERM II) and Banking Union

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Publication Date 2018-
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Summary:

Overview and information relating to Bulgaria's intention to join the Exchange Rate Mechanism (ERM II) and the Banking Union, seen as a first stage to full accession to the Eurozone.

Further information:

Bulgarian authorities sent on 29 June 2018 to relevant stakeholders a letter of intent regarding the country's intention to join the Exchange Rate Mechanism (ERM II) and the Banking Union. The matter was discussed by Eurozone member state representatives, the European Central Bank (ECB) and Denmark at a meeting on 12 July. The stakeholders welcomed the intention of the Bulgarian authorities to put in place the necessary elements for a successful entry into ERM II. In this context, the country took a number of commitments in policy areas which are of high relevance for a smooth transition to, and participation in, ERM II. The ECB and the Commission were set to monitor the effective implementation of those commitments; once a positive assessment was provided, a decision would be taken by the ERM II parties on the formal application of the Bulgaria authorities.

Decision (EU) 2020/1015 was adopted on 24 June 2020 on the establishment of close cooperation between the European Central Bank and Българска народна банка (Bulgarian National Bank). This was published in the Official Journal on 13 July.

On 10 July 2020, relevant stakeholders agreed to include Bulgaria's national currency (lev) in the ERM II. The central rate was set at €1 = 1.95583 leva. The agreement was largely based on the commitment by Bulgarian authorities to join the Banking Union and ERM II simultaneously and the completion by the country of a set of measures, described in their 2018 letter of intent.

This was seen as an important milestone in the country's efforts to join the Eurozone. Bulgaria is required to participate in the mechanism without severe tensions and without devaluing their currency central rate against the euro on their own initiative, for at least two years before the country can qualify to adopt the common currency.

Related Link(s)
Commentary and Analysis
ING: Snaps, 13/07/2018: Bulgaria: A new blueprint for EUR adoption https://think.ing.com/snaps/bulgaria-a-new-blueprint-for-eur-adoption/
Bruegel: Blog, 29/08/2018: Criteria for entry into the ERMII and the banking union: the precedent from Bulgaria https://www.bruegel.org/2018/08/criteria-for-entry-into-the-ermii-and-the-banking-union-the-precedent-from-bulgaria/
ING: Article, 10/07/2020: Bulgaria and Croatia set to join the lengthy ERM II process https://think.ing.com/articles/bulgaria-and-croatia-to-join-a-lengthy-erm-ii-process/

News
Reuters, 12/07/2018: EU backs Bulgaria's first step towards joining euro https://www.reuters.com/article/idUSKBN1K228C
Balkan Insight, 12/07/2018: Bulgaria Meets Resistance Over its Eurozone Plans http://www.balkaninsight.com/en/article/bulgaria-meets-resistance-over-its-eurozone-plans-07-12-2018
EurActiv, 13/07/2018: Bulgaria edges closer to joining euro https://www.euractiv.com/section/economy-jobs/news/bulgaria-edges-closer-to-joining-euro/
Reuters, 26/06/2019: Bulgaria hopes to join euro zone 'waiting room' by year-end https://www.reuters.com/article/idUSKCN1TR2R4
Reuters, 30/10/2019: Bulgaria hopes to join euro zone 'waiting room' by end of April -minister https://www.reuters.com/article/idUSL8N27F7P3
The Sofia Globe, 19/01/2020: Bulgarian PM Borissov holds talks with IMF head Georgieva https://sofiaglobe.com/2020/01/19/bulgarian-pm-borissov-holds-talks-with-imf-head-georgieva/
BNT News, 30/01/2020: Finance minister: Bulgaria will join Eurozone only with exchange rate at 1.95583 https://www.bnt.bg/en/a/finance-minister-bulgaria-will-join-eurozone-only-with-exchange-rate-at-195583
EurActiv, 06/02/2020: Bulgaria changes legislation to join euro ‘waiting room’ https://www.euractiv.com/section/economy-jobs/news/bulgaria-changes-legislation-to-join-euro-waiting-room/
RFE/RL, 10/04/2020: Bulgaria Rushes To Join Eurozone To Tap Coronavirus Funds https://www.rferl.org/a/bulgaria-join-eurozone-coronavirus-funds/30546765.html
Bloomberg, 09/07/2020: Croatia and Bulgaria Step Closer to Joining the Euro https://www.bloomberg.com/news/articles/2020-07-09/croatia-bulgaria-set-to-get-green-light-to-enter-erm-2
Reuters, 09/07/2020: EU to back Croatia, Bulgaria in first step to join euro, sources say https://www.reuters.com/article/idUSL8N2EG1VG
BNT News, 10/07/2020: Bulgaria has been accepted in the ERM II euro zone’s “waiting room” https://www.bnt.bg/en/a/bulgaria-has-been-accepted-in-the-erm2-euro-zones-waiting-room
Politico, 10/07/2020: Bulgaria, Croatia enter euro waiting room https://www.politico.eu/article/bulgaria-croatia-enter-euro-waiting-room/
RTÉ News, 13/07/2020: Bulgaria, Croatia take vital step to joining euro https://www.rte.ie/news/business/2020/0713/1152943-euro-zone-bulgaria-croatia/

Official
General Secretariat of the Council: Letter of Intent from Bulgarian Minister of Finance and the Governor of the Bulgarian National Bank on Bulgaria's path towards ERM II participation, June 2018 https://www.consilium.europa.eu/media/36125/st11119-en18.pdf
Eurogroup: Press Release, 12/07/2018: Statement on Bulgaria's path towards ERM II participation https://www.consilium.europa.eu/en/press/press-releases/2018/07/12/statement-on-bulgaria-s-path-towards-erm-ii-participation/
European Commission: Vice-President Valdis Dombrovskis' remarks at the press conference on Bulgaria's path towards ERM II and Banking Union participation (12 July 2018) https://ec.europa.eu/commission/presscorner/detail/en/SPEECH_18_4506
ECB: Press Release, 10/07/2020: Communiqué on Bulgaria https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr200710~4aa5e3565a.en.html
European Commission: Letter to ERM II parties on Bulgaria and assessment of prior commitments of Bulgaria (8 July 2020) https://ec.europa.eu/info/sites/info/files/economy-finance/com_opinion_on_bg_erm-ii.pdf
European Central Bank: Application letter from the Bulgarian authorities - including the annex with the post-entry commitments to be taken at the time of ERM II entry (9 July 2020) https://www.ecb.europa.eu/pub/pdf/annex/ecb.pr200710_annex~29156bba37.en.pdf
European Commission: Press Release, 10/07/2020: Commission welcomes Bulgaria and Croatia's entry into the Exchange Rate Mechanism II https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1321
Eurogroup: Press Release, 10/07/2020: Communiqués by the ERM II parties on Bulgaria and Croatia https://www.consilium.europa.eu/en/press/press-releases/2020/07/10/communiques-by-the-erm-ii-parties-on-bulgaria-and-croatia/
EUR-Lex: Official Journal of the European Union: Decision (EU) 2020/1015 of the European Central Bank on the establishment of close cooperation between the European Central Bank and Българска народна банка (Bulgarian National Bank) http://data.europa.eu/eli/dec/2020/1015/oj

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