Bazylea III a sektor bankowy w Polsce – potencjalne scenariusze reakcji banków
BULGARIA ENTERING EUROZONE
Summary: The eurozone, officially called the euro area, is a monetary union of 19 European Union (EU) member states that have adopted the euro (€) as their common currency and so legal tender. Every European Union member is obligated to adopt the Euro currency once it meets the criteria to do so. Being part of the union since 1rst of January 2007 Bulgaria has taken it’s responsibility in trying to meet the Maastricht Treaty1 criteria, but since now this has not happened .The tasks of the country`s government now are to meet the mentioned criteria and to seize the best moment of entering the eurozone.
Keywords: European Central Bank (ECB), Fiscal policy, Eurogroup
Introduction
The euro area consists of those Member states of the European Union that have adopted the euro as their currency. Today, around 330 million citizens in 18 counties live in the euro area, and this number will increase as future enlargements of euro area continue to spread the benefits of the single currency more widely.
When the euro was first introduced in 1999 – as 'book' money – the euro area was made up of 11 of the then 15 EU Member States.
Greece has joined in 2001, just one year before the cash changeover,
followed by Slovenia in 2007, Cyprus and Malta in 2008, Slovakia in 2009, Estonia in 2011, Latvia in 2014 and Lithuania in 2015.
Today, the euro area numbers 19 EU Member States.
Two of the Member States are outside the euro area. Denmark
and the United Kingdom have 'opt-outs' from joining laid down in Protocols annexed to the Treaty, although they can join in the future
1 The treaty led to the creation of the euro. One of the obligations of the treaty for the members was to keep "sound fiscal policies, with debt limited to 60%
of GDP and annual deficits no greater than 3% of GDP".
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if they wish. Sweden has not yet got qualified to be part of the euro area.
The remaining non-euro area Member States (Bulgaria, Czech Republic, Hungary, Poland, Romania, Sweden, Croatia ) are among those which acceded to the Union in 2004 and 2007, after the euro was launched. At the time of their accession, they did not meet the necessary conditions for entry to the euro area, but have committed to joining as and when they meet them.
All EU Member States are part of Economic and Monetary Union, which means they coordinate their economic policies for the benefit of the EU as a whole. However, not all EU Member States are
in the euro area – only those having adopted the euro are members of the euro area.
Table 1. National target dates for adoption of the euro
Lithuania 01.01.2015
Romania 01.01.2019
Bulgaria, Croatia, Czech Republic, Hungary, Poland and Sweden do not currently have a target date for adoption of the euro.
The convergence criteria are formally defined as a set of macroeconomic indicators which measure:
price stability, to show inflation is controlled;
soundness and sustainability of public finances, through limits on government borrowing and national debt to avoid excessive deficit;
exchange-rate stability, through participation in the Exchange Rate Mechanism (ERM II) for at least two years without strong deviations from the ERM II central rate;
long-term interest rates, to assess the durability of the convergence achieved by fulfilling the other criteria.
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The preparations for the euro affect all parts of the economy and all levels of society, and are the responsibility of the national government. The national authorities draw up a national changeover
plan outlining the overall framework and key elements of the transition to the euro, and appoint a national steering structure
to coordinate and supervise its implementation. The key elements to be covered by the practical preparations are:
the cash changeover;
the changeover of the different sectors (financial, retail, business in general, public administration, etc.);
the information and communication strategy.
Joining ERM II
While Bulgaria has not formally joined the exchange rate mechanism, the ±15% floating band permitted within ERM II is less restrictive than Bulgaria's current strict peg of 1.95583 BGN to 1 EUR. The lev has been pegged to the euro since its launch, and prior to that was pegged on par to the German Mark. While the currency board which pegs Bulgaria to the euro has been seen as beneficial to the country fulfilling criteria so quickly, the ECB has pressured Bulgaria to drop it as it did not know how to let a country using a currency board join the euro. The Prime Minister has stated the desire to keep the currency board until the euro was adopted. However, factors such as a high inflation, an unrealistic exchange rate with the euro and the country's low productivity are negatively affected by the system.
Since 2011, Bulgaria's non-membership of the ERM has been the primary factor that prevented their euro membership, as Bulgaria met the other criteria for euro adoption.Simeon Dyankov, Bulgaria's finance minister, said in September 2009 that Bulgaria planned to enter ERM II in November 2009, but this was delayed. In November 2009, Bulgaria stated that it planned to apply for joining ERM II in early 2010, but was forced to delay its application for at least one
year after updated figures put the budget deficit for 2009 at 3.7%
of GDP, outside the Maastricht criteria .On 22 December 2009
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Dyankov said that the country would apply to join the ERM II in March 2010,but due to a high deficit Bulgaria decided not to apply
in 2010. In late 2009, Dyankov said that Bulgaria would apply for ERM II membership by February 2010, however, the application
was further later delayed.
In July 2011 Dyankov stated that the government would not adopt the euro as long as the European sovereign-debt crisis was ongoing, but that euro adoption could take place as early as 1 January 2015. According to Deutsche Bank, at the time the government had selected a target date for ERM-II entry of the beginning of 2013. The government reiterated in September 2012 its intention to remain outside the eurozone for as long as the debt crisis remained
unresolved; it wanted a clear understanding of the consequences of adopting the euro before making a decision to do so. Bulgaria
abstained from entering ERM-II during 2013 and 2014,while restating their position that they were not planning on adopting the euro in the near future.
In January 2015, the new elect Finance Minister Vladislav Goranov said, that it was absolutely possible for Bulgaria to join ERM-II before the term of current government ends in 2018, and that
he would begin talks with the Eurogroup to map what sort of preparations the state should undertake to qualify for membership.
The former governor of theBulgarian National Bank, Kolyo Paramov, in office when the currency board of the state was established, believes the euro should be adopted already in January 2018, as this would „trigger a number of positive economic effects": Sufficient money supply (leading to increased lending which is needed to improve economic growth), getting rid of the currency board which prevents the national bank functioning as a lender of last resort to rescue banks in financial troubles, and finally private and public lending would benefit from lower interest rates (at least half
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as high)2. The former deputy governor of the Bulgarian National Bank, Emil Harsev, agreed with Paramov, stating that it was possible to adopt the euro already in 2018, and „Bulgaria’s membership in the eurozone will bring only positive effect on the economy" because
„since establishing the currency board in 1997, we have been
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For now there is no set date for accession in the euro area,
although the Bulgaria’s announcement in July to voluntarily join the European banking union can be considered as a smart move.
Moreover it is a signal that “the country is committed to achieve much better standards of banking supervision”3.
The unpredictable and sudden closing and later failure of CCB (Corporate Commercial Bank), which was one of the biggest lenders, came as a nasty surprise after Bulgaria’s central bank managed the global financial crisis very well. In the case of CCB, from June 2014, Bulgarian national bank (BNB) didn`t act as lender of last resort.
Fortunately the banking sector managed to stabilize and the rest of the banks remained stable. Nevertheless, what had happened in
June 2014 had it consequences and this banking scandal has it negatives and is not adding to Bulgaria`s chances to join the eurozone.
According to Antonio Timoner-Salva, senior economist at business information and analytics company HIS,: „Bulgaria does
not have the best reputation in Brussels, and the euro-area is more than just an economic club – it is also a political club”, he says. „EU authorities are still concerned about the long-term effect of letting Bulgaria join the euro-area".
If Bulgaria joins the euro area it will not only be able to take cheap loans from ECB but the Bulgarian national bank and the first 3 main banks will be supervised by ECB, which will guarantee stable
banking sector . The negatives will be that the taxes applied on the bank clients will rise.
However, the Bulgarian public still needs convincing.
The European sovereign debt crisis made Bulgarians more cautious about adopting the euro, and a recent survey by the Open Society
Institute showed two-thirds of respondents do not wish to replace the lev with the euro.
3 Antonio Timoner-Salva, senior economist at business information and analytics company HIS ,interview for “Euromoney “ Journal, August 2014
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Steve Hanke, professor of applied economics at the Johns Hopkins University in Baltimore, believes Bulgaria would be better off sticking with the lev. Hanke was an adviser to Bulgarian president Petar Stoyanov in 1997 during a period of hyperinflation and helped
introduce Bulgaria’s currency board. The board pegged the lev to
the German Deutschemark which successfully put an end to hyperinflation, and later pegged the lev to the euro. "Bulgaria
should not join the euro," says Hanke. "It’s a bad idea because you lose all discipline. Bulgaria has a very rigorous monetary system. Just
being a member of the EU but not part of the eurozone means they can’t get bailed out, so have to stand on their own two feet and be disciplined".
Citizen`s opinion
The last EUROBAROMETER survey on the theme “Introduction of the euro in the more recently acceded Member States” shows that
most of the citizens of counties still outside euro zone think that the introduction of the euro will have a negative consequences for
their country. Meanwhile, over four out of 10 respondents (44% )think the consequences for theircountry would be positive. In previous
waves of the survey, Romania was the only country in which a majority of respondents thought the introduction of the euro would
have positive consequences for their country (57% positive vs. 37%
negative). The majority of people in Hungary (51% vs. 41%) now also take this position. However, elsewhere the prevailing view is that introducing the euro would have negative consequences nationally.
This is especially so in the Czech Republic (69% negative vs.
26% positive), followed by Bulgaria (56% vs. 36%), Poland (54% vs.
40%), Croatia (53% vs. 40%), and Lithuania (47% vs. 41%).
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Figure 2. Consequences of the introduction of the euro at a national level, %
Source: Eurobarometer, “INTRODUCTION OF THE EURO IN THE MORE RECENTLY ACCEDED MEMBER STATES” Report
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On another question asked by Eurostat: “Will the changeover to euro change prices ?” A majority of respondents in all seven countries think that introducing the euro will increase prices (65%).
Although the majority of people think their country will benefit in four of the five ways under discussion. Four fifths of people (81%)
think that it will be more convenient for those who travel in other countries that use the euro, while seven out of ten respondents believe that joining will make it easier to shop in other countries that use the euro (70%). However, only around a third of respondents think
that introducing the euro will protect their country from the effects of international crises (35%).
After considering the likely benefits of introducing the euro, respondents were then asked about some potential inconveniences of joining the currency. Specifically, they were asked whether they agree or disagree with four statements about the effect that the changeover will have on them personally. Seven out of ten respondents (71%) say they are concerned about abusive price setting during the changeover.
However, less than half of the respondents agree with the other three statements:
48% agree that adopting the euro will mean that their country will lose a part of its identity, versus 49% (+1) who disagree;
45% agree that the replacement of their national currency will cause them a lot of personal inconvenience, versus 52% who disagree;
and 42% agree that adopting the euro will mean that their country will lose control over its economic policy, versus 53%
who disagree.
Conclusion
The tree main reasons of being part of the European union – being in a political and economical relations with the other European
counties , using the common currency – euro and being part
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of Schengen area. Till now Bulgaria has only undertaken one of them.
Adopting the euro will not be easy and quick process and it will bring its pros (such as lowering the interest rates, lower currency fluctuation for the investors and access to the cheap loans offered by ECB, etc) and cons (such as possibility of inflation and being asked to help another country from the euro zone if it is in crisis). Adopting the euro is the smarted exist of the currency board and most probably it will happen one day but till then a lot of reforms should be done.
References http://ec.europa.eu/
http://ec.europa.eu/public_opinion/topics_en.htm
http://www.euroviews.eu/2014/2014/04/19/slow-on-the-uptake-bulgaria-and-the-euro/
http://www.mediapool.bg/bulgaria-zapochva-pregovori-za-vavezhdane-na-evroto-news229383.html
http://www.minfin.bg/bg/pubs/1/8817
Report - Flash Eurobarometer 400 “INTRODUCTION OF THE EURO IN THE MORE RECENTLY ACCEDED MEMBER STATES”
www.euromoney.com
PERSPEKTYWY PRZYJĘCIA EURO PRZEZ BUŁGARIĘ Streszczenie: Strefa Euro jest monetarną unią 19 państw członków Unii Europejskiej, które przyjęły wspólną walutę Euro. Każdy kraj członkowski Unii Europejskiej jest zobligowany do przyjęcia wspólnej waluty Euro w momencie, w którym spełni odpowiednie kryteria. Bułgaria jest członkiem Unii Europejskiej od 1 stycznia 2007 roku. Od tego czasu nie udało się Bułgarii spełnić kryteriów z Maastricht. Celem rządu Bułgarii jest zbliżenie Bułgarii do spełnienia tych kryteriów oraz przyjęcie wspólnej waluty Euro w najlepszym momencie.
Słowa kluczowe: Europejski Bank Centralny, polityka fiskalna, eurogrupa
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Mariya Georgieva
CORPORATE SOCIAL RESPONSIBILITY (CSR)