Justice system and corruption dog Bulgaria’s euro bid

Significance

Bulgaria must also join the European Banking Union (EBU) as part of its Exchange Rate Mechanism (ERM) II bid, in order to alleviate concerns over institutional governance, economic convergence and the stability of its banking system. ERM II accession -- the ‘waiting room to the euro’ -- would bolster Bulgaria’s financial and monetary stability, and help serve as a policy anchor; Bulgaria had hoped to join this month, but Finance Minister Vladislav Goranov said in June he now hoped for entry by year-end if not before.

Impacts

• Timing will depend on Bulgaria’s meeting the new requirement to join both ERM II and the EBU at the same time.
• Political support from other euro-area states could also affect the ultimate timeline.
• That Croatia has just applied for ERM II shows adopting the euro is still a goal, particularly for smaller EU member states.