Frankfurt, Germany – European Union officials gave a green light on Wednesday to Bulgaria will become the 21 member of the Euro Currency Union, a key project of the EU destined to deepen ties between member countries.
The Balkan country of 6.4 million people is to change its national currency, the Lev, to the euro on January 1.
Here are basic facts about the union of currencies, also called Eurozone, and how countries bind to it.
The euro is a shared currency and a monetary system launched in 1999 when 11 EU member countries irrevocably set their coins to the euro as an accounting currency, then the national tickets and coins changed in 2002.
The EU established the European Central Bank to manage monetary policy and establish reference points for interest rates for member countries, similar to the role of the United States Federal Reserve in the United States.
Countries must comply with four criteria: low inflation, maintaining deficits and debt under control, low long -term interest rates and a stable exchange rate between its currency and the euro. Countries must go through a “waiting room” of two years in which their currency does not fluctuate excessively against the euro. The process is intended to demonstrate that their economies are converging sustainably with that of the Eurozone.
Once the European Commission determines that the requirements have been met, EU member governments decide for what is called a qualified majority vote. The approval needs a minimum of 55% of the Member States that represent at least 65% of the EU population.
After joining, countries face rules that limit debt and deficits. These rules are intended to prevent countries from having large deficits that could undermine the euro.
The European Commission ruled on Wednesday that Bulgaria has met the requirements, seconded by an opinion of the ECB. The matter now goes to a vote at a meeting of EU finance ministers scheduled for July 8. EU officials say that the vote is an agreement made.
Bulgaria is unusual in the sense that it linked its currency, the Lev, to the euro from the beginning of the Monetary Union in 1999, even before joining the European Union in 2007. Bulgaria also has very low levels of debt, only 24.1% of the annual economic production. That is well below the level of 60% established in the economic criteria for Eurozone membership. The last step was to obtain inflation below the reference point of 2.8%, or no more than 1.5% higher than the average of the three lower members of the Eurozone.
There were concerns about the level of corruption and money laundering in the poorest country in the EU. However, the commission and the ECB found that Bulgaria has progressed in those areas.
The most recent survey of the Eurobarometer conducted by the EU showed that 50% of the Bulgarians opposed and 43% in favor. The reasons include fears of inflation, distrust of official institutions in a country that has had seven governments in four years, and Generalized erroneous information on social networks.
The issue has been addressed by pro-ruse nationalist politicians advocating the national currency. President Rumen Radev fueled the anti-Europe forces with a referendum proposal, which was rejected by Parliament. The erroneous information included false statements that the euro would allow EU officials to confiscate inactive bank accounts or use a digital euro to control people.
On January 1, only euros of cash machines will be dispensed, although both currencies will circulate in cash for one month. After that, Lev notes can be exchanged in the banks for 12 months and for an unlimited time at the Bulgaro National Bank.
In theory, the euro brings means lower interest rates for businesses and consumers and relieves cross -border trade within the Eurozone. Companies no longer have to participate in currency change transactions or worry that exchange rate changes will erosion their earnings or holdings. Travelers no longer have to pay commissions in an exchange stand or on their credit card bill when vacation or on a business trip to another EU country.
Member countries obtain a seat in the ECB Rate establishment Council and, therefore, have a voice in monetary policy throughout the Eurozone.
The countries that join lose some authority over their own economy. They renounce their ability to establish their own interest rates and face restrictions on government spending and deficit, although these rules have proven flexible in practice. And they can no longer gain competitiveness in relation to other countries by allowing the exchange rate of their currency to devalue.
There are bitter memories of debt and the economic crisis that shook the eurozone in 2010-2015. After Greece admitted that his deficit and debts were much larger than previously reported, he ended up breaking his debts and market agitation to other Eurozone countries.
Greece, Portugal, Ireland, Spain and Cyprus were rescued with loans by the other eurozone governments, in exchange for strict austerity measures that affected many common people, including government workers and retirees.
The president of the ECB, Mario Draghi, is attributed the deactivity of the Eurozone crisis in 2012 by saying that the Central Bank would do “what is necessary” to save the euro. The ECB then said that it could intervene in bond markets to support countries beaten by agitation, a safeguard that calmed the markets even though it was never used.
Later, other background stops were added, including a Eurozone rescue fund and the banking supervision of national supervisors sometimes lax to the ECB.
Countries agree to join the euro as part of joining the EU, but not everyone has made the effort to meet economic requirements. There is no time window to join.
Denmark was awarded an exclusion option, while Sweden rejected the euro in a 2003 referendum despite not having an exclusion option and does not have an objective date to join. Other non -members are Czech, Hungary, Poland and Romania.
Poland officials, the greatest non -member, have shown little interest in joining despite recognizing the obligation to join someday. The winner of Sunday’s presidential elections, Karol Nawrocki, campaigned to maintain the Zloty currency.
The economy of the country has grown strongly without the membership of the euro, doubling its size in the last two decades, since its standard of living has almost reached Western Europe since it emerged from the communist domain in 1989.
