Bulgaria hits setback in bid for euro membership

Bulgaria has hit a setback to its hopes of soon becoming a member of the shared euro currency after the European Central Bank said the EU’S poorest country needs “wide-ranging” reforms to get its economy in shape.

That assessment came in the ECB’S report card Wednesday on progress toward membership among seven European Union member countries that have not yet joined the 19-country euro.

Bulgarian officials have said they want to enter the two-year process that leads to joining the euro, called ERM II, this year. Their hope is that a swift entry into the eurozone would guarantee Bulgaria’s deeper integration in the EU.

But the ECB expressed concern about high business debt, corruption and weak education and skills training. Bulgaria is also experiencing a high level of bad loans burdening bank balance sheets.

The decision is ultimately made by eurozone political leaders based on the currency union’s rules but the ECB report will strengthen skepticism about the Bulgarian bid. The EU’S executive commission released its own report Wednesday, saying Bulgaria had fulfilled requirements for sound public finances, stable long term interest rates and price stability. Economic Affairs Commissioner Pierre Moscovici cautioned that experience had shown that for countries to prosper in the eurozone, it’s important that their economies be truly in tune with others in the bloc. They must “work hard” to increase investment and productivity, he said.

Bulgaria’s desire to join makes a positive statement for EU officials against a background of rising anti-eu political forces in Hungary, Poland and most recently in member country Italy.

There is also however the worrisome example of Greece, which joined the euro in 2001 after fudging its budget statistics and with an economy burdened by corruption, political patronage and bureaucracy. Greece wound up needing three bailouts and precipitated a eurozone financial crisis.