Speech by Executive Vice-President Dombrovskis at Conference on "Bulgaria Towards the Euro"
Honourable Prime Minister and Government representatives,
Honourable Governor of the National Bank,
Ladies and gentlemen,
First of all, thank you for inviting me to speak at today's conference.
Today marks one year since the start of Russia's full-scale military assault against Ukraine. An unprovoked, unjustified and brutal invasion of another sovereign country.
Ukrainians are fighting not only for their country, but also for all of Europe, for the European project and values.
Today, on February 24th, I pay tribute to all of Ukraine's heroes who have fallen in this war - and to the endurance of Ukrainians in the face of intense battles and much suffering.
Ukraine will win this war. Europe will win. The whole democratic world will win.
The outcome of the conflict will have a global impact.
It directly affects the security architecture in Europe.
We must stop Russia now, because we see from Georgia in 2008 , Crimea in 2014, and what is happening now, that the Kremlin will go as far as it can, unless it is stopped.
The EU strongly supports Ukraine, providing every support necessary to survive this winter and win the war.
We provide massive financial support, including macro-financial support of EUR 7.2 billion last year and EUR 18 billion this year to cover budgetary needs of Ukraine, and also – to repair critical infrastructure.
We support Ukrainians who fled the invasion and found shelter in the EU Member States, already around 4 million people – of which around 50 thousand are staying in Bulgaria.
For the first time in the history of the EU, we are providing military support for a country at war.
The EU stands in full support of Ukraine politically, and the most important sign of this is that we decided to grant EU candidate country status to Ukraine.
Ukraine chose its European path a long time ago, since the Maidan revolution.
And let us not forget:
Ukrainians are fighting not only for their own country, but for the whole EU, and the whole democratic world.
Because this Russian war is also an attack on the EU, our security system, and values.
We have to acknowledge that there is also a brutal hybrid and disinformation war ongoing.
Russia is employing hybrid attacks to weaken our resolve and divide us.
We will not allow that to happen.
So it is of utmost importance that we in the EU show continued support for Ukraine, and also fight the Kremlin propaganda machine within the EU and beyond.
This is how to protect our countries, our people, our democracy and future from the Russian imperialist nightmare.
The EU is committed to support Ukraine for as long as it takes.
We are now coming out with our 10th package of sanctions against Russia, in coordination with international partners.
It has a strong focus on enforcement and preventing circumvention, with a new reporting obligation for Member States on Russian assets, including Central Bank assets.
Our sanctions are biting hard and contributing to sustained economic recession in Russia.
But their effectiveness also depends on how well they are enforced.
That means enforcement in every EU country. If our sanctions are to be effective, we must be coherent on this.
It also applies to seizing and freezing Russian assets. We are working on legal solutions for using confiscated Russian assets to finance Ukraine's reconstruction.
Ladies and gentlemen,
At this highly sensitive time in international relations, this is a test case for our democratic values.
The geopolitical goalposts are shifting like never before.
The world is becoming more conflicted and fragmented.
In 2007, Bulgaria joined the European Union.
Now, in the middle of this geopolitical turmoil, it is preparing to join the euro area.
This is about much more than replacing the lev with the euro.
Above all, it is about choosing to belong to the core of the European project. The euro protects Europe at times of financial and economic crisis.
Taking the path towards the euro is also about deepening a country's integration into the EU and into the democratic world.
It is vital that Bulgaria does not weaken on this chosen path.
Since its launch, the euro has become more than just a means of exchange between euro area countries.
It is a symbol of Europe's strength, unity and solidarity at a time when these qualities are being tested and threatened.
It is a rock of stability in these turbulent times.
It is good for the overall cohesion of EU Member States.
In just over two decades, the euro has made a significant contribution to the stability, competitiveness and prosperity of European economies.
This is an unprecedented and tangible achievement of European integration.
As you know, on January 1 this year, Croatia became the 20th country to join the euro area.
More countries joining the euro adds to the EU's global standing and influence. It confirms the euro's status as a successful, attractive and resilient currency.
Ladies and gentlemen: let me now outline some of the benefits that introducing the euro can bring for Bulgarian citizens.
Firstly: adopting the euro sends a positive signal for investors.
It removes uncertainty about future policy, strengthens external credit ratings and helps to stabilize and lower interest rates.
In turn, this helps to promote foreign and domestic investment, leading to higher economic growth and more jobs.
Using the euro lowers barriers for businesses and removes currency exchange costs.
And it brings a positive impact on growth thanks to full integration into the EU's single market, where a country's goods and services will become more competitive.
In the case of Bulgaria, as we know: the lev is already pegged to the euro.
This means that Bulgaria effectively “imports” the monetary policy of the European Central Bank – but without any input into its decision-making.
Introducing the euro would give Bulgaria a seat at the table where those decisions are made.
Also, I know that not everyone in Bulgaria is in favour of replacing the national currency with the euro.
But I remember when I was Prime Minister of Latvia in 2013 - the year before we moved to the euro - only 40% of people in Latvia thought that its introduction would have positive consequences.
Now, 87% of Latvians support the common currency. In fact, support for the euro is rising among all Eurozone members, reaching last year its highest level ever – 72%.
All I would say from the experience in my own country is that it is vital to inform clearly.
This is a collective responsibility: to reassure people of the practical and positive effects of the euro.
And it must be inclusive: it should involve political leaders, social partners, non-government organisations and other interested parties.
So what happens next?
Like any country preparing to adopt the euro, Bulgaria must first meet all convergence criteria: price stability, sound public finances, a stable exchange rate with the euro, and converging long term interest rates.
We see Bulgaria as likely to fulfil the convergence criteria for long-term interest rates, exchange rate stability within ERM II, and sound public finances.
As regards public finances, Bulgaria has a strong track record and has one of the lowest debt to GDP ratios in the EU. But it's important to keep it this way; to keep budget deficit to 3% of GDP as foreseen by the Maastricht Treaty.
The main issue is the price stability criterion, which Bulgaria has not yet met.
Today's high inflation environment makes this task a lot harder. Inflation is now a global issue, very much linked to Russia's aggression against Ukraine.
Many countries, including Bulgaria, are facing high prices at the moment.
So, yes, as already announced by the Bulgarian government, the unfavourable external circumstances are causing a delay in Bulgaria's euro accession plans. It is no longer possible for January 1st 2024.
But we should not allow this delay to blow us off course.
Bulgaria's euro accession remains the ultimate goal, and it should take place as soon as all conditions are met.
Hopefully it can be done a year later.
It is important to make sure that Bulgaria can join the euro in the best conditions possible.
This is our focus now.
To that effect, further work is needed on the implementation of the so-called ERM II post-entry commitments.
We are looking forward to the adoption of a number of legislative changes in the areas of anti-money laundering, insolvency and insurance and further implementing steps in the areas of state-owned enterprises, to give some examples.
The European Commission will continue working closely with Bulgaria to support its efforts.
This goal is within reach. We are fully committed to seeing you through the process of euro accession. Bulgaria has a place at the heart of the EU, and in the euro area as well.
So let me commend the authorities on the work they have done so far to get to this point in the convergence process.
This is already impressive.
Ladies and gentlemen,
Let me finish by congratulating you on all the hard work done so far.
I know that the road to the euro can be bumpy. It can seem long.
But it is a road that changes countries for the better.
We hope that Bulgaria will become the 21st country to join the euro area, cementing its membership of the European family and securing its place at the core of the European process.