Peripheral Bulgaria Needs Euro, Schengen to Cut Brexit Risk


A man sticks posters of a map of the European Union with a slogan in Bulgarian reading 'You are here' and 'Bulgaria in the European Union' in Sofia, on Dec. 29, 2006.

Photographer: Dimitar Dilkoff/AFP via Getty Images
  • Brexit talks may split EU into core, periphery, Donchev Says
  • Bulgaria sees EU members at impasse in solving migrant crisis

Bulgaria needs to move ahead quicker with steps to adopt the euro and the European Union’s visa-free travel regime to pull the post-communist state from the edge of European politics after joining the EU nine years ago, a top government official said.

The Black Sea nation of 7.2 million people, the poorest in the EU, already has little political influence and there is growing concern that preparations for the U.K.’s planned exit from the 28-member bloc may make smaller members on the so-called periphery have even less say, Deputy Prime Minister Tomislav Donchev said.

“How much Europe do we want? For a geographically peripheral European country directly exposed to all crises, this question has substantial meaning,” Donchev said in an interview in Sofia. “If the outcome is a political construction in which the core EU countries have different status from the states on the periphery, my forecast is that this will generate risks for the core countries.”

Bulgaria, whose 2007 membership came with caveats and restrictions because of concerns it wasn’t ready to join the world’s largest trading bloc, is working to bring living standards up to EU norms and keep the economy growing so it can lock itself deeper into the main EU economy. The country was hit by the economic meltdown of neighboring Greece and more recently, it has had to cope with migration through its borders northward.

Euro Preparations

Even so, the 43-year-old former mayor who is in charge of managing EU funds and economic policy, said the country is ready to get serious about joining the ERM-2 pre-euro exchange-rate mechanism. Its public debt is at 27 percent of economic output, below the EU limit of 60 percent, and the budget deficit is forecast at 1.9 percent of gross domestic product, less than the EU ceiling of 3 percent.

Bulgaria “in no way would be a burden and I hope the EU will have the political maturity to let Bulgaria join the euro zone,” Donchev said. The government hasn’t yet set a deadline for application to the ERM-2.

Bulgaria’s aspiration to move toward euro adoption may not meet EU’s immediate approval, Ciprian Dascalu,  chief economist for the Balkans at ING Groep NV in Bucharest, said.

“We doubt the government in Sofia would receive a positive signal from European authorities, who are overwhelmed by a never-ending succession of crises, to follow with such plans, ” Dascalu said in an e-mailed note. 

Bulgaria, which also shares a border with Turkey, is growing skeptical over its ability to influence the debate over the flow of migrants from the Middle East. The government urged the EU last month to implement the agreement with Turkey designed to curb the flow of migrants from the Middle East via Greece and Bulgaria.

Migrant Dispute

“It is worrying that we continue to have strong disagreements on the most acute issue related to the refugees, where it’s very difficult to reach a common European position,” Donchev said.

Bulgaria, which fulfilled all the requirements to be part of the passport-free Schengen area, “wasn’t admitted for political reasons, and ironically, now guards one of the EU’s external borders under the heaviest pressure from migrants,” said Donchev. “The voice and weight of all EU countries is theoretically equal, but it isn’t so in practice.”

So far, the U.K.’s bid to leave the EU, a process known as Brexit, doesn’t significantly affect Bulgaria’s economic growth outlook, Donchev said, as 3 percent of Bulgarian exports are shipped to the U.K. He raised this year’s GDP growth forecast to 3 percent, up from the government’s previous estimate of 2.1 percent.

Free Movement

In future Brexit talks, Bulgaria will join Poland and the Czech Republic in insisting that the U.K. adheres to rules on free movement of labor in return for access to the single market in goods and services, Donchev said. That’s a red line for many other ex-communist states whose citizens often travel to richer western countries for work since joining the EU starting in 2004.

“The political challenge is to work out a common European position,” Donchev said. “If member states’ positions are strongly diversified, it’ll be much harder to negotiate.”

British Prime Minister Theresa May’s refusal to say when she’ll trigger the start of Brexit talks is fueling complaints that foot-dragging may harm the bloc’s other 27 members.

“The shake-up that the EU is going through may lead to more Europe and more consolidation, it may help iron out dissension among EU members or, to the contrary, lead to its disintegration,” Donchev said. “My wish is for Brexit to bring a mobilizing and consolidating effect.”

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