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Merkel and Macron Hand Boost to Bulgaria's Euro Aspirations

  • PM Borissov received support in visits to Germany, France
  • Balkan nation wants to be sixth ex-communist euro-area member

Courting support at the heart of the European Union for its plan to adopt the euro, Bulgaria scored successes in Germany and France, where appetite for integration has been reawakened following the defeat of populists in key elections.

Chancellor Angela Merkel and President Emmanuel Macron both said they’d back the Black Sea nation’s efforts to swap the lev for the common currency. They told Prime Minister Boyko Borissov during his trips to Berlin and Paris that they’d help Bulgaria enter the ERM-2 exchange-rate mechanism, the precursor to joining the euro area.

“From our point of view Bulgaria should be able to participate in everything as quickly as possible,” Merkel told reporters Wednesday in the German capital. She said the EU must create a “vista of hope” for the Balkan region, where the prospect of joining the world’s biggest trading bloc is seen as a tool to ease renewed tensions.

Bulgaria, which joined the EU a decade ago and remains its poorest nation, has made euro adoption a priority in the early weeks of Borissov’s third cabinet in eight years. Renewed zeal for integration may provide a window of opportunity for the country of 7 million people after shocks including the Greek debt crisis, a surge in refugees and, most recently, Brexit. Five of the currency union’s existing members are from the bloc’s ex-communist east.

Bulgaria already meets the EU’s public-debt and fiscal requirements for joining ERM-2. Its currency, the lev, is pegged to the euro under a currency board system imposed 20 years ago in the wake of a banking crisis.

The government plans to apply for ERM-2 membership when there are assurances its bid won’t be rejected, Finance Minister Vladislav Goranov said last week in an interview. He voiced concern that Bulgaria’s wealth gap to other EU members is too wide.

“In the face of Brexit negotiations, EU leaders may choose to send a sign of unity and openness to enlargement,” said Ciprian Dascalu, chief economist at ING Bank NV in Bucharest. He warned of an “ongoing debate about readiness” in terms of convergence, the labor market and institutions. “This is up to political negotiation.”

A stay exceeding the usual two years in ERM-2 would be a possible way for Bulgaria to narrow the convergence gap, Dascalu said.

Macron said he’d also back Bulgaria’s long-standing bid to join the EU’s visa-free Schengen zone. Entry has been held up because of concern over corruption and the judiciary. Bulgaria ranks worst in the bloc for graft, according to Transparency International.

The yield on Bulgaria’s euro-denominated bonds due 2024 fell 1 basis point to an all-time low of 1.272 percent at 4:40 p.m. in Sofia, data compiled by Bloomberg showed.

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