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Bulgaria Joins the Euro 12/31 06:06
SOFIA, Bulgaria (AP) -- On New Year's Day, Bulgaria becomes the 21st country
to join the euro currency union, furthering its integration into the European
Union. But the historic milestone arrives amid political instability and
skepticism among ordinary people fueled by fears of price rises.
Supporters of switching to the euro from the old currency, the lev, are
praising the move as one of the greatest achievements since the 1989 transition
from a Soviet-style economy to democracy and free markets. They hope it will
make the country more attractive for investors and strengthen its orientation
toward wealthier Western Europe.
But many people are uneasy, in a country where corruption is rife and trust
in the authorities is low. One fear is that merchants will round prices up or
otherwise use the changeover to worsen inflation, at a time when inflation has
rebounded to 3.7%.
An EU Eurobarometer poll from March showed that 53% of 1,017 people surveyed
opposed joining the eurozone, while 45% were in favor. A separate Eurobarometer
poll, taken between Oct. 9 and Nov. 3 on a similar sample, showed that about
half of Bulgarians opposed the single currency while 42% were in favor. The
margin of error was about plus or minus 3.1 percentage points for the March
poll.
Some welcome the euro, others are wary
The government successfully completed the euro adoption process by beating
inflation down to 2.7% earlier this year to comply with EU rules and win
approval from EU leaders. But clearing that hurdle was followed by a new
chapter of political chaos. The government resigned after less than a year in
office amid nationwide anti-corruption protests. This left the country without
a regular budget for next year and is hampering plans for long-overdue
structural reforms and decisions on use of EU support funds. A new election --
the eighth in five years -- is expected to be held next spring.
Nevelin Petrov, 64, said he welcomed the euro. "Bulgaria is a full member of
the European Union, and its rightful place is alongside the other developed and
democratic European nations," he said. "I am convinced that the adoption of the
euro will contribute to the long-term prosperity of our country," he said.
Others, like Darina Vitova, who runs a pedicure salon in Sofia, said things
were moving too fast although she welcomed the change "in principle."
"The standard of living and incomes in our country are far from those in the
richest European countries, while prices here are rising and life for the
average person will become more difficult," she said. She acknowledges that
when heading to the beaches in neighboring Greece, it will be more convenient
to pay with the same "pocket money" she uses at home.
Bulgaria, with its 6.4 million people, is one of the poorest members of the
27-country European union. The average monthly wage is 1,300 euros ($1,530).
Countries that join the EU commit to the euro, but actually joining can take
years and some members are in no hurry. Poland in particular has seen strong
economic growth since joining the EU in 2004 without adopting the euro.
Pro-Russian politicians have fanned discontent
Opponents of joining have fed fears that the changes will allegedly lead to
more poverty and loss of national identity. Social media has spread
disinformation such as false claims that the euro could lead to confiscation of
bank accounts. Nationalist and pro-Russian groups exploit these fears.
European Central Bank President Christine Lagarde has said that countries
have experienced a slight, transient rise in prices of 0.2%-0.4% right after
joining. Price rises can be more apparent than real, as cafe and hairdressers
may put off printing new menus and price lists ahead of the change, so that
increases are only delayed, not caused by the euro.
Anti-euro rallies in May and September were organized by the pro-Russian
Vazrazhdane party but remained smaller than the mass protests that toppled the
government. While the anti-euro protests were supported by older people based
on economic anxiety, the mass protests that toppled the government appeared to
represent a younger electorate fed up with corruption and eager to integrate
with Europe.
Analyst says euro adoption is a strategic plus
Anti-euro disinformation spread by pro-Russian politicians and social media
aim "to reduce support for the European Union, NATO and Ukraine," said Dimitar
Keranov, program coordinator for engaging Central Europe at the German Marshall
Fund in Berlin.
Bulgaria's European integration "is not in Moscow's interest at all, so if
it can somehow polarize society and weaken support for the European Union
that's what it tries to achieve," he said.
Euro adoption is another way to combat Russian influence, he said: "The
further Bulgaria advances in its European integration, the harder it becomes
for Russia to influence the country."
Petar Ganev, an analyst at the Sofia-based Institute for Market Economics,
says that that by stepping down the outgoing government has sent a signal of
uncertainty to foreign investors.
"Instead of capitalizing on euro adoption as a strong and positive signal to
the international community -- investors, debt holders, and those investing in
Bulgarian assets and economic activity -- we risk sending the opposite
message," Ganev said in an interview with the Associated Press.
Ganev believes that eurozone membership should be regarded as an
opportunity, an additional mechanism to address corruption and the rule of law,
although it alone cannot resolve Bulgaria's chronic cycle of elections and
political fragmentation and instability.
Economic impact may be slight
Local economists think that joining the euro will not bring dramatic changes
to Bulgaria's economy. That is because the lev has been pegged since 1999 to
the euro by law, at a fixed rate of 1 lev for every 51 euro cents.
The lev and the euro will be in dual use for cash payments for the whole
month of January, but people will receive only euros in change.
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