EU-Report Accession Bulgaria

Chapter 11: Economic and Monetary Union

A detailed assessment of the various aspects of Bulgaria's economic policy has been given above, in the Chapter discussing the economic criteria (B-2). Therefore, the present section is limited to a discussion of those aspects of the Economic and Monetary Union Acquis ­ as defined by Title VII of the EC Treaty and the other relevant texts ­ which candidate countries should implement before accession, i.e. the prohibition of direct public sector financing by the central bank, the prohibition of privileged access of the public sector to financial institutions, and the independence of the national central bank. As to the process of liberalisation of capital movements, upon the completion of which compliance with the EMU acquis is conditional, this aspect has been covered above, in the section on Chapter 4 ­ Free movement of capital.

There have been no legislative developments on the adoption of the acquis in this area since the last Regular Report.

Overall assessment

Bulgaria will participate in EMU upon accession with the status of a country with a derogation under Article 122 of the EC Treaty, and it will need to implement the necessary changes to its institutional and legal framework by the date of accession.

In the area of central bank independence, further alignment is needed in the areas of institutional and personal independence (in particular on safeguarding against possible conflicts of interest relating to the duties of Members of the Board, making rules for dismissal compatible with the acquis and introducing provisions for judicial review of dismissal decisions).

Bulgaria also needs to further align its legislation with the provisions of the acquis prohibiting privileged access of public sector authorities to financial institutions, in particular as regards the remaining restrictions on insurance companies and on investment of pension scheme assets, and with the provisions of the acquis prohibiting direct financing of the public sector.

Conclusion

In its 1997 Opinion, the Commission concluded that it was premature to judge whether Bulgaria would be in a position, by the time of its accession, to participate in the Euro area. The Commission also concluded that Bulgaria's participation in the third stage of EMU as a non-participant in the Euro area could pose serious problems, even in the medium term, as the country had made only very limited progress in the transition to a market economy. The Commission considered that it was therefore hard to evaluate when Bulgaria, after the eventual cessation of the currency board arrangement, would be able to have an independent Central Bank.

Since the Opinion, progress was initially slow, but major steps forward have been taken over the past few years, and Bulgaria has now achieved a high level of alignment with the EMU-related acquis.

Negotiations on this chapter have been provisionally closed. Bulgaria has not requested any transitional arrangements in this area. It is generally meeting the commitments it has made in the accession negotiations in this area.

Bulgaria should focus further efforts on completing alignment along the lines set out above, in particular to guarantee the independence of the Central Bank and the prohibition of privileged access of the public sector to financial institutions.

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