EU to Strengthen Budget Rules by End-Year

Sofia News Agency, www.novinite.com and www.sofianewsagency.com

Euro zone leaders has vowed to strengthen European Union budget rules to avoid a repeat of the Greek debt crisis as they met on Thursday on the sidelines of a European Union summit. The reached deal reportedly commits to "a strong coordination of economic policies in Europe" that would increase joint EU government monitoring of economies across the 27-nation bloc and strengthen the EU's budget limits on debt and deficit. "The current situation demonstrates the need to strengthen and complement the existing framework to ensure fiscal sustainability in the eurozone and enhance its capacity to act in times of crisis," the draft text said. "For the future, surveillance of economic and budgetary risks and the instruments for their prevention, including the excessive deficit procedure, must be strengthened," the draft said. "Moreover, we need a robust framework for crisis resolution respecting the principle of member states' own budgetary responsibility," it said. "We ask the president of the European Council to establish a task force with representatives of member states, the (European) Commission and the European Central Bank, to present, before the end of this year, the measures needed to reach this aim, exploring all options to reinforce the legal framework." EU budget rules say countries may not run budget deficits higher than 3% of gross domestic product or have debt above 60% of GDP. Greece is among the top sinners with a gap of 12.7% in 2009. The Greek crisis has triggered fears about the stability of the eurozone and concerns that it may end up foiling Bulgaria's aspirations to join the euro in three years. Bulgaria is widely believed to be among the countries most at risk from potential spillovers from Greece after banks invested in central and eastern Europe. The country is more susceptible to contagion risk from than neighboring Romania or Turkey, because Greek banks control 28 percent of the Balkan country’s market. There have been months of speculations over when the former communist state would formally apply to the bloc's exchange-rate mechanism, the so-called Eurozone waiting room. According to the latest plans announced by Finance Minister Simeon Djankov this should happen by July, when the Spanish presidency of the European Union ends. Minister Djankov, a World Bank economist, hopes to offset a possible reluctance to admit Bulgaria into the ERM, stemming from the global crisis, by garnishing the application with a targeted balanced 2010 budget, the smallest 2009 deficit in the EU and laws overhauling the inefficient health-care and social-security systems. Countries must be members of ERM II for two years before they can formally join the eurozone. Bulgaria believes that it could be ready for euro entry by 2013. Joining the exchange-rate mechanism would bring Bulgaria closer to the umbrella of the euro region and the protection of the European Central Bank and is conditional on whether the new government will succeed to restore Brussels trust. The lev is already linked to the euro in a currency board that keeps the Bulgarian currency at 1.9558 to the euro. Joining the exchange-rate mechanism may allow the lev to fluctuate by as much as 15 % around a central band, though the central bank has said it will leave the lev tightly pegged to the euro through the duration of the two years.

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