The European Central Bank (ECB) said on July 10 that Bulgaria and Croatia have been accepted to join the Exchange Rate Mechanism (ERM2), the euro zone’s “waiting room”. The two countries can join the euro area after spending at least two years in ERM2.
“At the request of the Bulgarian authorities, the finance ministers of the euro area Member States of the European Union, the President of the European Central Bank, and the finance ministers and central bank governors of Denmark and Bulgaria have decided, by mutual agreement, to include the Bulgarian lev in the Exchange Rate Mechanism,” the ECB said in a statement.
“Following a careful assessment of the appropriateness and sustainability of Bulgaria’s currency board, it was accepted that Bulgaria is joining the exchange rate mechanism with its existing currency board arrangement in place, as a unilateral commitment, thus placing no additional obligations on the ECB,” the statement said.
The central rate of the Bulgarian lev was set at 1.95583 leva for one euro, the same fixed rate maintained under Bulgaria’s currency board.
Bulgaria applied in June 2018 to join ERM2 and the Banking Union, committing to carry out a set of measures in six policy areas: banking supervision, the macro-prudential framework, the supervision of the non-banking financial sector, the anti-money laundering framework, the insolvency framework, and the governance of state-owned enterprises.
“The agreement on participation of the Bulgarian lev in ERM2 is furthermore accompanied by a firm commitment by the Bulgarian authorities to pursue sound economic policies with the aim of preserving economic and financial stability and achieving a high degree of sustainable economic convergence,” the ECB said.
In a statement, the European Commission said that it welcomed the decision and would continue to encourage and support the efforts of the Bulgarian and Croatian authorities to complete the process of joining the euro area.
“This decision recognises the important economic reforms already undertaken by Bulgaria and Croatia while confirming the continued attractiveness of Europe’s single currency. We will continue to stand with both countries as they take their next and final steps towards joining the euro area,” European Commission president Ursula von der Leyen said.