Bulgaria’s attempt to enter the ERM II waiting room is a farce. The first act of this three-act play begins with the mere thought of abandoning Bulgaria’s currency board and the lev. The currency board killed Bulgaria’s terrible hyperinflation of 1997, and it stabilized the economy and paved the way for Bulgaria’s entry into the EU and NATO. It has worked automatically and perfectly, just as I designed it to work. The Bulgarian public knows this and supports the currency board.
But, Prime Minister Boyko Borisov and his echo chamber, Finance Minister Vladislav Goranov, want to do away with one of the few Bulgarian institutions that works perfectly well and is widely respected by Bulgarians, as well as foreigners. This is a farce.
The second act of this farce involves the European Central Bank’s precondition that the First Investment Bank had to be recapitalized before Bulgaria could enter the Single Supervisory Mechanism and the ERM II waiting room. In my view, this discriminatory precondition imposed by Bulgaria’s masters in the European Union was illegal– another farce.
The play’s grand finale started when the coronavirus pandemic struck. While the Bulgarian public was looking the other way, Prime Minister Borisov changed course. He argued that Bulgaria was missing out on EU funding because Sofia was not a member of the eurozone. This is total nonsense. Then, in a desperate attempt to recapitalize the First Investment Bank, the Bulgarian Development Bank, a state-owned bank, purchased the rights to FIB shares at double their market price. Only time will tell how this questionable maneuver will be viewed by the EU’s Directorate-General for Competition and whether Bulgaria’s government will move a step closer to what most Bulgarians fear: the loss of their beloved lev. This last act is, of course, the greatest farce of all.
