Who's next?

[chrisild]

Bulgaria plans to join the Exchange Rate Mechanism (ERM-II) some time this year - the antechamber of the currency union so to say. (Currently the Bulgarian currency is unilaterally tied to the euro.) According to finance minister Vladislav Goranov, the application will come in the first half of this year - that is, in the six months of the Bulgarian presidency of the Council of the European Union. More here for example.

Now whether this is just hot presidency air or more remains to be seen. Even if the Bulgarian lev joined the ERM-II in mid-2018, it would stay there at least until mid-2020.

Christian

[Figleaf]

Very interesting and excellent fun. I had a look at Bulgarian economic indicators. They looked much better than I thought. Per capita PPP GDP is climbing nicely, inflation is low, unemployment (below 7%) also, balance of payments looks fine, gov't budget is in deficit, but looks manageable and debt to GDP is just below 25%! I'd like a stern audit of those figures to prevent another Greece from happening, but otherwise this looks excellent, especially for a country that has a history of economic weakness. You are right that it may be just hot air, but the stats say they can do it if they want to, especially if they take their time.

Peter

[chrisild]

One problem that Bulgaria has, apparently to a higher degree than most other member states, is corruption and a lack of transparency. We will see whether that issue has any influence on the decision to let the lev into ERM-II ...

What I do appreciate is the signal that the presidency sends with regard to the currency union. You would certainly not hear anything like that from Warsaw, Prague or Budapest (and judging from how the governments act there, this is probably good for the euro area), but here we have a government that basically says Yes.

Christian

[chrisild]

The Croatian government seems to have plans with regard to the euro: It wants the country (well, its currency, the kuna) to join the Exchange Rate Mechanism (ERM-II) in mid-2020. Source: Euractiv. The Croatian central bank has a press release here (in Croatian; the English pages have not been updated yet).

Christian

[eurocoin]

Interesting, if everything goes according to plan on 1 January 2022 Bulgaria will introduce the euro and on 1 January 2023 it will be introduced in Croatia.

[Figleaf]

Craotia has been doing quite well in the last few years. GDP/Capita rose nicely from 13 600 in 2014 to 15 900 in 2018. Inflation is in line with much of the rest of Euroland at around 1%. Unemployment is at a record low of 7.5%.

However, government debt/GDP is quite high at 74%. With the economy going so well, tax income must be rising, but it would still be good if the government would be seen pruning dead wood in government expenditure. EU growth prospects are stable, so within a time frame of three years there is enough time to bring the government debt/GDP ratio down sharply. Apparently, the market expects this to happen, as the 10 year government bond rate has receded from over 2% to a record low of 1.24% in July 2019. This is an excellent opportunity to roll over government debt at lower cost, reducing the debt/GDP ratio even more.

Politically, this is a positive signal. It says EUR is an attractive option, in the face of opposition to the currency in the government of nearby Italy. If the government succeeds in reducing its debt, Croatia should be a very attractive candidate. EUR should strengthen the most important sector of the Croatian economy: tourism. Its coast line should be the first to profit.

Peter

[Angus]

It seems that Bulgaria and Croatia have both been threatening to join ERM-II but haven't quite yet.  They may both do so this year.

[stef]

ECB announced today that "The Bulgarian lev and Croatian kuna are being included in the EU’s Exchange Rate Mechanism II."
Press release (Bulgaria)
Press release (Croatia)

[Angus]

Great! So does that mean 2023 for coins?

[Figleaf]

Not automatically. There is a procedure for accession, but there are discussions all along the route. They may slow down or accelerate the procedure.

Peter

[chrisild]

Don't know about Bulgaria, but Croatia seems to have plans. In a German forum somebody posted a link to the new National Kuna Euro Transition Plan: PDF document in Croatian, dated 23 December 2020 and published by the national central bank. Seems that the country plans to introduce the euro on 1 January 2023.

Christian

[Angus]

Interesting, thanks. Have they designed the coins yet?

[eurocoin]

The document also mentions a design competition in which a selection will be made by experts. The citizens of Croatia will have the final say and will be able to vote on the designs selected by the experts. It also mentions things about euro starter kits being made available etc. A pretty detailed plan.