How far are we with the euro?

They ask me how far we are with the euro.

In the summer of 2018, Bulgaria made unilateral commitments to carry out a number of actions in several areas - as preconditions for our subsequent admission to ERM-2 and the Banking Union.

And now everything has been reported as completed. The Council of Ministers held a special meeting and adopted an official report. The media close to power are trumpeting "huge achievements."

Will our European partners believe these bureaucratic boasting from Sofia?

And what is the reality?

Below I have listed the relevant areas according to Bulgaria's letter of promises, sent with the signatures of Finance Minister Vladislav Goranov and BNB Governor Dimitar Radev on June 29, 2018. This letter is public and anyone can read it online.

1. Banking Union

Reported by the government as completed.

In real life:

At the last possible moment – as a last-minute buyer during an auction – the state (through the Bulgarian Development Bank) – participated in the capital increase of First Investment Bank. This capital increase was requested by the ECB as a result of their stress test and asset quality review.

The EC needs to officially confirm that the BDB's scandalous involvement did not violate EU state aid rules. The BNB, the National Agency for the Protection of National Security and the Competition Commission also need to issue relevant permits.

2. Macro-prudential supervision

Reported by the government as completed.

In real life:

Formally, relevant legal changes have been adopted in Bulgaria.

In practice, however, there are no changes in the practice of granting loans in banks.

3. Non-bank supervision

Reported by the government as completed.

In real life:

Formally, various acts and documents have been adopted in Bulgaria in the relevant areas.

In practice, however, there are many problems being discussed about this sector in the country. In 2019, a large insurance company ("Olympic") went bankrupt. Another 2-3 insurance companies are unofficially said to be in severe financial difficulty or on the verge of bankruptcy.

4. Insolvency Framework

Reported by the government as completed.

In real life:

Formally, many documents have been adopted in Bulgaria that create an impression of progress in this area.

But in practice, there are no signs of improved efficiency of bankruptcy procedures.

5. Combating money laundering

Reported by the government as completed.

In real life:

Here, the government is probably praying that Western embassies in Sofia will not pay attention to the huge scandals of late.

Formally, relevant regulatory changes have been adopted in Bulgaria, including transposed European directives.

In practice, suspicions are emerging in the country that banks are systematically committing violations. In 2019, Investbank attracted international attention due to money transfers received there from Venezuela. Recently, the National Anti-Money Laundering Agency (DANS) announced that it was launching an investigation into Unicredit Bulbank in connection with information that large sums of money were regularly withdrawn from this bank in violation of anti-money laundering regulations. Information about this was documented and disclosed by Vasil Bozhkov.

It is no coincidence that in its latest Country Specific Recommendations Report for Bulgaria, the European Commission explicitly recommends the following to Bulgaria: "Increase efforts to ensure adequate risk assessment and mitigation, effective supervision and implementation of the anti-money laundering framework."

6. Management of state-owned enterprises in accordance with good international practices

Reported by the government as completed.

In real life:

Formally, certain laws and documents have been adopted in Bulgaria.

In practice, the management of state-owned enterprises remains a field for political party influence and there are public examples of conflicts of interest.

The latest major public scandal involved the disclosed assets of Sevdelina Arnaudova, head of the government information service. It also emerged that her husband is both a member of the Board of Directors of the large state-owned company Bulgartransgaz and receives a salary from the ruling political party GERB.

And in addition to the above 6 formal areas promised in the June 2018 letter:

Our European partners, who are expected to give a positive assessment and let us into the "waiting room" for the eurozone, are monitoring 2 more important areas: rule of law and the fight against corruption.

Here too, the situation in Bulgaria is not rosy. In its latest Report with specific recommendations for Bulgaria, the EC emphasizes that "the Commission continues to monitor judicial reform and the fight against corruption in Bulgaria" through monitoring under the Cooperation and Verification Mechanism.

The questions related to corruption at the highest levels of power in Bulgaria far outnumber the answers. Have Western embassies noticed, for example, the accusations and related information about the Minister of Finance that have flooded the public space in the last 18 months?

And what category of scandals do Minister Taneva's recorded public confessions that she recommends misleading the European Commission about how European funds are spent in Bulgarian agriculture fall into?

These topics are yet to be developed.

Meanwhile, the government makes plans, sends them to Brussels and Frankfurt, and then reports successful implementation.

"Punta Mara," the Prime Minister would probably secretly say to himself.

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