Interview | Paschal Donohoe: It is still possible for Bulgaria to join the euro in 2025

I believe that Bulgaria can and will join the single currency very soon. But the first step is to pass the test.

Inflation is the biggest challenge at the moment. If you were finance minister, what would you do to bring it down?

The truth is that it is currently very difficult to influence inflation in the country. Because what is driving inflation in Bulgaria, Ireland or elsewhere in Europe are basically global factors arising from the consequences of the pandemic combined with the effects of the war. In this respect, I think the decisions you can make at local level can go in two directions.

The first is to ensure that fiscal and central bank policies do not contribute to domestic demand in a high employment economy. And I know that this is an issue that the central bank is very conscious of.

And secondly, to promote competition and consumer choice, which in itself can play a role in lowering prices.

All of this is quite difficult because many of the factors that are currently driving inflation are global in nature. I know that there are politicians in the country who are skeptical about the introduction of the euro. They associate the euro with inflation, but that's not fair, it's not true.

What is the likelihood that the convergence report in July will be positive? And if not, when can we ask for another report?

I believe that the next assessment will show real progress here in Bulgaria. And it will show that Bulgaria is fully prepared for many of the tests, but it has to pass all the tests to be considered fully ready. If it does not pass all the tests, the government can ask for another assessment (convergence report).

It is at the discretion of the government to request this assessment at the most appropriate time. This is largely a decision of the Bulgarian government.

In other words, Bulgaria will possibly be the first country not to join the eurozone on 1 January, but perhaps on a different date?

I do not want to speculate on that. But certainly this is another incentive to make further efforts to reduce inflation. I believe that if the tests are passed, it is still possible to join some time in 2025.

When you talk about tests that need to be carried out- is this about fulfilling the Maastricht criteria or are there other hidden criteria, such as the quality of the institutions?

It's about the tests laid down in the EU's founding treaties. They relate to the state of public finances and inflation, nothing else.

The work of the institutions in the member states is constantly evaluated and monitored within the framework of the European Union. So there is nothing mysterious about it. The same is happening in Ireland. The European Union regularly assesses the performance of institutions and regulators in Ireland. And it provides insights into their performance. But the criteria and tests that are of great importance to the euro area are the tests that are set out in the Treaty.

How important is it for Bulgaria to have a functioning regular government when the next convergence report is inquired?

Political stability is the key. Of course, it would be even better to have a government focussed on securing eurozone membership.

Political stability in Bulgaria has so far had a decisive impact on its ability to make progress towards joining the euro. This is also a prerequisite for passing the economic tests. Energy must be focussed on fulfilling the criteria.

What could be the advantages of joining the single currency?

I think the really important news is that Bulgaria is making great progress towards joining the euro. I believe that joining the single currency will have an extremely positive impact on the economy, employment and exports. I believe that the benefits will be sustainable in the long term.

Those who are against this process say that the Bulgarian economy is not sufficiently prepared, that it has not reached the necessary level of convergence. What is the most accurate criteria as to whether certain countries are ready to join the eurozone or not?

But that is precisely why these tests are so important. The tests, as I have already emphasised today, are not carried out by the Bulgarian government and not by the local Bulgarian authorities. They are carried out by the European Commission.

And I can assure you that the European Commission will report very impartially, fairly and clearly on the relevant indicators of convergence between the Bulgarian economy and the eurozone. So to those who are worried about Bulgaria's readiness, I can assure you that it is not Bulgaria that decides whether it can join, but the institution of the European Union.

Who should monitor unfair commercial practises after the introduction of the euro?

The national government can intervene, especially if there are concerns about an unfair practice. These matters are still a national competence, not the European Union's competence. It is up to your national authorities to decide what action they take to address this.

What is the future of the euro and the role of the digital currency in it?

The digital euro is about recognising that in a few years' time we will have digital currencies that are available to people in Bulgaria and Ireland, but they are not guaranteed by the government.

And I believe that we need a digital euro to maintain people's confidence in the confidentiality of their personal data and in the safe use of the euro currency and to ensure that they can continue to use money with certain values for free and to give them security in the new system.

And when it is introduced, most of its really important benefits will be invisible. Most people may not even notice them when they use it, if they choose to do so.

But if we do not have it, we will really notice its absence. Then we will increasingly realize that our data is with private providers and we have to pay more to use the money in certain ways.