The government approved the Action Plan including measures in regard to the intentions of the Republic of Bulgaria for accession to the exchange rate mechanism II (ERM II) and to the Banking Union by July 2019.
This continues the initiated procedure in July, when Bulgaria sent a letter to the finance ministers of the euro area countries, which stated its firm intention to join the ERM II and the Banking Union.
The exchange rate mechanism or ERM is a system introduced by the European Community in March 1979. On 1 January 1999, the euro was introduced and ERM II replaced the ERM with the participation of Greece and Denmark. ERM II receives a new life after 10 new countries join the EU in 2004. The currency mechanism is then approved as a system for maintaining the exchange rates of the applicant parties.
Participation in ERM II is one of the nominal criteria for joining the euro area. Candidate countries must be involved in the mechanism for at least two years and their exchange rates should not be under pressure during this time.
The Action Plan includes measures which, in view of the commitments made by the formal letter, should be implemented by the end of June 2019. The measures are in regard to strengthening the framework of supervision in the banking sector; improving supervision of credit institutions; strengthening supervision of the non-banking financial sector (pension funds and insurance companies); and improving the framework for insolvency procedures.
In addition, Sofia must demonstrate improved results in countering corruption and money laundering, as well as modernising the governance framework for state-owned enterprises.
The implementation of these measures will ensure compliance with the commitments in advance in policy areas which are of major importance for the smooth transition to the ERM II and the Banking Union by July 2019 and, as a final result, the introduction of all convergence criteria, in accordance with Article 140 of the Treaty on the Functioning of the European Union.
Under the current provisions, there are no formal ex ante eligibility criteria for ERM II – the participation itself in the mechanism is a criterion for the adoption of a country in the euro area. However, in order to ensure a smooth participation, it must be guaranteed that the main structural reforms in the candidate country, including fiscal consolidation and price liberalisation, are met.
