July 12, 2018 / 3:12 PM / in 2 months

EU to back Bulgaria's first step towards joining euro - source

BRUSSELS (Reuters) - Euro zone finance ministers are expected to give their green light on Thursday to Bulgaria’s bid to join the bloc’s banking union, a step towards the Balkan state’s adoption of the euro, EU officials said.

FILE PHOTO: Valdis Dombrovskis attend a news conference with Greek Finance Minister Euclid Tsakalotos (not pictured) at the Finance ministry in Athens, Greece, June 15, 2018. REUTERS/Costas Baltas

Bulgaria meets the nominal criteria to adopt the common currency, with low inflation, healthy public finances and its lev currency already pegged to the euro.

But it is also the EU’s poorest country, and widespread graft and troubles at some of its banks have cast a shadow over its prospects of joining.

One EU official told Reuters that euro zone finance ministers will agree on Thursday on a “timeframe” for Bulgaria’s next steps towards the euro membership.

They will say they will accept Sofia’s request to join the banking union, once the country makes a formal request - a move expected in the coming days or even hours.

Banking union member countries transfer to EU bodies the powers to oversee their top banks and deal with ailing lenders.

In about one year, there will be a reassessment of Bulgaria’s progress towards aligning its economy, banks and rules to the banking union, the official said.

Once this process is completed, Bulgaria will be able to apply to join the bloc’s ERM-2 exchange rate mechanism - a waiting room of at least two years, that precedes euro membership.

Bulgaria has made several commitments in a letter sent to euro zone authorities before the finance ministers’ meeting to strengthen its banking sector and its anti-money laundering systems.

“We stand ready to work closely with Bulgaria in these areas so that they can join both the ERM-2 and the banking union, which is, so to say, a stepping stone toward joining the euro area,” the EU Commission’s vice-president Valdis Dombrovskis told journalists before the meeting on Thursday.

“Following on this work on these pre-commitments there will be formal Bulgaria’s application for ERM-2,” Dombrovskis said, noting that once an application is made to join the ERM-2, it could take just a few days to accept it.

Reporting by Francesco Guarascio in Brussels and Tsvetelia Tsolova in Sofia

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