DAVID McHUGH
5 min read
FRANKFURT, Germany (AP) — European Union officials gave the green light Wednesday for Bulgaria to become the 21st member of the euro currency union,, a key EU project aimed at deepening the ties between member countries.
The Balkan country of 6.4 million people is to make the switch from its national currency, the lev, to the euro on Jan. 1.
Here are basic facts about the currency union, also called the eurozone, and how countries join it.
What is the euro?
The euro is a shared currency and monetary system launched in 1999 when 11 EU member countries irrevocably fixed their currencies to the euro as an accounting currency, then swapped out the national notes and coins in 2002.
The EU established the European Central Bank to handle monetary policy and set interest rate benchmarks for member countries, similar to the role of the U.S. Federal Reserve in the U.S.
How do countries join the euro?
Countries must meet four criteria: low inflation, keeping deficits and debt under control, low long-term interest rates and a stable exchange rate between their currency and the euro. Countries must go through a two-year “waiting room” in which their currency does not fluctuate excessively against the euro. The process is meant to demonstrate that their economies are sustainably converging with that of the eurozone.
Once the European Commission determines that requirements have been met, the member governments of the EU decide by what's called a qualified majority vote. Approval needs a minimum of 55% of member states representing at least 65% of the EU population.
After joining, countries face rules limiting debt and deficits. Those rules are intended to keep countries from running large deficits that could undermine the euro.
What is Bulgaria’s situation?
The European Commission ruled Wednesday that Bulgaria has met the requirements, seconded by an opinion from the ECB. The matter now goes to a vote at a meeting of EU finance ministers slated for July 8. EU officials say the vote is a done deal.
Bulgaria is unusual in that it pegged its currency, the lev, to the euro right from the beginning of monetary union in 1999, even before it joined the European Union in 2007. Bulgaria also has very low levels of debt, only 24.1% of annual economic output. That is well below the 60% level set in the economic criteria for eurozone membership. The last step was getting inflation below the benchmark of 2.8%, or no more than 1.5% higher than the average of the three lowest eurozone members.
There were concerns about the level of corruption and money laundering in the EU's poorest country. The commission and the ECB found however that Bulgaria has made progress in those areas.
