In recent years the euro area had to deal with the dual pressure of effects from the global financial crisis and its own structural challenges. In response to that, the euro area needed to design and implement a multitude of institutional reforms.
Although Bulgaria is not a member of the euro area yet, its reforms do matter for us because of both their global impact and our commitment to join the European Monetary Union.
Adopting the euro is an obligation under the EU Accession Treaty and a long-standing objective for Bulgaria. Further to the formal part of it, Bulgarian membership of the euro area may benefit both sides.
On the one hand, Bulgaria may contribute to the strength and stability of the euro area. The country has displayed an impressive track record of practically meeting the nominal Maastricht convergence criteria for many years. For example, Bulgaria's prudent public financial management produced broadly balanced budgets for most of the past two decades. As of today, Bulgaria's debt-to-GDP ratio is the third-lowest in the EU. Therefore, adding one more voice of common sense in dealing with the public financial management issues in the euro area would be a good thing for everybody.
On the other hand, the very process of acceding to the euro area invigorates the policymaking and mobilises the institutions in Bulgaria. The related reform efforts are geared towards speeding up the real euro area convergence of our national economy.
Given the upsides of Bulgaria becoming part of the euro area, is the process taking too long? The answer lies beyond the assessment of how the various convergence criteria are being met. Today, Bulgaria's overall preparedness is analysed from the perspective of the euro area's own lessons from the recent financial crisis.
The Banking Union is a new key segment of the euro area's architecture, non-existent only a few years ago. Also, areas such as institutional quality and governance have been acknowledged as important factors in the macroeconomic performance.
Nowadays, an applicant aspiring to join the euro area and its Single Supervisory Mechanism ought to prove, among other things, the strength of its financial system as well as the quality and efficiency of its institutions.
That is the rationale behind the recently announced new approach to be applied in the case of Bulgaria with respect to the process of the Bulgarian lev's participation in the Exchange Rate Mechanism II (ERM II).
In line with these new developments, the Bulgarian authorities undertook various commitments to implement measures and policies which should ensure a smooth transition to joining simultaneously the ERM II and the Banking Union.
Bulgaria's new road to full-fledged euro area membership will lead us through so far uncharted territory, including the use of the mechanism of "close cooperation". There may be risks of both external and domestic origin, affecting the progress towards the euro adoption in Bulgaria. These are concerns which are well-acknowledged and rather explicable.
Richer in experience and institutionally evolved, the euro area of today is different from a decade ago. That is why, any future euro area enlargement will be different from the past.