FRI, 25 JAN 2002 23:40:09 GMT
Euro Sets Out in Bulgaria, Too
Business Upturn Expected in Conditions of Single Currency
AIM Sofia, January 5, 2002
Simultaneously with its official debut in Europe the new common
currency, the euro, was also launched in Bulgaria. The new banknotes are
already rustling in the hands of the Bulgarians and even if it until
recently seemed like some virtual reality, nowadays it has become quite
real and tangible.
Until February 28, the former currencies of the states of the euro-zone
that are withdrawn from circulation will be exchanged for the euro at a
commission of 0.25 per cent in four partner banks of the Bulgarian
National Bank (BNB) - Biohim, United Bulgarian Bank, Bulbank and Post
Bank. On the very first working day after the New Year’s Day long queues
formed in front of them although the purchase of former currencies will
continue after February 28. But then, they will be exchanged for levs
and the commission will be somewhat higher.
On the first working day after the introduction of the euro on January
1, 2002, 243 thousand euros were taken out of the central office of the
BNB, and almost two million euros from the four banks.
Almost all the banks in Bulgaria exchange 12 European currencies for
euros. According to incomplete data of BNB, in just the first two
working days of this year currencies worth more than 300 million euros
were exchanged by the whole banking system. At the moment, after the
German mark the currency that is exchanged the most in Bulgaria is the
Greek drachma according to the data from BNB.
In majority of exchange offices, however, the new currency that they
should get from banks is still scarce. The enormous number of people
they are expected to offer services to in the first days after the New
Year's holiday, however, and not quite clearly formulated coordination
between exchange offices and commercial banks are the reasons for the
lack of the new currency.
According to dealers the interest for exchange offices will gradually
diminish because of the introduction of the euro, but that will not
seriously affect their business. In the meantime, in Biohim commercial
bank an observant client detected defective notes. Three 100-euro notes
had a defect in manufacture - they lacked the hologram sign. According
to the head teller of the bank, Rumen Popov, the notes were not
counterfeit but defective. Such cases are comparatively few, although
there were some. The central bank in Finland also found seven such notes
without the hologram, but 500 euro ones.
Deputy governor of the central bank Martin Zaimov commented that it was
not surprising that among 14 billion manufactured notes some were
defective. If a man should come across such a banknote he should simply
report to BNB and have it replaced.
The assessments that introduction of the euro is a true "currency
revolution" in view of the fact that this is the first time in world
history that whole nations are voluntarily giving up their own financial
sovereignty. How this "revolution" will affect pensions, salaries,
standard of living of the Bulgarians, whether there will be problems
with the assets of the banks and accounts of firms? How will the new
currency affect the economy in general? These questions are preoccupying
the Bulgarians now and they are persistently demanding an answer to it.
>From the point view of the currency board in Bulgaria absolutely nothing
will change because of the introduction of the euro. The board is linked
to the German mark and at the same time for the euro, so it will not be
necessary to establish the exchange rate again, because the ratio
between the lev and the euro has been quoted for quite some time. The
fact that the rate is not a round figure like with the mark (1 lev = 1
DEM) should not cause concern. The appearance of new banknotes has just
a psychological effect on ordinary Bulgarians who did not know the
foreign currency rate.
It is true that for the time being the euro is not a strong currency in
relation to the American dollar, so there are fears that it might
continue to devalue. Experts believe, though, that the euro will
consolidate its position. The question is more of psychological nature,
because the dollar exists for more than 90 years, while the euro is only
three years old, and can be seen since only ten odd days. It is expected
that by the introduction of the additional currency into Bulgarian
currency board - the euro, and by the increase of confidence in it, its
price in relation to the dollar will gradually rise. That would
automatically lead to the increase of the value of Bulgarian lev, as
supporters of the new currency believe.
According to their belief, Bulgarian business will profit from the
conditions of the single European currency. The euro will bring about
better transparency in formation of prices and reduction of taxes on
transactions. It is expected that European investors will look upon
Bulgarian economy as a sound economy because of the absence of currency
risk. This should increase the attractiveness of the facilities for
There is no reason to expect that the euro will have a negative effect
on salaries and the standard of living of the Bulgarians. Speculations
about a rise of prices or an inflationary shock are completely
unfounded, experts are resolute, because, after all, Bulgarian economy
operates in levs, not euros.
According to President of Bulgarian Commercial and Industrial Chamber,
Bozidar Bozinov, business deals will also become more transparent, and
Bulgaria as a tourist country will become more attractive. Thanks to the
euro it will be much easier to make comparisons of the prices in
Bulgaria with those in the countries of the euro-zone.
Although it is not a member of the EU, with its economy Bulgaria is
connected with the countries of the EU by quite strong links. About 60
per cent of Bulgarian export is turned towards the EU, and the import
from these countries also amounts to between 55 and 60 per cent. The
euro can only stimulate its future trade with the EU. On the other hand,
the connection with the single European currency increases the
self-confidence of the Bulgarians who are doing their best to join the
European family. That will happen only after their pockets become
sufficiently stuffed with euros. But for the time being these prospects
are quite far away.