EU's Poorest Member Country Smacks Down Euro As Bulgaria Refuses To Join Eurozone

Tyler Durden's picture

If one needs a shining example of why the days of Europe's artificial currency are numbered, look no further than the EU's poorest country which moments ago said "Ne Mersi" to the Eurozone and the European currency. From the WSJ: "Bulgaria, the European Union's poorest member state and a rare fiscal bright spot for the bloc, has indefinitely frozen long-held plans to adopt the single currency, marking the latest fiscally prudent country to cool its enthusiasm for the embattled currency. Speaking in interviews in Sofia, Prime Minister Boyko Borisov and Finance Minister Simeon Djankov said that the decision to shelve plans to join the currency area, a longtime strategic aim of successive governments in the former communist state, came in response to deteriorating economic conditions and rising uncertainty over the prospects of the bloc, alongside a decisive shift of public opinion in Bulgaria, which is entering its third year of an austerity program. "The momentum has shifted in our thinking and among the public…Right now, I don't see any benefits of entering the euro zone, only costs," Mr. Djankov said. "The public rightly wants to know who would we have to bailout when we join? It's too risky for us and it's also not certain what the rules are and what are they likely to be in one year or two."

When a parasitic technocrat asks to shake your hand, you refuse:

Of course, Bulgaria is right: at this point the only "upside" to new EMU entrants is for the unelected Brussels technocrats, who are now the butt of every possible joke, to demand said countries hand over their middle class' wealth in order to bailout Greece, Portugal, Ireland, Spain, Italy and all the rest of the "wealthy and developed." And since. in trader jargon, by not being "long" the euro, Bulgaria is effectively "short" it, expect to hear some rather disparaging statements emanating out of Europe's insolvent core vis-a-vis the poor nation shortly.

From the WSJ:

Prime Minister Boyko Borisov said concerns had been heightened by growing disputes between policy makers, some of whom back Germany's call to give priority to fiscal discipline over growth, while others want a more expansionary policy.

 

"I'm certain that we will definitely see a deepening divide in Europe now because many governments are not prepared to stomach the difficult decisions they have to take. It's like a spoilt child who doesn't want to go to the dentist to fix his bad teeth, even though the operation is needed," Mr. Borisov said. "This moment is critical for the euro zone and for the EU," he added.

 

Mr. Djankov said that Bulgaria's economy should still expand by around 1.5% this year, but warned that the euro zone could face up to five years with "zero growth" if national leaders continue to mull policy responses to the crisis instead of fully backing Germany's call to continue strict fiscal consolidation.

 

On the periphery of the euro zone, but overwhelmingly dependent on the bloc's larger economies for growth, Bulgaria has thus far managed to weather the euro crisis. The economy last year grew by a modest 1.7% and the European Bank for Reconstruction and Development expects that to slow to 1.2% this year. Unemployment has risen to over 12%, but that is around half the levels in Greece and Spain, while Russian investment in the Black Sea resorts is rising rapidly.

 

In July, when investor sentiment toward the euro zone was less negative, Sofia tapped capital markets, with a heavily oversubscribed five-year €950 million 1.19 billion) Eurobond.

 

But Bulgaria's exposure to the deteriorating health of the euro zone has been compounded in recent months by mounting problems of other economies on its borders.

The paradox is that when Greece finally succumbs to reality, and is forced (or opts) out of Europe and the EMU, the biggest beneficiary will be Bulgaria, as billions in capital are redirected toward it from the "poor" country's southern neighbor, for whom the future is so bleak, rumors of a military coup make the rounds every other day.

As to why Bulgaria is slowly becoming the model for Europe, here is a brief extract from a Bloomberg article which explains why taking the pain and sufferening now, and administering true austerity, even if it means total losses of wealth for those who are not prepared for hyperinflation (which Bulgaria had for a long period of time in the 1990s) instead of deferring pain via unrepayable debt, always leads to beneficial consequences:

In 1989, the Soviet bloc collapsed. A new Bulgarian democracy was born, but with no money in the state treasury to pay for it. The nation’s savings were insignificant, shops were empty, unemployment was high and infrastructure was rudimentary. Austerity was just a fact of life.

 

After seven years of delayed reforms, booming private businesses and an almost complete lack of regulation, hyperinflation came to Bulgaria in 1996 and again wiped out the nation’s savings, forcing the closure of a third of the country’s banks. As a result, the lev -- Bulgaria’s currency -- was pegged to the deutsche mark (later to the euro), and the central bank was banned from lending to commercial banks, a precaution that remains in place today. The International Monetary Fund requires that all Bulgarian currency in circulation should be fully matched by foreign-exchange reserves.

 

The decade of 1989-1999 was harsh, but it turned Bulgaria into a disciplined nation of savers -- even after the country joined the EU in 2007. The banking sector is financed by these savings accounts, which provide a healthy Tier 1 capital- adequacy ratio of 15.8 percent. Credit-card penetration is extremely low -- Bulgarians prefer cash.

 

Being poor is no fun, of course. Public-sector employees are badly paid and retired people struggle to survive with their low pensions. Not a single motorway has been completed to link one end of Bulgaria with another and only parts of the subway in the capital, Sofia, work. This is the price to pay for not spending money that isn’t yours to improve your lot, at the level of the state and of the individual consumer.

 

But today Bulgaria has positive economic growth and the second-lowest state debt in the EU (after Estonia) at 16 percent of gross domestic product. It also has a manageable budget deficit of about 2 percent of GDP, despite levying a flat corporate and personal income tax of just 10 percent. Foreign- exchange reserves amount to 6 percent of GDP. In short, the country has a future.

 

Greeks, by contrast, have been spending more than they earn for the last 20 years. Once an employee entered the public sector, he couldn’t be laid off; he received 40 days’ vacation per year; and he was paid 14 months out of 12, with guaranteed annual raises. Greeks are richer as a result, but that lifestyle is not sustainable. Debt to GDP is 165 percent and the budget deficit is an unmanageable 9.1 percent.

For more read here.

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nmewn's picture

Hmmm, Bulgaria.

(the sound of rifling through travel brochures)

Dr. Engali's picture

Surely Simon Black will be sending us a post from his new ranch Bulgaria soon.

machineh's picture

I thought Simon already had a place on the booming Black Sea coast.

Swimmin' pools, movie stars ...

dlmaniac's picture

Perhaps Bulgaria should read FOFOA blog so that they could be conned into believing that Euro / FreeGold would solve our problems. LOL. What a joke.

Michael's picture

I'm voting for complete and total worldwide economic collapse. I always vote for the winner.

Freddie's picture

I thought Simon Black was in Argentina banging Pelosi's doppelganger Kirschner.  They are both leftist c*nts filled with botox.   At least Kirschner's vineyards on Doug Casey's property are not radioactive like Pelosi's Nor Cal Fukashima vineyards.  Pelosi's wine has a tangy after taste from MOX and cesium.

F her, the Libtards and their muslim!

Manthong's picture

Although I don't know much of the aforementioned contributors personal or business arangements in South America, only about a dozen years and a dozen inches of hair separate those two collectivist witches.

http://i49.tinypic.com/346vz4k.jpg

http://hosted.ap.org/dynamic/stories/L/LT_ARGENTINA_CREDIT_CARDS?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2012-08-31-11-32-04

saturn's picture

He better hurry up before Bullgaria turns Beargaria.

Peter Pan's picture

I could have sworn that the reason for Bulgaria not joining the euro was that it figured out that its level of corruption could not accommodate any further corruption.

Arnold Ziffel's picture

"Bulgarian banks are in better shape then ever," BBC reported the other night. Interviewed bankers said Greeks are moving over (with all their money and businesses) to Bulgaria and deposting millions.....to escape the disaster in Greece.

NewWorldOrange's picture

Joining the Euro club would be about as beneficial to the average person in Bulgaria as accepting IMF loans has been for average people in countries around the world. It's a loan shark/protection racket that bankrupts peoples, like any other debt racket.

The IMF plan:

Step 1: The IMF offers you a loan.

Step 2: If you refuse the loan, the ratings agencies waltz in and bankrupt your country by downgrading your credit rating.

Step 3: Economic Blackmail and/or CIA/Military Intervention

People on the street in nations that have declined these loans are fairing far better than those who accepted them (Iceland, as just one recent example.) The elites aren't doing as well though and are often deposed (Gaddafi, for example.)

Watch out Bulgarian leaders. The writing is on the wall, and soon, you probably will be too. Credit downgrades to come.

(note to self: After the downgrades, BTFD.)

hourglass86's picture

There is a tiny problem. Bulgaria's banking system is actual.....Greek. 

So a collapse of Greece means collapse of Bulgaria.

 

Goood! Dont u love how complex this financial circus is?

Dr. Kenneth Noisewater's picture

They speak English in Bulgaria and respect individual rights to bear arms?

NewWorldOrange's picture

Good question. Researched it.

"Licensing Requirements:   In July of 2003, the Bulgarian government amended the law to make it less stringent.   To obtain a permit to carry a firearm, people no longer have to pass mental status tests.   Further, valid reasons for denying such a permit no longer include “misuse of drugs and alcohol”, “systematically disturbing the peace” or “putting national security in danger”.

Bulgarian is the official language, and uses the Cyrillic alphabet (like Russian, and very easy to learn -- I speak some Russian myself, which is one reason I liked "A Clockwork Orange" and chose the avatar and moniker I did, since all the slang in it derives from Russian.) I've been to Romania, next to Bulgaria, and most young people in the cities spoke decent English, as did most employees in businesses frequented by international travelers. I suspect it's much the same in Bulgaria. I'll be making a trip there soon and will just take the crash course in Bulgarian.

One factoid I like about Bulgaria: "About 97 per cent of the population live in privately owned and owner-occupied homes."

 

 

Ghordius's picture

"About 97 per cent of the population live in privately owned and owner-occupied homes." That's also because they hyperinflated in 1996.
And afterwards the Lev was pegged, first to the DM and now to the EUR.

NewWorldOrange's picture

Apparently that's true. One advantage of hyperinflation is people can easily pay off large debts with worthless paper.

Pseudolus's picture

Its due to land reforms in transition. the same over much of CE/SEE

 

dont have much, but what they have is unencumbered by debt...

LawsofPhysics's picture

If they use barter or PMs we better send in NATO to "liberate" them quick!!  < sarc off >

StychoKiller's picture

Bulgaria was sent a brochure for the Titanic.  When they showed up at the dock, they were greeted with the rust bucket known as the Patna.  No Thanks!

HardAssets's picture

Looks like Bulgaria will soon be having  an NGO sponsored  'color revolution'

 Maybe this time around they'll use brown - - - to signify bullshit

Dr. Engali's picture

The poor Eurocrats are running out of people to fleece. It's too bad the other "leaders" don't have the balls to follow Bulgaria'and Iceland's lead.

Ghordius's picture

nope. it means that the eurozone is a voluntary thing (if you qualify). you can enter, you can leave, you can apply, you can abstain. you can.

hurray for Bulgaria, I hope this will stop all those idiotic rumors of whole countries being dragged kicking and screaming into the EZ

It does not make sense at the moment for Sweden or Bulgaria or anybody else to enter the EZ. In fact, the only countries that could think about it seriously are Danemark and Switzerland, and I doubt they want at all, for all that they both have a floor vs the EUR.

nmewn's picture

How did Greece ever qualify?...oh, yeah, Goldmans Sack.

Yes, good job Bulgars.

Ghordius's picture

there was an immense diplomatic pressure from the US and the UK at that time

parallel to it, Bush II promised (the gall of this emperor to do such things) Turkey a ticket to the EU and the EZ

some still see it as the classic Trojan Horse Manouver. fitting, eh?

nmewn's picture

I have no idea why the US would want Greece in the EU but I seem to recall GS was involved in "grading" Greek sovereign debt. Not sure about Turkey...I think they were in (or applied to be in) even before Bush's daddy was elected...could be wrong.

Ghordius's picture

it's a very, very long story and goes back to the Crimea War. In short: Russia.

nmewn's picture

Oooh, those old emperors...clearly Bush's fault ;-)

Ghordius's picture

Bush II, leader of the hegemon of the Alliance called NATO, fretted about the happiness and loyalty of Greece and Turkey, two key Partners in the region. They asked him to broker an entry to the e-clubs. Greece was deemed innocuos due it's size. And as difficult to reject as the grandmother of the bride at a wedding.

Greece had always two Big Brothers and natural allies since indipendence: the UK and Russia.

This chessboard is old, and the changes are gradual. Watch Syria. Watch Lybia. Watch Egypt.

Russia's influence here is OLD. It was called "The Great Game".

jonjon831983's picture

Thinking on opposite side, perhaps these pre-EUZone countries have done the same thing, but have realized they can't keep the game up and are ditching?

 

just a thought.

Freddie's picture

Was it the Bulgarians or Romainians who dealt with vampires like Vlad The Impaler and the other vampires - The Rothschild klan?

NewWorldOrange's picture

Vlad wasn't a muslim?

/sarc Just playin' Freddie. And Vlad/Dracula/Transylvania are rooted in Romania.

Dr. Engali's picture

Looks to me like your leaders are voluntarily putting your people in poverty via the wealth transfer mechanism of the Euro.

Ghordius's picture

LOL - compared to what? the dollarzone? the poundzone? the swiss-franc-zone? pls provide your comparison or your argument looks quite empty...

Don't forget that if we had the same crisis with 17 currencies instead of one we would have faced a completely different set of issues, thanks to competitive devaluations inside a continent that is tightly integrated.

ask the Californians to devalue their dollar vs the Texan one, will ya?

Dr. Engali's picture

I'm not saying our system hasn't become a wreck. But the difference here is we are a single sovereign nation, whereas the European Union is many soverign nations cobbled together in adhoc fashion under a single currency.

Ghordius's picture

and how much poverty would have a competitive devaluation between 17 countries have created? As Bastiat said, you have to consider what can be seen and what cannot be seen.

GOLD used to be the common currency in europe. Whoever comes and starts to flap his gums about the common currency is usually out of his depth or is angling about the debt situation - and then usually saying that "it would be easier if the southerner would just devalue".

You can't be a friend of devaluation and at the same time say it's "made to fleece the people". Except if you are a banker that wants to profit from churn, that is. Choose your side.

AurorusBorealus's picture

There are at least 2 good points that you make here.  Gold was the "common currency of Europe."  Gold as a common currency did not prevent poverty, wars, class-warfare, the exploitation of the poor... none of these things.  In fact, that gold was a common currency, contributed mightily to the fall of Spain (the first time circa 1680) as a world power.  The influx of gold from the Americas caused massive inflation in Spain, and the wealthy in Spain began purchasing goods from areas with less gold, where labor was cheaper (i.e. England), which resulted in a transfer of ability, especially in the crucial crafts of ironworking and shipmaking.

 In our time, debt-based currency, masked by veil of international trade, has allowed whole peoples and nations to linger for long periods without producing sufficiently.  As with Spain in the 17th century, the longer the problem festers, the more skill and ability the people lose.  One need only go to a welfare office in the U.S. to realize why most of the people lined up there do not do anything productive.  They long ago lost any ability to do so.  The problem of Southern Europe today is not simply one of "devaluing" and "leaving the Eurozone."  The problem is socio-cultural as well as economic and financial.  Now, take a look around the United States and look at how many people actually do something productive.  Ask yourself, is the U.S. southern Europe or northern Europe.  The U.S. is also the printer of the global currency du jour.  If you think that inefficiencies in Southern Europe have been masked by debt-based money, you ain't seen nothing yet.

Anusocracy's picture

Too many hunter-gatherer/liberals, too few berry bushes and tubers to pick.

Socialism worked 10,000 years ago, today it is a failed anachronism.

Soon, conservative/fascism will be outed as the failure it is.

Ghordius's picture

+1 I'd say that the difference between a gold regime (where a hoard, treasury or "war chest" has to be built up for the eventuality of war) and a fiat regime where you are immediately ready for war mainly changes how often you can go to war

BurningFuld's picture

Sovereign Nations should never give up the right to print their own currency. And what is wrong with COMPETITIVE devaluations is that not what capitalism is all about? Eat or be eaten and all that. The Euro was a retarded idea that made an entire unnecessary Euro bureaucracy living on the backs of everyone. Cheaper to have a currency exchange mechanism me thinks. 

Ghordius's picture

currency exchange mechanisms? targets for speculation. ask Soros

And you are conflating the EU and the EZ

TWSceptic's picture

"and how much poverty would have a competitive devaluation between 17 countries have created?"

 

Actually the eurozone / EU is the cause of most of the current problems in Europe, not a panacea at all. You're delusional if you believe things would be worse without it. That's exactly what the eurocrats want you to believe so they can rob you of your wealth and independance. Or perhaps you are one of them.

 

Also just because someone is against fiat money doesn't mean they want the euro so that there are less fiat currencies. In fact no competition in fiat money makes it even worse. So that's a straw man fallacy . 

Ghordius's picture

how so? and aren't the "eurocrats" in a different club? EU and EZ are not the same. ask the British

Element's picture

Sovereign nations are only so if they can print their own currency.

Or rather the local Rothschild central-bankster global-franchise does.

So ever who controls the money supply is the actual operative sovereign, and that isn't the state, per-sec.

Which means the Sovereign states are an illusion, because whether it's a local CB printing currency, or the ECB, its all controlled by the same Sovereign.

So who cares if they stay or go?

It makes no ultimate difference as that cow is still getting milked into oblivion by the same network of fractional-reserve scammers anyway.

So the 'state' is just the network's extended legal apparatus and enforcement-arm, so that the scammers can keep up their scam indefinitely, by force if necessary. 

War is preferred, or at least not avoided much, because the two 'different' sides and states, are really the exact same network anyway.

So the network is scamming both sides seamlessly, no matter what, as long as the franchise and the 'govt' front-office of the scammers is in place.

The modern state has been designed and configured for the actual 'Sovereign', the Rothschild criminal banking clique, to always remain in ultimate control, in every country, no matter what else occurs.

Does it matter what Bulgaria does?

Countries without a Central Bank will be over-run ... unless they have a sufficent deterrent ... and eventyually, they'll be over-run, anyway. 

The only real independent Sovereign Nation can be one without a Rothschild central-bank scammer.

 

 

That is the Enemy - there is no other Enemy - it is the only Enemy we have - all the rest of the 'Enemies', are in fact a derivation of this singular Enemy.  When we are attacked, it will always be this singular enemy's network of influence that is ultimately responsible for unfolding events.

Ghordius's picture

Sovereign Nations are - according to our shared customs - the ultimate grown-ups. They can do what they want, including marry or divorce.

Sharing a currency is like sharing a domicile, or a facility. Or a pipeline, or a space vehicle. Or whatever.

If they cease to be sovereign, then this is another story.

This "common EUR currency is a thing of the Rothschild" is a myth.

Element's picture

You are monumentally naive ghordius.

Goldman's man is the head of the ECB today, and that's rothschild's criminal regime right there.

Curious you want to deny the implications and call it a 'myth'

Calling the pseudo-Sovereign state the "ultimate grown-ups" ... again, monumentally naive, and more than a bit state-ist too.

Ghordius's picture

and you confuse a cynicism of a different, if you want "higher" level than yours as naivity. "you guys" (a number of ZH writers that think they have swallowed the whole red pill) here use this "rothshild's regime" meme - how much do you know about it? can you explain what they did to silver in the 19th century, for example? or how their grip on gold functioned then?

note that I wrote "according to our customs". do you really think that by just adopting a personal anti-statist stance the statists stop? I'd say the world around you looks different from your model. you can still find endless legions willing to die for the glory of a flag, for example.

corruption forms it's own conduits. it's a spontaneous self-feeding process, does not need a cabal that plans it in detail

sorry, in my eyes "you guys" have several blind spots. and one of them is how empires function and behave.

don't let your own - very commandable - philosophy blind you for how "the others" think, behave and impact the world