The currency board mechanism operating in Bulgaria is stable, according to the latest report of Eurobank EFG, Greece, which owns the Post Bank Bulgaria, the press centre of the bank said.

The unit for analysis and forecasts of the financial institution concludes that the advantages of the Bulgarian currency board mechanism are: tight fiscal discipline, considerable foreign exchange reserves and better cyclic curve of the economy compared, for instance, with the Baltic countries.

The experts' conclusions show that if there are no new, significant global jolts or serious mistakes in Bulgaria's home policy - for instance, breaching the financial discipline - without the intervention and active participation of the Bulgarian government the market players cannot enforce any devaluation of the lev (the national currency) or termination of the currency board.

Politically, keeping the currency board in place until Bulgaria joins the Eurozone is the easiest scenario, as the negative impact of the national currency devaluation in the

short term. This option does not require to change the established market rules which have been providing macro-economic stability in the past decade. On the other hand, this postpones the necessary adjustment of the actual exchange rates and this exposes Bulgaria to not being competitive after joining the Eurozone.

The lev's devaluation at the moment of the country's accession to the ERM2 monetary system is a possible scenario but it involves a great macro-economic risks due to the private sector's large indebtedness in foreign currency and the possible effects on domestic demand and the possibility of inflation in the short-term, the Eurobank EFG report says. The Eurobank experts predict that Bulgaria will be able to join the Eurozone later than officially projected at the moment.

Source: BTA