Bulgaria delays eurozone application as deficit soars

(SOFIA) - Bulgaria's public deficit for 2009 will be way above expectations and accordingly the country would not be able to apply for euro membership this year, Finance Minister Simeon Djankov said Friday.

The deficit for 2009 would likely top 3.7 percent of Gross Domestic Product, instead of 1.9 percent, as established by European Union calculations, Djankov told reporters.

The Bulgarian calculation of the deficit was originally 0.8 percent of GDP, Djankov said.

He blamed the blow-out in the deficit on recently discovered contracts signed by the previous government worth 2.14 billion leva (1.09 billion euros, 1.46 billion dollars) which had not been funded.

"We have just found 148 annexes to contracts (signed under the previous administration) ... These annexes will have an effect on the 2009 budget," Djankov said.

As a result, Bulgaria would not apply this year to begin the process of adopting the euro.

"We are officially giving it up ... It would be insolent with this deficit to apply."

Djankov noted that Sofia had informed the European Commission that its 2009 budget would be revised.

A report due next week from Brussels on Sofia's convergence programme to join the eurozone will also be amended, he added.

The government, which came to power last July, had said earlier that it aimed to join the Exchange Rate Mechanism II process early this year, with a view to entering the eurozone two years afterwards.

Bulgaria has had since 1997 a currency board arrangement with the IMF, obliging the government to keep a tight fiscal policy and avoid budget deficits.

After a visit to Germany in February, Prime Minister Boyko Borisov admitted that beginning the euro membership process was no longer realistic.