If Bulgarian officials were expecting a helping hand from European Central Bank (ECB) president Jean-Claude Trichet during his visit to Sofia just as the campaign for Parliament elections next month was about to start, they were in for a disappointment.

Unsurprisingly, Trichet re-iterated the same point he has made in recent months that the eurozone entry rules should not be relaxed under any circumstances, urging Bulgaria to focus on policies that would allow it to join the exchange rate mechanism (ERM-2), euro’s waiting room.

Deflecting questions on why Bulgaria was not ready for the ERM-2 – inflation in the country remains higher than the Maastricht criteria stipulate – and what were the main obstacles in Bulgaria’s way to joining the eurozone, Trichet said it was up for the Cabinet to answer such queries, but added that Sofia should pay careful attention to the "conduct of sound fiscal policies and to the implementation of timely and consistent structural reforms that support the sustainability of the [eurozone] convergence process."

Acknowledging that Bulgaria’s economy had so far withstood well the pressures caused by the global financial crisis, Trichet said that Bulgaria should not become complacent. "I should like to encourage the Bulgarian authorities to be ambitious enough in pursuing sound and stability-oriented economic policies that can bring sustainable economic growth in the medium and long term," he told a news conference.

Despite receiving no new reassurances on when Bulgaria could join the ERM-2, Prime Minister Sergei Stanishev was upbeat after meeting Trichet. The global economic slowdown had hit Bulgarian exports, but at the same time drastically reduced external imbalances, Stanishev said in a statement released by his press service.

Should Bulgaria’s imbalances continue to shrink, Sofia would formally apply to join the ERM-2 because joining the eurozone was one of the country’s top priorities, the statement said. Until Bulgaria joined the eurozone, however, the country would maintain the currency board agreement, which pegs the Bulgarian lev to the euro, at its current exchange rate.

Complacency
Complacency was also one of the key issues Trichet focused on during his speech at the University of National and World Economy, where he was awarded a Doctor Honoris Causa degree, in which he described the unfolding global financial crisis as the first serious test faced by a post-globalisation world.

Central banks had a duty to reinforce the resilience of the global financial system, he said. "We are, for the first time, putting to the test the soundness and resilience of the globalised economy, which has become increasingly integrated over the past 15 years. We now have to draw, systematically and without complacency, the lessons of the global crisis that we are fighting against."

"We should not allow that, a few years from now, a new crisis would emerge that would be similar to the current one. That would be unforgivable."
Although the G20 group of developed countries and international financial institutions, the ECB included, had agreed on the broad policies that had to be pursued - reducing procyclicality, fighting short-termism and imposing more transparency - the key now was to have governments swiftly implement their stimulus programmes.

"Decisions that have already been taken should be implemented swiftly," Trichet said. "This holds true, in particular, for recapitalisation, as currently only about 55 per cent of funds earmarked for recapitalisation have been used in the euro area. In crisis times, rapid implementation is crucial."

On a global level, the International Monetary Fund had to keep a closer eye on the macroeconomic policies of systematically important countries and economies. "The IMF has to play a fundamental role in such monitoring, coupled with responsible and active peer surveillance. The European Central Bank, for its part, will continue to be an anchor of stability and confidence," he said.