Bulgaria will apply again to join the Exchange Rate Mechanism (ERM2) by the end of April, Prime Minister Boyko Borissov said on April 10.

This is yet another sharp change in the plans of the government in Sofia after in March it indicated that will delay its ERM2 entry plans until 2021. It has several times changed the deadlines in the past few years.

“By the end of April Bulgaria shall apply for membership in the Eurozone’s waiting room. … This crisis has shown us that the countries which are not in the waiting room and in the Eurozone will take on debt at high interest rates,” Borissov said as quoted in a government’s statement.

He added that Bulgaria will apply together with Croatia and will meet all criteria at the time of application.

“We shall be accepted and then will be allowed swap payments,” Borissov said.

According to Investor.bg, Bulgaria has not taken steps to delay joining the ERM2 until now despite indications by the central bank’s governor at the end of March that this is the most likely scenario.

The country has applied for membership of ERM2 and the European banking union, and meets the nominal criteria to adopt the European common currency, with its currency, the Bulgarian lev, pegged to the euro, low inflation and healthy public finances. However, the EU has demanded that Bulgaria also check its banking system due to suspicions that some locally-owned banks are not stable enough.

The latest asset quality review (AQR) and stress test of the banks in Bulgaria, carried out by the ECB, found capital shortfalls at two out of six Bulgarian banks – First Investment Bank (FIBank) and Investbank. The same two banks failed the previous AQR and stress test and were required to build up additional capital buffers.

At the beginning of April, Investbank announced it has completed the required capital hike to meet the ECB’s requirements. Fibank is yet to comply with the prescribed measures. It was planning to issue new shares as part of the measures aiming to raise its capital, but in February Bulgaria's Financial Supervision Commission (FSC) rejected the prospectus for a planned capital hike without providing any information on the reasons for its decision.

Bulgaria has deadline until April 26 to send the ECB the official information on completed requirements. If the ECB agrees that the country meets all criteria, the country will be allowed to move on the next stage of its membership in ERM2 and the banking union.

On April 11, Finance Minister Vladislav Goranov said that the capital buffers of one bank are the last hurdle the country must overcome to join ERM2, referring to Fibank. At a joint press conference with Borissov, Goranov said this bank has completed 70% of the ECB’s requirements already.