Eastern Europe February 26, 2010, 10:01AM EST

Greek Crisis Dims Bulgaria's Euro Dreams

The government of EU member Bulgaria made adopting the euro a top priority, but then Greece hit the skids. Now membership in the common currency seems far off

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In the Balkans, everything is shared, luck as well as misfortune. So you’d better pray for your neighbor. And in this part of Europe failure is more infectious than success.

Events in February proved that fact quite clearly when, months after the new Bulgarian government made adopting the euro a top priority, it had to take a step back because of the misfortunes of neighboring Greece.

Bulgaria joined the EU on 1 January 2007, and since then many Bulgarians (including me in this column) have spoken of a post-enlargement hangover, asking where the next frontier should be. EU and NATO – these were achieved. Where to now? Of course, improving the quality of life is the obvious answer. But countries also need a dream, something to motivate society and government. A national purpose was lacking to give Bulgarians the push they always seem to need to carry out even something as prosaic as economic and judicial reforms.

The center-right government of Prime Minister Boyko Borisov, which came to power last summer, needed several months to come up with an answer. By winter they had it: the euro. Bulgaria should make all possible sacrifices in order to enter the euro zone, preached the deputy prime minister and finance minister, Simeon Dyankov, a former World Bank official. And he acted accordingly, cutting expenses, keeping the deficit low, even delaying payments to private companies that had already fulfilled their obligations to the state. The Bulgarian establishment had learned a lesson from the EU and NATO accessions: we will tighten our belts and suffer some losses, but in the end we will win our national game. Just give us one.

Bulgaria had some preparation to face this challenge. Thirteen years of pegging its currency to the euro and, before that, the deutsche mark taught Bulgarian politicians fiscal discipline. One of the positive side effects of the economic crisis was lower inflation. During his World Bank tenure, Dyankov had become expert at tightening budgets and minimizing state expenses in countries from Colombia to Georgia. And despite the claims of skeptics on the left and right that during a crisis the state should spend rather than cut, the goal looked almost doable until …

… until Greece imploded. Its public debt soared, with a deficit far above the euro zone’s 3 percent limit, and its credit rating became the lowest in the EU. Strikes erupted while the government prepared a rescue plan and Brussels watched in despair. Greek politicians admitted that the state had cheated with statistics – both before and after adopting the euro. In short, there was hardly a worse moment for another Balkan country to apply for the euro zone.

Bulgarians got the message. “Due to the problems of Greece our bid to join the euro looks unrealistic in the next two to three years,” Borisov said two weeks ago. And what about Dyankov? “He is still optimistic,” added the prime minister with a smile. “He even thinks we could strengthen the euro zone. But let’s be frank: The odds are against us.”

Bulgaria and Greece are different countries with different economies. Each should be judged on its merits – that is one of the rules of Brussels. But the outside world thinks in relative terms: if the so-called PIGS (Portugal, Italy, Greece, and Spain) have similar problems big enough to shake the euro, why should Bulgaria be in a position to strengthen it?

It has happened so often, this linking of problems. Bulgaria and Romania, for example, were bound together during the EU accession process. They were a strange pair, indeed, neither happy to be stuck with the other. In the beginning, Bulgaria claimed Romania lagged behind and hindered the Bulgarian effort. Then, shortly before 2007, things changed and Romania began claiming the same about Bulgaria. Neither had really bothered to study the other; the neighbor was just good for a scapegoat. Our EU hardships are not our own, each claimed. The lazy neighbor was to blame.