Interesting......

INSEAD Professor's Bid for Bulgarian Govt 'Frozen' over Speculations

INSEAD Professor Ilian Mihov announced Friday night that he was not going to join the Bulgarian government as a Deputy Prime Minister for the time being.

Speaking live on the bTV channel, Mihov said his bid to join the Borisov Cabinet was now "frozen".

He explained this was his personal decision that resulted largely from political speculations about how his joining the cabinet would affect the currency peg, and respectively, the economic stability in Bulgaria.

Mihov referred to the speculations in the Bulgarian media in which a number of critics raised their concerns saying that upon joining the Borisov Cabinet, the INSEAD professor would modify the currency peg in the country in dangerous ways. The grounds for such allegations were his past statements in which he recommended greater flexibility of the currency peg.

Mihov made it clear that his nomination to join the Bulgarian government as a Deputy Prime Minister was put on hold, not withdrawn. He told bTV he had not pulled out, and that PM Borisov had not terminated his invitation for him.

"Those speculations are a matter of a political attack. I have made it clear - as early as 2001 when I published an article about it - that I support the currency peg, and think that it is the greatest achievement of Bulgaria in the last few years. I don't want to abolish it or to change the current exchange rate. The idea of my joining the government is to help the cabinet team because there is a lot of work. I fail to comprehend those political speculations," Mihov said explaining this was what he told PM Borisov during their meeting on Thursday.

The INSEAD Professor made it clear that he could join the Bulgarian government once the country became part of the Eurozone waiting room - the ERM 2.

"Once we join it will be clear that the current exchange rates will be preserved, so there could be no speculations of my potential interference with the currency peg," Mihov said.

He stressed the fact that his decision to "freeze" his nomination was motivated by his concerns that heated internal debates over his potential intentions regarding the currency peg could be construed as a matter of instability that might hinder Bulgaria's accession to the ERM 2.

"The moment there are political machinations, there is a risk of economic instability and insecurity. There are no set criteria for joining the Exchange Rate Mechanism, admission is granted based on a country's stability. So if someone looks at Bulgaria from abroad and sees all the quarreling, they might think its stability is threatened," Mihov explained making it clear he preferred to step back temporarily if this could in any way jeopardize Bulgaria's chances to make progress towards adopting the euro.

Professor Mihov made it clear that he was going to continue to cooperate closely with the Borisov government.

In mid-January, Mihov was nominated by PM Borisov to become a new Bulgarian Deputy PM without a portfolio who would coordinate EU funds absorption, and would help Bulgaria adopt the euro. His nomination came to replace World Bank VP Kristalina Georgieva who was supposed to join the Borisov government in 2010 but instead became Bulgaria's new EC nominee.

Uncles Comment: The 'elephant in the room' here is that the Lev is overvalued against the Euro by around 20%, if not more this makes exports expensive and imports cheap.Not good in a recession, but other EU states will not allow devaluation because it will give the Bulgaians a competitive advantage, if you take away raw material costs rising like petrol which is increasingly priced in Euros.