The exchange rate mechanism II
(ERM II) is a regime of fixed exchange rates in which all EU countries wishing to adopt the euro as their currency must participate.
Bulgaria is looking to join the Euro, Europe's single currency, in 2009 or 2010, after the obligatory two years it would have to spend in the Exchange Rate Mechanism II
(ERM II) 'waiting room' following the country's planned accession to the EU in January 2007.
Therefore, the real appreciation does not necessarily have to be a significant problem either in the Exchange Rate Mechanism II
(ERM II)--as its wide fluctuation band gives room for a modest strengthening--or in the euro area.
The center-right government dropped its plans for applying for Exchange Rate Mechanism II
, the waiting room to the euro zone, after raising the alarm that the 2009 budget gap was 3.7% of GDP because of a number of unreported deals rather than the 1.9% expected due to unaccounted procurement deals.
And the loss of monetary policy independence that would come from joining the Exchange Rate Mechanism II
(ERM II) would further enhance the relative importance of other macro-economic policies, such as fiscal and incomes policies.
A smooth and balanced process towards the early entry into Exchange Rate Mechanism II
(ERM II) and the adoption of the euro, at minimal cost and disruption, is at the heart of monetary policy as well as of other macroeconomic policies, not only in Slovenia but as well in many other accession countries.