. what practical changes would this bring to the work of banking supervision? the changes are of a regulatory and administrative nature. a large part of them have been prepared already and we are ready for their introduction on the date of our effective accession. under the close cooperation mechanism the ecb exercises direct supervision over the largest banks and there the bnb will be involved with the participation of bnb ’ s experts in the supervisory teams. an ongoing active exchange of supervisory information will be established between us and the ecb concerning the other banks that will remain under bnb ’ s direct supervision. countries like hungary, poland and especially the czech republic are markedly against joining the eurozone at this point. is the currency board the main difference between them and bulgaria which explains this discrepancy between policies, or are there other factors at play? 1 / 3 bis central bankers'speeches this is a political decision, above all. what ’ s positive in our case is that this decision is based on strategic and not conjunctural considerations. practically, there isn ’ t a serious political factor in our country that does not support this decision. on the technical level, the monetary regime in bulgaria allows for its implementation to happen quicker and seamlessly. you said in an interview for market news this spring that the downturn in europe could turn out to be temporary, but that would remain to be seen. how would you comment the developments in recent months? uncertainty is on the rise and a lot of current data indicates a continuing economic downturn in the eurozone. this motivates the ecb to make decisions for an even more stimulating monetary policy. the technical details and the degree to which the ecb decided to step up its policy are a subject of debate, but the basic macroeconomic motivation behind these decisions is clear, in principle. responding to a question by investor. bg, bnb says that given the lev ’ s fixed exchange rate, delaying the entry into erm ii cannot create direct financial and macroeconomic risks for the bulgarian economy. could the opposite happen, however? is it possible for erm ii membership to be negative for bulgaria if it comes during unfavourable times for the european economy? to put it in different words, should we be in a hurry for the eurozone or should this goal be consistent with the conditions and trends for the time being? we should follow our strategic plan with a focus on the quality of the process. due to the nature of our monetary regime

the financial and macroeconomic stability in the country. the bnb was to determine the moment, after which the convergence grows into a self - propelled process of struggling for a market share. such a transition entails considerable risks, as it does not lead to sustainable growth rates of both financial intermediation and economic activity and employment. therefore, since the beginning of 2004, the bnb started a process of phasing in measures ( primarily prudential and administrative ) aimed at slowing down bank credit growth to a sustainable level, which would not put to risk the stability of the economy. data indicate the central bank ’ s policy resulted in a change in commercial banks ’ behaviour and reduced the growth of bank lending to 32. 4 % at the end of 2005. in the current year, while sustaining the effect of already implemented measures, we expect banking credit to grow with a rate below or near 20 %. as i mentioned earlier, the dynamics of banking intermediation in the country cannot be contemplated in isolation from the process of free movement of capital and the accompanying dynamics of the balance of payments current account. intuitively, many economists tend to seek direct cause and effect relation between bank credit growth and the current account dynamics. they rely on the logic that the growth of banking intermediation increases the possibilities for consumption and investment, which combined with the existence of free trade and the slower response of domestic supply leads to the accumulation of external imbalances. such reasoning is to a great extent rational, but it should not lead, as is clearly manifested in the bnb ’ s policy, to defining the simple rule that the balance of payments dynamics can be directly controlled through controlling the banking credit rates of growth. this clarification allows me to turn to the next issue i would like to discuss, namely the dynamics of the country ’ s external position. the stable macroeconomic environment in bulgaria, plus the sustainably high rates of economic growth and the prospects for its membership in the eu brought in an increasing amount of investments. their share in the gdp in the first three quarters of 2005 increased to 26. 6 %, which marks the highest level reached since the beginning of economic reforms in the country. the growth of investments and the concomitant improvement of employment, increase both the current incomes of households, and their expected future incomes, which is associated with increased consumption and decrease in the savings in the economy. as a consequence of these processes, the gap of the balance of payments current account widened