Bulgaria and Romania: Economic Assessment of the EU Accession and Impact of the Global Financial Crisis

Bulgaria and Romania joined the European Union on January 1, 2007 and are so far the last countries to do so. Before this important step, both countries had undergone a long way of economic transformation from planned to free market economy. The transformation began in the early 1990s but so far it has not been finished. Compared to the other Central and Eastern European countries, Bulgaria and Romania still belong to the least developed ones, which is probably the most important reason why these countries did not join the EU in May 2004 together with other Central and Eastern European countries, but almost three years later, in January 2007. The thesis, however, focuses mainly on what happened after January 2007 and aims at analyzing the first years of Bulgaria and Romania in the enlarged European Union and discuss also possible effects of the upcoming economic and financial crisis on both countries. The subject matter of the thesis is divided into three main chapters, accompanied by introduction and summary of main conclusions. First part (Chapter 2) focuses in detail on the process of economic transformation in both countries, on the summarization of the pre-accession period and on the challenges both countries were facing at that time. Main focus here is on the home economy, foreign economic relations and home affairs including current political situation. Analysis of pre-accession negotiations with the EU focuses both on general issues and also on detailed monitoring of the whole process by the European Commission. Second part (Chapter 3) analyzes in detail the first years of Bulgaria and Romania in the EU. The chapter opens with analysis of nominal convergence and fulfillment of Maastricht criteria and continues with real and structural convergence, analysis of external balances and integration of product and financial markets. Labor mobility, structural aid, development of business environment and main challenges for both economies are discussed as well. Third part (Chapter 4) focuses on the latest development and shows the effects of the current economic and financial crisis on Bulgarian and Romanian economies. The chapter discusses development of short term economic indicators and tries to assess the actual impact of the crisis and macroeconomic development in 2009 and 2010. This is, however, extremely difficult due to persisting uncertainty and absence of robust economic predictions. The analysis thus suffers from unavailability of relevant and up-to-date information and economic data.