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EU help for Bulgarian banks

June 30, 2014

Government officials in Bulgaria have called on citizens not to panic, following runs on two crucial banks in the country last week. But many said they doubted the Balkan country's financial stability.

Clients of First Investment Bank in Sofia, Bulgaria
Image: Reuters

The European Union on Monday approved a request by Bulgarian authorities to extend an emergency credit line of 3.3-billion-lev (2.36-billion-dollar) to the country's banks.

"The Commission concluded that the state aid implied by the provision of the credit line is proportionate and commensurate with the need to ensure sufficient liquidity in the banking system in the particular circumstances," the EU executive said in a statement.

Bulgarian leaders had appealed to citizens not to withdraw all their savings as banks in the EU's poorest member state reopened Monday. The call came just days after runs on two major lenders, raising widespread fears that the Balkan nation's financial stability was in jeopardy.

Massive withdrawals of deposits at Corporate Commercial Bank and First Investment Bank posed the biggest challenge for Bulgaria in nearly two decades.

The central bank said there had been a deliberate and systematic attempt to destabilize the banking system and vowed to take all measures needed to protect people's savings.

Keep your calm!

Law enforcement officials launched a criminal investigation, and five people were arrested on suspicion of spreading false information about the health of banks by sending random emails and mobile phone messages to customers, prompting them to withdraw their money immediately.

"There's no cause or reason to give way to panic," Bulgaria's President Rosen Plevneliev said. "There's no banking crisis, there's a crisis of trust and there's a criminal attack," he maintained.

He added that the fixed euro-lev exchange rate would remain unchanged until the country's accession to the single-currency eurozone. "The money of private citizens and firms is safe," Plevneliev insisted.

The bank runs coincided with a period of political turmoil in the country. Prime Minister Plamen Oresharski's minority cabinet had been dogged by charges of graft and street protests and said it would soon resign, agreeing to a snap parliamentary election on October 5.

hg/rs (Reuters, dpa)