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Bulgaria's caretaker government eyes access to euro 'waiting room'

SOFIA (Reuters) - Bulgaria's interim Prime Minister Ognyan Gerdzhikov said on Wednesday his government wanted to apply formally to join the Exchange Rate Mechanism (ERM-2), commonly known as the euro "waiting room", before it hands over power.

The Balkan country joined the European Union in 2007, and while it has low inflation and stable public finances its entry into the euro zone has been stymied by widespread corruption and low incomes.

Bulgarians go to the polls in a snap election on March 26 and Gerdzhikov acknowledged a lot of work would be needed if his administration was to succeed.

"This is a political issue and we have to consult with EU members," Gerdzhikov told reporters after a government meeting. "There is a lot of work to be done, there are people working on it. I will be happy if we push it through, but I cannot give any guarantees for the time being."

Gerdzhikov's caretaker government will remain in office until a new administration is installed. But with Bulgaria's two main political parties, the center-right GERB and leftist Socialists, running neck-and-neck in opinion polls, forming a working government may be difficult, analysts say.

There is no deadline for Bulgaria to join the euro and financial analysts and economists are divided over whether the Balkan state should rush into the two-year ERM-2 exchange rate mechanism.

Supporters say doing so would help Bulgaria's integration into the EU and bring it in from the periphery, as discussion about a two-speed Europe intensifies following Britain's decision to leave the bloc.

Critics argue that a formal application from an unelected government and without the proper support from major euro zone countries and the European Central Bank would be doomed to fail.

Bulgaria meets the formal criteria to adopt the euro - it has low inflation, low interest rates as well as stable public finances, but diplomats say it needs to crack down on corruption before adopting the single currency.

Bulgaria, the EU's poorest member state, already pegs its lev currency to the euro.

(Reporting by Tsvetelia Tsolova; editing by Richard Lough)

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