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Bulgaria to become 21st euro area member from January 2026
Bulgaria to become 21st euro area member from January 2026

Fibre2Fashion

time10-07-2025

  • Business
  • Fibre2Fashion

Bulgaria to become 21st euro area member from January 2026

The Council of the European Union has formally approved Bulgaria's accession to the euro area, with the transition set for January 1, 2026. The lev will be converted at a fixed exchange rate of 1.95583 per euro, aligning with its central rate under the Exchange Rate Mechanism II (ERM II), which Bulgaria joined on July 10, 2020, ECB said in a release. The EU Council has approved Bulgaria's euro area entry from January 1, 2026, with the lev fixed at 1.95583 per euro. Backed by the European Parliament and confirmed by the 2025 Convergence Report, Bulgaria meets all criteria. The ECB has supervised Bulgarian banks since 2020. Bulgaria will be the 21st euro area member, after Croatia in 2023. The decision follows a strong endorsement from the European Parliament, where Members of the European Parliament (MEPs) voted in favour of Bulgaria's adoption of the euro, with 531 votes in support, 69 against, and 79 abstentions. The vote confirms that Bulgaria meets all required convergence criteria, the European Parliament said. 'Today's vote sends a clear signal: Bulgaria is ready to join the Euro area. All criteria have been met, and this step marks a key milestone towards Bulgaria's full European integration - for the country and its citizens,' Rapporteur Eva Maydell (EPP, BG) said after the vote. The European Commission had already confirmed Bulgaria's readiness in its 2025 Convergence Report, published in June following a formal request from Sofia in February. Bulgaria's euro adoption follows years of preparation, including the start of close cooperation between the European Central Bank (ECB) and Bulgarian National Bank in October 2020. Since then, the ECB has been supervising Bulgaria's banking system, directly overseeing four significant institutions and monitoring 13 others. With this transition, Bulgaria will become the 21st member of the euro area. Croatia was the most recent country to adopt the euro, joining in 2023. Fibre2Fashion News Desk (HU)

Bulgaria Poised to Join the Euro: An Interview with Scope Ratings' Dennis Shen
Bulgaria Poised to Join the Euro: An Interview with Scope Ratings' Dennis Shen

Yahoo

time17-06-2025

  • Business
  • Yahoo

Bulgaria Poised to Join the Euro: An Interview with Scope Ratings' Dennis Shen

The European Commission and the European Central Bank have announced that Bulgaria meets the euro convergence criteria. Is Bulgaria now expected to adopt the euro? January 2026 appears to be the likely accession date. The process has been many years in the making, but Bulgaria has made meaningful progress. Bulgaria is on track today to join the euro but encountered delays in recent years. Were they warranted? If Bulgaria had been admitted sooner into the euro area's waiting room – the Exchange Rate Mechanism II (ERM II) – the country may have finalised its euro entry sooner. But before Bulgaria's entry into the ERM II in 2020, there were political reservations within the euro area about the eastward expansion of the bloc. Since 2020, though, the further delays since entering ERM II have been warranted. The global cost-of-living crisis contributed to high inflation leading to a temporary divergence from the price-stability criterion until very recently. This contrasts with Croatia, which entered ERM II at the same time as Bulgaria but became a euro area member in January 2023. Political instability in the recent years has created economic uncertainties and delays to reforms. There have been seven general elections just since 2021, for example, and divisions remain between political parties around the subject of the euro. But divergence from the price-stability criterion alone may have ruled out euro adoption before January 2026. Is recent EU support for Bulgaria's euro entry the result of changing geopolitics and a push to deepen integration or just a reflection of the country's success in meeting the quantitative criteria? Accession may have been supported by the current geopolitics. Incentives for the EU to deepen and broaden the union have grown since the escalation of the Russia-Ukraine war and likely grew further after the US presidential elections. Traditional post-war alliances have fractured, resulting in a more divided and less predictable world. That may have resulted in greater goodwill from Brussels on subjects strengthening the union. The fault lines in Bulgaria between pro-European forces calling for a deepening of the union, and those favouring rapprochement with Russia, are playing out daily in the nation. The EU recognises that any further delay in accession might place euro entry in fundamental doubt given anti-euro movements inside Bulgaria. But the core reason as to why Bulgaria is due to adopt the euro is because the country has undertaken the necessary reforms and now meets the criteria. How will euro adoption affect the Bulgarian economy? Joining the single currency should support the stability of Bulgaria's highly euro-ised economy, enhance monetary policy flexibility, and improve borrowing conditions. Euro adoption will anchor trend growth, which Scope Ratings (Scope) has estimated around 2.75% a year, and may accelerate convergence towards average European Union living standards. Opinion polls suggest around a half of Bulgarians oppose euro adoption. Could that be a problem? Bulgarians are not the first people of a country preparing to adopt the euro who have proven sceptical about the benefits ahead of accession. But support for the euro tends to rise after the adoption of the single currency as the worst fears of many turn out to be unfounded. Inflation is a case in point. Rather than raising inflation as some Bulgarians fear, entering the euro should reduce inflation over time as integration within the euro bloc trims transaction costs. Borrowing costs as a member state of the euro area should be lower than they would be if Bulgaria stays outside. Should the EU be concerned that Bulgarian governments might ease budgetary discipline and endanger the stability of the currency union after euro entrance? Bulgaria has a record of fiscal discipline, recording modest budget deficits and low public debt. The recent years of more elevated budget deficits of around 3% of GDP – the Maastricht Treaty threshold – and rising public debt have been partly the result of heightened political instability, including recurring general elections and the associated populist policy responses. I believe we are unlikely to see any overt slippage of budgetary discipline after euro admission. Croatia is a good example of a nation keeping fiscal discipline after it joined the euro. Euro-area member states need to meet specific fiscal rules. They must submit annual draft budgets for European Commission evaluation under the European Semester, a process that non-euro EU member states do not need to do. The EU fiscal framework, including the Stability and Growth Pact and Excessive Deficit Procedure, remains firmly in place. As the political instability associated with divisions around euro adoption is partly responsible for the recent budgetary slippage, settling the question of the euro for a generation may alleviate some of the political fault lines and curtail certain government spending risks. See also from Scope on Bulgaria's euro accession. For a look at all of today's economic events, check out our economic calendar. Dennis Shen is the Chair of the Macro Economic Council and Lead Global Economist of Scope Group. The rating agency's Macroeconomic Council brings together the company's credit opinions from multiple issuer classes: sovereign and public sector, financial institutions, corporates, structured finance and project finance. Brian Marly, senior analyst of sovereign ratings at Scope and lead sovereign analyst for Bulgaria, contributed to writing this Q&A. 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