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EU ministers back Bulgaria's euro adoption from 2026
EU ministers back Bulgaria's euro adoption from 2026

Reuters

time20-06-2025

  • Business
  • Reuters

EU ministers back Bulgaria's euro adoption from 2026

BRUSSELS, June 20 (Reuters) - European Union finance ministers gave formal support on Friday for Bulgaria to adopt the euro currency, paving the way for the country to become the 21st member of the euro zone from January 1, 2026. The backing of the ministers follows positive assessments of the country's readiness from the European Commission and the European Central Bank. It will be endorsed also by EU leaders at a summit in Brussels on June 26. The exchange rate at which the Bulgarian lev will be converted into euro will be set by EU finance ministers at their meeting in early July, giving Bulgaria six months to prepare the technical transition for the start of the year. Bulgaria has been striving to switch its lev to the euro since it joined the European Union in 2007. But after such a long wait, many Bulgarians have lost their initial enthusiasm, with 50% now sceptical about the euro, according to a Eurobarometer poll in May. Some Bulgarians fear the currency switch will drive up prices. Bulgaria's euro adoption will come three years after the last euro zone expansion, when Croatia joined the single currency grouping at the start of 2023. The accession of Bulgaria into the euro zone will leave only six of the 27 EU countries outside the single currency area: Sweden, Poland, Czech Republic, Hungary, Romania and Denmark. None of them have any immediate plans to adopt the euro either for political reasons or because they do not meet the required economic criteria.

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. This article was originally posted on FX Empire Should You Invest in European Stocks Now? Online Cosmetics Retailer Oddity Draws in Big Money Production Increases, Big Money Lift SABESP Core & Main Flashes Bullish Outlier Signals Should You Invest in the US Stock Market Now? Outlier Inflows Boosting Carpenter Technology Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

EU gives Bulgaria green light to adopt euro from start of 2026
EU gives Bulgaria green light to adopt euro from start of 2026

Arab News

time04-06-2025

  • Business
  • Arab News

EU gives Bulgaria green light to adopt euro from start of 2026

'Today, the European Commission concluded that Bulgaria is ready to adopt the euro as of 1 January 2026,' the Commission saidBulgaria has been striving to switch its lev currency to the euro ever since it joined the European Union in 2007BRUSSELS: The European Commission and the European Central Bank gave Bulgaria the go-ahead on Wednesday to adopt the euro currency from the start of 2026, making Bulgaria the 21st country to join the single currency a 'convergence report' describing how Bulgaria's economy dovetails with the rest of the euro zone, the Commission said Bulgaria met the formal criteria needed to adopt the currency now used by 347 million Europeans in 20 countries.'Today, the European Commission concluded that Bulgaria is ready to adopt the euro as of 1 January 2026 – a key milestone that would make it the twenty-first Member State to join the euro area,' the Commission said in a Commission also looked at whether Bulgaria's economy and markets are integrated with the rest of the EU, as well as the trends in the country's balance of a separate report, the ECB also said Bulgaria was ready.'I wish to congratulate Bulgaria on its tremendous dedication to making the adjustments needed,' ECB Executive Board Member Philip Lane said in a has been striving to switch its lev currency to the euro ever since it joined the European Union in 2007. But after such a long wait, many Bulgarians have lost the initial enthusiasm with 50 percent now skeptical about the euro, according to a Eurobarometer poll in May. Some Bulgarians fear the currency switch will drive up prices.'Ensuring price transparency and combating abusive price increases will require a special effort,' EU Economic Commissioner Valdis Dombrovskis told a news conference.'Previous practices and data from other euro area countries demonstrate that this is perfectly achievable, with price increases resulting from previous changeovers having been minimal,' he a member of the euro zone, apart from using euro notes and coins, also means a seat at the European Central Bank's rate-setting Governing positive recommendation from the EU executive arm means that EU leaders will have to endorse it later in June. EU finance ministers will then fix the conversion exchange rate for the Bulgarian lev into the euro in July, leaving the rest of the year for the country to technically prepare for the THE CRITERIATo get the positive recommendation, Bulgaria had to meet the inflation criterion, which says that the euro-candidate cannot have consumer inflation higher than 1.5 percentage points above the three best EU April, the best performers were France with 0.9 percent, Cyprus with 1.4 percent and Denmark with 1.5 percent, which put Bulgaria with its 2.8 percent just within the euro candidate country also cannot be under the EU's disciplinary budget procedure for running a deficit in excess of 3 percent of GDP. Bulgaria meets this criterion with a budget deficit of 3.0 percent in 2024 and 2.8 percent expected in country's public debt of 24.1 percent of GDP in 2024 and 25.1 percent expected in 2025 is well below the maximum level of 60 percent, and its long-term interest rate on bonds is well within the 2 percentage point margin above the rate at which the three best inflation performers Bulgaria had to prove it had a stable exchange rate by staying within a 15 percent margin on either side of a central parity rate in the Exchange Rate Mechanism was easily done because Bulgaria has been running a currency board that fixed the lev to the euro at 1.95583 since the start of the euro currency in euro adoption will come three years after the last euro zone expansion, when Croatia joined the single currency grouping at the start of accession of Bulgaria into the euro zone will leave only six of the 27 EU countries outside the single currency area: Sweden, Poland, Czech Republic, Hungary, Romania and of them have any immediate plans to adopt the euro either for political or because they do not meet the required economic criteria.

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