Bulgaria to adopt the euro: How do countries join the Eurozone?

Euronews

2 days ago

The European Central Bank cut its key deposit rate on Thursday by 25 basis points to 2%, its lowest level in more than two years.
The interest rates on its main refinancing operations and the marginal lending facility will also be lowered to 2.15% and 2.40% respectively, with effect from 11 June 2025.
The interest rate on the main refinancing operations is the rate banks pay when they borrow money from the ECB for one week, while the marginal lending facility is the rate banks pay when they borrow from the ECB overnight.
The deposit facility is the interest rate banks receive when they deposit money with the central bank overnight.
"While the uncertainty surrounding trade policies is expected to weigh on business investment and exports, especially in the short term, rising government investment in defence and infrastructure will increasingly support growth over the medium term," said the ECB on Thursday.
"Higher real incomes and a robust labour market will allow households to spend more. Together with more favourable financing conditions, this should make the economy more resilient to global shocks."
Thursday's cut, which brings the deposit rate to half of its peak seen in June 2024, is supported by easing price pressures.
New ECB projections expect headline inflation to average 2.0% in 2025, 1.6% in 2026 and 2.0% in 2027.
In May, the annual inflation rate in the eurozone came in below estimates at 1.9%. That's down from April's 2.2% total, and under the ECB's 2% target.
Core inflation, which strips out volatile food and energy prices, also eased in May, coming in at 2.4%, from 2.7% in April.
Cooling has taken place more rapidly than the ECB predicted earlier this year, partly thanks to a stronger euro — making imported goods cheaper — and lower-than-expected energy costs.
These factors, as well as a softer labour market, are expected to help temper inflation in the coming months. Rerouted goods away from the US, redirected because of high tariffs, may also end up in Europe, pushing costs down as supply increases.
Growth projections for the eurozone are also highly uncertain as tariffs from the US administration disrupt global trade and dampen consumer demand.
The eurozone economy grew by 0.3% in the first three months of this year, up from 0.2% in the prior quarter, surpassing expectations.
Despite the prospect of a global trade slowdown, increased spending intentions on defence and infrastructure in Europe have raised hopes of accelerated growth.
Germany has approved a constitutional amendment to its 'debt brake' rule, meaning defence spending above 1% of GDP will not be subject to borrowing limits. The government has also created a €500 billion extrabudgetary fund for additional infrastructure spending.
These developments mean Thursday's rate cut is expected to be the last easy decision for the Governing Council.
According to a note from ING published earlier this week, 'the market has priced in one by cut by the end of the year to a deposit facility rate of 1.75%'.
'There are moderate chances that the ECB could cut further later on. Pricing, however, is mostly driven by sentiment surrounding US-EU trade relations, with tensions having risen again of late,' economists added.
The Balkan country of 6.4 million people is to make the switch from its national currency, the lev, to the euro on 1 January.
Here are basic facts about the currency union, also called the Eurozone, and how countries join it.
The euro is a shared currency and monetary system launched in 1999 when 11 EU member countries irrevocably fixed their currencies to the euro as an accounting currency, then swapped out the national notes and coins in 2002.
The EU established the European Central Bank to handle monetary policy and set interest rate benchmarks for member countries, similar to the role of the US Federal Reserve in the US.
Countries must meet four criteria: low inflation, keeping deficits and debt under control, low long-term interest rates and a stable exchange rate between their currency and the euro. Countries must go through a two-year 'waiting room' in which their currency does not fluctuate excessively against the euro. The process is meant to demonstrate that their economies are sustainably converging with that of the Eurozone.
Once the European Commission determines that requirements have been met, the member governments of the EU decide by what's called a qualified majority vote. Approval needs a minimum of 55% of member states representing at least 65% of the EU population.
After joining, countries face rules limiting debt and deficits. Those rules are intended to keep countries from running large deficits that could undermine the euro.
The European Commission ruled on Wednesday that Bulgaria has met the requirements, seconded by an opinion from the ECB. The matter now goes to a vote at a meeting of EU finance ministers slated for 8 July. EU officials say the vote is a done deal.
Bulgaria is unusual in that it pegged its currency, the lev, to the euro right from the beginning of monetary union in 1999, even before it joined the European Union in 2007. Bulgaria also has very low levels of debt, only 24.1% of annual economic output. That is well below the 60% level set in the economic criteria for Eurozone membership. The last step was getting inflation below the benchmark of 2.8%, or no more than 1.5% higher than the average of the three lowest Eurozone members.
There were concerns about the level of corruption and money laundering in the EU's poorest country. The commission and the ECB found however that Bulgaria has made progress in those areas.
The most recent Eurobarometer poll carried out by the EU showed that 50% of Bulgarians were opposed and 43% in favour. Reasons include fears of inflation, distrust of official institutions in a country that has had seven governments in four years, and widespread misinformation on social media.
The issue has been taken up by pro-Russian nationalist politicians who argue for keeping the national currency. President Rumen Radev stoked anti-euro forces with a proposal for a referendum, which was rejected by parliament. Misinformation included false claims that the euro would allow EU officials to confiscate dormant bank accounts or use a digital euro to control people.
On 1 January, only euros will be dispensed from cash machines, though both currencies will circulate in cash for a month. After that, lev notes can be exchanged at banks for 12 months and for an unlimited time at the Bulgarian national bank.
In theory, the euro brings means lower interest rates for business and consumers and eases cross-border trade within the eurozone. Companies no longer have to engage in currency exchange transactions or worry that exchange rate shifts will erode their profits or holdings. Travelers no longer have to pay commissions at an exchange booth or on their credit card bill when vacationing or on a business trip to another EU country.
Member countries get a seat on the ECB's rate-setting council and so have a voice in Eurozone-wide monetary policy.
Countries that join lose some authority over their own economy. They give up their ability set their own interest rates, and face restrictions on government spending and deficits, though those rules have proved flexible in practice. And they can no longer gain competitiveness relative to other countries by allowing their currency's exchange rate to devalue.
Bitter memories remain of the debt and economic crisis that shook the Eurozone in 2010-2015. After Greece admitted its deficit and debts were much larger than previously reported, it wound up defaulting on its debts and market turmoil spread to other Eurozone countries.
Greece, Portugal, Ireland, Spain, and Cyprus were bailed out with loans by the other Eurozone governments, in return for strict austerity measures that impacted many ordinary people including government workers and retirees.
ECB President Mario Draghi is credited with defusing the Eurozone crisis in 2012 by saying that the central bank would do 'whatever it takes' to save the euro. The ECB then said it could intervene in bond markets to support countries hit by turmoil, a safeguard that calmed markets even though it was never used.
Later other backstops were added, including a Eurozone bailout fund and moving banking oversight from sometimes-lax national supervisors to the ECB.
Countries agree to join the euro as part of joining the EU, but not all have made the effort to meet the economic requirements. There is no time window to join.
Denmark was granted an opt out, while Sweden rejected the euro in a 2003 referendum despite not having an opt out and has no target date to join. Other non-members are Czechia, Hungary, Poland and Romania.
Officials in Poland, the biggest non-member, have shown little interest in joining despite acknowledging the obligation to join someday. The winner of Sunday's presidential election, Karol Nawrocki, campaigned on keeping the zloty currency.
The country's economy has grown strongly without euro membership, doubling in size over the past two decades as its standard of living has almost caught up with Western Europe since emerging from communist rule in 1989.
Wizz Air recorded a net profit of €213.9 million in the fiscal year 2025, representing a 41.5% year-on-year decline.
The low-cost Hungarian airline also reported a comprehensive profit of €225.8m, missing its target of €250m to €300m.
EBITDA, meanwhile, came in at €1.1 billion, a decrease of €58.9m compared to the prior fiscal year.
Total revenue showed a 3.8% rise on the year, at €5.3bn, and the firm reported record traffic, amounting to 63.4 million passengers.
'I describe our fiscal year F25 with two words: resilience and transformation. In an environment where rare challenges have become recurrent, Wizz Air has evolved structurally, embedding increased flexibility into our standard operating model,' József Váradi, Wizz Air Chief Executive Officer, said in the earnings release.
Among the challenges facing the airline this fiscal year was an obligation to ground its Airbus jets because of faulty engines.
'At end of F25, there were 42 grounded aircraft due to GTF engine inspections and 3 grounded aircraft in Ukraine,' said the firm. By the end of the first half of the next fiscal year, it expects to have about 34 planes grounded.
"Wizz Air is a more resilient business today," added Váradi.
"Despite the unproductivity of a grounded fleet, we successfully delivered a second consecutive year of profitability. We have the benefit of more than a year of experience operating under these unique circumstances - conditions airlines would never experience when demand exceeds supply."
Wizz Air shares were down around 23.5% in daily trading just after 10am CEST in daily trading.