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

Arab News

2 days ago

'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 area.In 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 statement.The 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 payments.In 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 statement.Bulgaria 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 said.Becoming 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 Council.The 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 transition.MEETING 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 performers.In 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 limit.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 2025.The 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 borrow.Finally, 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 II.This 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 1999.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 or because they do not meet the required economic criteria.