The European Commission’s latest report on convergence has determined that Bulgaria does not meet the necessary conditions for adopting the euro. This conclusion, announced on June 26, affects Bulgaria along with five other EU member states that are not yet part of the Eurozone.
According to the report, Bulgaria falls short specifically on the criterion of price stability while meeting the criteria for sustainable public finances, exchange rate stability and long-term interest rates. Among these countries, Bulgaria stands out as the only one failing just one of the four criteria, while its legislation is deemed compatible with the rules of the economic and monetary union.
Sweden fulfills the price stability criterion. Bulgaria and Sweden fulfill the criterion for public finances. The Czech Republic is expected to implement it based on the EC Article 126(3) report dated June 19. Bulgaria, the Czech Republic and Sweden fulfill the criterion for long-term interest rates. Bulgaria fulfills the criterion of exchange rate stability. None of the other candidate countries for the Eurozone are part of the so-called waiting room for the euro. This is ERM II – the European Monetary Mechanism, in which a country must be at least two years before the introduction of the single currency. The EC’s report is complemented by the European Central Bank’s (ECB) report on convergence, which was also released on June 26.
Public sentiment in Bulgaria regarding the euro reflects mixed opinions, with recent Eurobarometer data showing less than half of Bulgarians in favor of euro adoption. Comparatively, Romania and Hungary show higher levels of support, while skepticism remains prevalent in Poland. Despite this, a significant majority in Bulgaria anticipates the euro’s introduction within the next five years, although concerns persist about potential price increases once the euro is adopted.
Bulgaria initiated its path towards the Eurozone by joining ERM II in 2020 after fulfilling preliminary commitments dating back to 2018. The country aims to achieve economic stability and convergence as prerequisites for adopting the euro. Plans initially aimed for entry on January 1, 2025, but recent indications suggested a more plausible timeline of January 1, 2026, to mitigate technical challenges associated with mid-year currency transitions.
Meanwhile, Bulgaria’s caretaker government is slated to deliberate on a draft law today that outlines the procedural framework for introducing the euro. Once approved by the government, the bill will proceed for consideration in the National Assembly, marking a pivotal step towards Bulgaria’s aspirations of adopting the European single currency.
Bulgaria does not have a set timeline for entering the Eurozone, according to EC spokeswoman Veerle Nuyts, responding to a journalist’s inquiry.
“In today’s assessment, we have acknowledged that Bulgaria does not meet all the necessary conditions for Eurozone membership. Nevertheless, we maintain a constructive dialogue with Bulgaria and appreciate its ongoing aspiration to join the Eurozone once it meets all the criteria. Bulgaria also has the option to request a specialized evaluation to gauge its compliance with the convergence criteria when it believes it has achieved them,” Nuyts elaborated.
The Bulgarian National Bank (BNB) has announced that Bulgaria is on track to meet the inflation criterion needed for Eurozone membership, following the 2024 Convergence Reports by the European Commission and the European Central Bank. These reports assess the progress of Bulgaria and five other EU member states obligated to adopt the euro: the Czech Republic, Hungary, Poland, Romania and Sweden. Convergence reports are typically issued every two years, or upon request from a member state seeking an evaluation of its readiness to join the euro area, as previously done by Latvia in 2013.
According to the BNB, Bulgaria currently satisfies three out of the four numerical criteria for euro adoption: stability in public finances (budget balance and public debt), exchange rate stability and long-term interest rates. The remaining criterion, price stability measured by inflation, is anticipated to be met until the end of this year. The reports highlight that Bulgaria’s inflation is expected to decrease in the coming months, aligning it with the final requirement for Eurozone entry.
In 2023, Bulgaria recorded a budget deficit of 1.9% of GDP, well below the EU’s 3% limit, and a government debt-to-GDP ratio of 23.1%, significantly lower than the 60% reference value. Bulgaria’s average long-term interest rate from March 2023 to April 2024 stood at 4%, below the EU’s 5.5% threshold.
Regarding the exchange rate criterion, Bulgaria has maintained a stable exchange rate within the European Exchange Rate Mechanism II (ERM II) since joining on July 10, 2020. The country’s participation in ERM II supports its unilateral commitment to the currency board, with an official exchange rate of BGN 1.95583 per euro, showing no deviations during the reference period. Bulgaria stands alone among the assessed countries in meeting this criterion.
The reports affirm that Bulgaria’s legislation is aligned with EU requirements, subject to specified conditions and interpretations. To advance toward full Eurozone membership, Bulgaria is urged to continue fostering a stable and predictable business environment and enhancing its institutional framework for sustainable convergence with Eurozone economies.
Based on the findings of the EC and ECB reports, Bulgaria is noted as the most advanced among the six countries towards adopting the euro, having made substantial strides in meeting convergence criteria. Once Bulgaria fulfills all membership criteria until year-end, the country intends to request extraordinary convergence reports from the European Commission and the European Central Bank. These reports will serve as the basis for expediting a decision on Bulgaria’s entry into the Eurozone, according to the BNB.
Acting Prime Minister Dimitar Glavchev has stated that Bulgaria is on track to fulfill all the criteria necessary for joining the Eurozone until the end of this year, except for price stability, according to assessments from the European Central Bank (ECB). Glavchev made these remarks ahead of the Council of Ministers’ regular meeting.
Glavchev emphasized that Bulgaria anticipated achieving price stability until year-end, which would complete the requirements for Eurozone accession. He further noted that once all criteria were met, Bulgaria intended to request comprehensive convergence reports from both the European Central Bank and the European Commission to demonstrate its readiness for Eurozone membership. (Novinite)