Bulgaria meets all the convergence criteria for joining the euro area from January 2026, according to the European Commission and the ECB on Wednesday 4 June.
For Bulgaria, the euro will mean “stable prices“, “lower transaction costs” and, for the enlarged euro area, “greater international weight”, said European Commissioner for Economy and Productivity Valdis Dombrovskis.
Initially hoped for in 2024 (see EUROPE 13440/18), Bulgaria’s euro area membership was previously hampered by the issue of inflation. At the end of April, price inflation in Bulgaria stood at 2.7%, below the reference value of 2.8% (average of the three best-performing euro area countries over one year, plus 1.5 percentage points).
According to a European official, prices will rise in Bulgaria over the coming months as a result of tax reforms, before declining again. “This short-term rise is not a source of concern for inflation performance”, he said on Tuesday 3 June.
Bulgaria is a top performer in terms of fiscal policy. The Bulgarian deficit was 2.0% of GDP in 2022 and 3.0% in 2024, and should stabilise at 2.8% in 2025 and 2026, according to the Commission. There is therefore no risk of an excessive deficit procedure being opened (maximum threshold: 3% of GDP). Estimated at 25.1 and 27.1% of GDP in 2025 and 2026 respectively, Bulgarian public debt is expected to be the second lowest in the euro area this year (maximum threshold: 60% of GDP).
The ECB also notes that the criterion of euro/lev exchange rate stability has been met. The Bulgarian currency has been participating in the ERM II system since July 2020.
Fourthly, Bulgaria fulfils the criterion on the convergence of long-term interest rates. At the end of April, this rate was 3.9% in the country, below the reference value of 5.1% (average of the three best-performing euro area countries over one year, plus 2 percentage points).
The EU institutions point out that Bulgaria has been participating in the banking union since 2020. The country’s five main banks, accounting for over 75% of banking assets, are directly supervised by the ECB.
At macroeconomic level, Bulgaria has no excessive imbalances, but housing prices need to be monitored. Another issue is the shortage of skilled labour and lack of social integration.
It is now up to the Eurogroup to validate the Commission’s and ECB’s assessments on Thursday 19 June, with a view to a green light from the European Council the following week. On Tuesday 8 July, the Ecofin Council will adopt the legislative texts on the table, including the definitive lev/euro conversion rate. Bulgaria’s share of capital of the ‘European Stability Mechanism’, the permanent rescue fund for euro area countries, will also have to be determined.
The Bulgarian authorities will intensify preparations for the transition to the euro: dual price labelling, adaptation of bank ATMs, close price monitoring, communication campaigns, etc.
See the Commission’s assessments: https://aeur.eu/f/h5t ; and the ECB’s: https://aeur.eu/f/h5u (Original version in French by Mathieu Bion)