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Bulgaria can’t join the eurozone due to high inflation, ECB says

Bulgaria isn't ready to join the euro area, the ECB said
Bulgaria isn't ready to join the euro area, the ECB said Copyright Lukasz Kobus/ European Union, 2023
Copyright Lukasz Kobus/ European Union, 2023
By Jack Schickler
Published on Updated
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Sofia had expressed hopes it could join the EU currency zone in the middle of next year, but must meet tough economic criteria.

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Bulgaria can’t join the eurozone due to its high inflation, the European Central Bank has said in a report on Wednesday. 

That’s set to cause disappointment in Sofia, which is seeking to become the 21st member of the currency zone, despite popular concerns it might exacerbate price rises in the Balkan state. 

“Limited progress has been made by non-euro area Member States of the European Union on economic convergence with the euro area since 2022,” the ECB said in a press release.

Prices in Bulgaria are rising at an annual 5.1%, 1.8 percentage points higher than they’d need to be to join the currency union, the ECB said – though it added that inflation will likely “decrease gradually over the coming months” as supply bottlenecks ease.

At a press conference today, Bulgarian Prime Minister Dimitar Glavchev noted the findings, and said he would request a further assessment from EU authorities once the country met all euro criteria.

Countries don’t automatically join the euro when they become EU members – but are expected to do so once they converge with legal and economic norms, including stable exchange rates and sound public finances.

The only exceptions are Sweden and Denmark, which negotiated political and legal opt-outs, and are keeping their national currencies.

Political turmoil

On 4 June, according to Bulgarian news agency BTA, Deputy Finance Minister Metodi Metodiev expressed hope that Bulgaria could join the euro in mid-2025, as gentler economic conditions would allow it to request an extra assessment from the EU.  

But just a few days later, the country was sent into political turmoil by national and European elections that saw a strong performance by the far right.

The pro-Russian, ultra-nationalist Vazrazhdane party secured around 14% of the vote and three of the country’s 17 MEPs, after saying the euro would destroy the Bulgarian economy.

The GERB party led by former Prime Minister Boyko Borissov will now need at least two partners to form a governing coalition – and abandoning the lev may not prove a votewinner.

According to a Eurobarometer survey, just 49% of Bulgarian citizens favour joining the euro, and 64% of the populace think it will further raise prices.

Inflation fears

After the pandemic, inflation in some EU countries soared to as high as 17%, as the Ukraine war pushed up energy and food costs.

The ECB, charged with keeping inflation around 2%, checks how inflation in euro candidates compares to the EU’s best performers, which last year were Denmark, Belgium and the Netherlands.

Remaining EU members Czechia, Hungary, Poland and Romania haven’t aligned their legislation with EU norms and haven’t joined the exchange rate mechanism, a means of avoiding wild currency swings with the euro.

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Earlier in June, Romania was taken to task by Brussels for being set to have the highest budget deficit in the EU, at 7% in 2025.

That follows years of warnings for Bucharest to balance its books and reform tax and public sector wages.

Hungary, led by Viktor Orbán, has long been eurosceptic, and in Warsaw ministers are still cautious about abandoning the zloty, despite warmer relations with Brussels since Prime Minister Donald Tusk took office.

Subscribe here to stay informed on the latest EU policy development with our newsletter, "The Policy Briefing", your weekly insight on European rulemaking, key events and data trends.

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UPDATE (26 June, 13:41): adds comment from Glavchev.

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