Sofia has expressed hope of joining the EU currency area as soon as the middle of next year, but it will need to meet strict economic criteria to do so.
advertisementThe European Central Bank said in a report on Wednesday that Bulgaria cannot join the euro zone due to its high inflation rate.
That is likely to come as a disappointment for Sofia, which is seeking to become the euro zone's 21st member state despite public concerns that it could worsen price hikes in the Balkans.
“After 2022, non-euro area European Union Member States will be able to make limited progress in their economic integration with the euro area,” the ECB said in a press release.
The ECB said prices in Bulgaria were rising at an annual rate of 5.1 percent, 1.8 percentage points above the level needed to join the monetary union, but added that inflation was “likely to gradually decline in the coming months” as supply bottlenecks ease.
Speaking at a press conference today, Bulgarian Prime Minister Dimitar Grafchev took note of the findings and said he would ask EU authorities for further assessment once Bulgaria met all eurozone criteria.
Although countries do not automatically join the euro just because they become EU members, they are expected to do so once legal and economic norms such as stable exchange rates and sound finances are in place.
The only exceptions are Sweden and Denmark, which have negotiated political and legal opt-outs and have retained their own currencies.
Political turmoil
On June 4, Deputy Finance Minister Methodi Methodiev expressed hope that Bulgaria could join the euro in mid-2025, as a calmer economic situation would allow the country to request additional assessments from the EU, according to the Bulgarian news agency BTA.
But just days later, the country was plunged into political turmoil after the far-right won powerful elections in Germany and Europe.
The pro-Russian, ultra-nationalist Vazhrazhdane party, which argues that the euro would destroy Bulgaria's economy, won about 14 percent of the vote and three of the country's 17 European Parliament members.
Former Prime Minister Boyko Borissov's GERB party needs at least two partners to form a coalition government, and abandoning Lev may not win him any votes.
According to a Eurobarometer survey, only 49% of Bulgarians are in favor of joining the euro, and 64% believe that joining the euro would make prices higher.
Inflation Concerns
After the pandemic, inflation soared to 17% in some EU countries as the war in Ukraine pushed up energy and food costs.
The ECB, which is responsible for keeping inflation at around 2 percent, is checking how inflation in eurozone candidate countries compares with Denmark, Belgium and the Netherlands, the EU's best performers last year.
The remaining EU member states – the Czech Republic, Hungary, Poland and Romania – have not align their laws with EU standards and do not participate in the exchange rate mechanism, a means to avoid wild currency fluctuations with the euro.
Earlier in June, Romania was criticised by the EU for projecting a budget deficit of 7% in 2025, the highest in the bloc.
This follows years of warnings for Bucharest to balance its budget and reform taxes and civil servant wages.
Prime Minister Viktor Orban's Hungary has long been eurosceptic and ministers in Warsaw remain cautious about abandoning the zloty, despite improved ties with Brussels since Donald Tusk took office.
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Update (June 26, 13:41): Added Grafchev's comment.
