Bulgaria's bid to join the euro zone is being hampered by high inflation, according to a European Central Bank (ECB) report. Bulgaria is keen to become the 21st member of the EU monetary union, despite widespread fears that membership would make things even more expensive.
Bulgaria's inflation rate is currently 5.1 percent annually, 1.8 percentage points above the threshold needed for euro zone membership, according to the ECB report. But the ECB noted that inflation is expected to “gradually decline in the coming months” as supply chain issues are resolved.
Bulgarian Prime Minister Dimitar Grafchev acknowledged the report's findings at a press conference and said he would ask EU authorities to reassess Bulgaria once it met all the criteria for adopting the euro.
Deputy Finance Minister Methodi Methodiev expressed optimism that Bulgaria could join the eurozone by mid-2025 if an improving economic situation would allow for a new assessment from the EU.
However, political turmoil followed shortly after the national and European elections, with the far-right, pro-Russian anti-euro party Vazraddane winning around 14% of the vote and three of Bulgaria's 17 MEPs.
Former Prime Minister Boyko Borissov's GERB party is currently facing the challenge of forming a coalition government, with the abolition of the lev being a contentious issue. According to a Eurobarometer survey, only 49% of Bulgarians support joining the euro, and 64% believe that joining the euro would lead to further price increases.
Joining the euro is not automatic for EU member states, who must first abide by legal and economic standards, including maintaining stable exchange rates and sound public finances. Sweden and Denmark are exceptions, having negotiated withdrawal deals that allow them to keep their own currencies.
After the pandemic, inflation soared in several EU countries, hitting 17%, due in part to the impact of the war in Ukraine on energy and food prices. The ECB, which aims to keep inflation at around 2%, is assessing euro zone candidates against the inflation rates of some of the EU's best-performing countries, including Denmark, Belgium and the Netherlands.
Other EU member states, such as the Czech Republic, Hungary, Poland and Romania, have yet to align their laws with EU standards and join the exchange rate mechanism that stabilises their currencies' fluctuations against the euro.
Romania faced criticism from the EU earlier in June over a projected 7% budget deficit in 2025, after years of recommendations to balance its finances and reform its tax and civil service wage system.
Hungary, under the leadership of Prime Minister Viktor Orbán, maintains a eurosceptic stance, while in Poland, despite improved ties with the EU under Prime Minister Donald Tusk, the government remains cautious about replacing the zloty with the euro.
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