Bulgaria
Euro accession in times of permanent political crisis
Bulgaria joins the Eurozone. The population is skeptical. Political instability and corruption overshadow the project. But the economy is hoping for investments.
A new motif will adorn many euro coins from the New Year onwards: Saint John from the Rila Mountains can then be seen on Bulgaria’s one euro coin. The southeastern European country will become the 21st member of the Eurozone at the turn of the year.
John, who withdrew into the wilderness of the mountains as a hermit, temporarily living in a cave and living on herbs, is the country’s most important saint, patron saint of the population and founder of the country’s most famous monastery.
Many observers hope that Johannes will bring the country some luck: after bankruptcies, bad luck and mishaps, Sofia only manages to finally join the euro area with a lot of hassle. At least two attempts failed.
Croatia as a negative role model?
Bulgaria was actually supposed to expand the eurozone as early as 2024, but the government’s sloppy preparations and failure to meet the admission criteria put a damper on the plan. Above all, high inflation, which at times reached double-digit rates, made joining impossible.
Even now the ECB and the EU Commission are turning a blind eye. The country only barely achieved the reference value of 2.8 percent for inflation that they set (2.7 percent) and with a lot of good will. Critics tend to speak of whitewashing. As in the case of Croatia, which joined the eurozone in 2023, Bulgarian inflation did not have to be measured against the overall average of all member states.
Certain countries with particularly high and particularly low inflation were selected for the calculation – so that it fit nicely. In the case of Croatia, this was a failure: The country keeps making headlines because inflation is particularly high there after the introduction of the euro. The Bulgarians are also afraid of this, which is why the introduction of the euro is not very popular. In most surveys, almost half of the population is skeptical or against the euro.
Scandals and mistrust characterize politics
The country, the poorest in the European Union in terms of gross domestic product, suffers from high levels of poverty. Over a fifth of the population already lives below the national poverty line and struggles to put food on the table regularly. In addition, Bulgarians do not have much confidence in their government. There have been seven general elections since 2021, and the next one is already coming up.
Scandals such as the highly publicized publication of bedroom photos of former Prime Minister Boiko Borissov shook trust in the state apparatus. They showed him sleeping in bed armed with a pistol, a gold bar and a wad of 500 euro bills, but Borissov portrayed this as a conspiracy.
Massive corruption, mismanagement and political failure are the order of the day. Those responsible are also accused of drawing up the first budget in euros: That’s why over 500,000 Bulgarians recently took to the streets across the country. The protests ultimately led to the resignation of the current government.
Enviable Economic growth
Given these circumstances, many skeptics are not particularly happy about joining. They argue that even small countries could cause the euro zone to slide and warn of a new Greece. The ECB and the EU Commission were also too generous when Hellas joined. Athens had presented false economic data at the time, and the auditors in Frankfurt and Brussels were demonstrably sloppy in their control work.
This resulted in the worst crisis to date in the common currency area, which almost dragged the euro into the abyss. But Dimitar Radev, economist and head of the Bulgarian central bank, doesn’t want to know anything about such horror stories. The 69-year-old, who has been a guest on the ECB Governing Council for several months before becoming a full member, points to the close ties between the previous national currency, the Lev, and the euro.
In fact, it has been pegged to the common currency since the euro was launched in 1999. The country’s economy is very robust, with Bulgaria recording an enviable economic growth of three percent – twice the EU average. After the introduction of the euro, it is likely to attract a lot of investment. Companies hope for new opportunities. Greater integration into the European Union is likely to increase the pressure to bring traditionally strong corruption under better control.
Probably the last entry into the euro for the time being
With Bulgaria’s current accession, the expansion of the euro zone is likely to take a break for the time being. According to EU laws, all 27 member states are supposed to join the Eurozone if, like Denmark, they have not ruled out joining. But except in Romania, where they are still a long way from fulfilling the admission criteria, there is currently not much interest: especially in Poland, the Czech Republic and Sweden they would prefer to stick to the local currency.
This is partly due to nationalistic reasons, at least in Eastern Europe, but is also due to the ECB’s failure to quickly combat the last wave of inflation. Many central banks that are hesitant about the euro point out that, due to their independence, they were able to get inflation under control better and faster than the ECB.
So Johannes from the Rila Mountains will probably have to wait a little longer until the landmarks of the countries that are still missing can be seen on the euro coins. But the hermit has never lacked modesty.
