Bulgaria is on track to officially adopt the euro as its currency on January 1, 2026, becoming the 21st member of the Eurozone. This significant step follows the European Union Council's formal approval, confirming Bulgaria's successful fulfillment of the stringent economic convergence criteria.
The nation's journey towards euro adoption has been a multi-year endeavor, characterized by a commitment to fiscal discipline and economic reforms. A crucial phase in this process was Bulgaria's entry into the European Exchange Rate Mechanism (ERM II) on July 10, 2020. During its time in ERM II, Bulgaria worked to stabilize its national currency, the lev, against the euro, establishing a fixed conversion rate of 1.95583 lev per euro, which will be the official rate upon adoption.
To qualify for the euro, Bulgaria had to meet key convergence criteria, including price stability, sound public finances (with a deficit not exceeding 3% of GDP and debt below 60% of GDP), and exchange rate stability. The country has shown considerable progress in meeting these benchmarks, with its inflation rate decreasing from over 9.5% to approximately 2.7% in the past year, with further reductions anticipated.
The transition to the euro is expected to yield substantial economic benefits for Bulgaria. Analysts predict lower interest rates on loans for businesses and consumers, which could stimulate investment and spending. A notable structural change will occur in the banking sector, with minimum reserve requirements for commercial banks projected to decrease from 12% to 1%. This increase in liquidity is anticipated to enhance banks' lending capacity, potentially boosting economic activity and supporting growth forecasts of around 2.75% annually.
Beyond direct financial advantages, Bulgaria's entry into the Eurozone is expected to enhance foreign investment and trade by eliminating currency exchange risks and simplifying transactions. This move is viewed as a strengthening of Bulgaria's position within the European economic framework, providing access to the European Central Bank's monetary policies and stability mechanisms. Continued adherence to sound economic policies will be crucial for sustained prosperity within the Eurozone.