Alter Euro: Bulgaria

Lev is currently the national currency of Bulgaria, the latter joined ERM II in 2020 and plans to adopt the euro in 2024.
credit: Flickr

In the absence of direct political ambition, a superfast Europe is a reality in many common policies. The defense policy, the European Public Prosecutor’s Office or the Charter of Fundamental Rights are each loaded with exceptions, special regimes, exceptions… Economic and monetary union can hardly avoid this difference.

Eurozone: very fast Europe

Euro is the single currency of the European Union. The main contracts provide for this. The euro, introduced only 21 years ago, represents the culmination of the demand for monetary, financial, budgetary and economic convergence, so countries need time and reforms before adopting it.

After 2002, seven new countries joined the euro zone, Slovenia in 2007, Cyprus and Malta in 2008, Slovakia in 2009, Estonia in 2011, Latvia in 2014 and Lithuania in 2015. Croatia will become a member of this joyful brotherhood on January 21. , 2023. 34 independent states, even if they use the dollar, are far from creating a monetary union. Note, however, that while Montenegro and Kosovo use this de facto currency, Andorra, Monaco, the Vatican and San Marino pay in euros with their national side coins.

Legally, states have an obligation to adopt the single currency, which they agreed to by joining the Union, with the exception of Denmark, which obtained an exception. Thus, 6 countries remain which can be grouped into two categories. Opponents (Sweden, Poland, Hungary, Czech Republic): despite a good or healthy economy, political leaders, sometimes backed by cautious public opinion, reject the further integration that the euro would represent. Volunteers (Bulgaria and Romania): despite a fragile economy and risks for both sides, the leaders, relatively supported by their constituents, have been campaigning in Brussels for years to join the club. Thus, the vast majority of political forces in Bulgaria allocate an important place to the euro in their programs, only the radical Russophile rightists oppose it.

The 2008 crisis and its dramatic consequences in continental Europe, especially in the south, in Greece, raised fears of a breakup of the eurozone. The stability and capacity requirements of the candidate states have therefore increased considerably, not to mention the political risks. The example of Austria-Dutch blocking the integration of Bulgaria and Romania into the Schengen area (in favor of Croatia) shows that on the one hand, the “savings” have struck again, and on the other hand, fears are still visible.

Bulgaria is close to qualifying for the Euros

Five so-called convergence criteria are applied to each EU member state before adopting the euro. They are used to check the stability of the currency, its convertibility or the adequacy of the national budget and legislative system. These economic and financial criteria take care not to bring an economy that is too fragile to participate in the establishment of the common monetary policy, they should reassure the population that already uses the euro and those who intend to change the currency.

Compared to the euro zone average, the price stability criterion requires an inflation rate below 5%, the sound and reliable public finances criterion requires a deficit of less than 3% of GDP and a debt of less than 60%, and the interest rate convergence criterion. mandates long-term interest rates below 2.9% and the exchange rate stability criterion involves participation in the European Exchange Rate Mechanism II.

The European Central Bank (ECB) confirms all five of these criteria for Bulgaria in its report on the convergence of Member States’ monetary policies. Non-compliance with inflation and deficit criteria is explained by a particularly difficult situation (war in Ukraine, energy price crisis) and the ECB believes that it will not cause problems in the medium and long term.

Membership is hindered by a politicized institutional environment

On the other hand, the ECB points to legislative and institutional deficiencies in the prohibition of monetary financing (the use of “money printing” to save the economy), the independence of the Central Bank and the legal integration of the Eurosystem. Thus, the banking institution calls for reforms in structural resilience (the ability of institutions to cope with crises), business environment, financial stability and institutional quality. Many big projects still standing between Lev and Euro.

If the date of acceptance is still uncertain, the design of the parts has already been determined. Thus, the Bulgarians discarded the representation of the Cyrillic alphabet, the design of the Rila monastery in the southwest of the country, and the Tsarevets fortress in the center, and chose another monument, the horseman of Madara: a rock-cut sculpture. A horseman, representing the east of the country, swelled a lion after his dog. Dating back to 710, it is a memory of the ancient Bulgarians and already bears a few centimeters of the current currency, the lev.

Member States, the only EU country to use the Cyrillic alphabet, decided in favor of the Bulgarian language during the 2007 Treaty of Lisbon, against the opinion of the general bodies, to include the EBPO notation on euro banknotes.

Therefore, there is still a long time before the Sofia authorities accept the euro. If the convergence criteria are met, legislative reforms should further strengthen the stability and transparency of the Bulgarian system, which still promises months of waiting in a context of severe political instability.

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