For Bulgaria, the euro is the final stage in the long-term goal of integration into the single European financial area.
The currency board system was introduced back in 1997, meaning that the Bulgarian lev is 100% backed by foreign exchange reserves and directly pegged to a more stable currency – first the German mark and then the euro.
This practically guaranteed minimal exchange rate fluctuations and inflation control. However, the changeover to the euro involves much more than just the exchange of banknotes.
Each country must fulfil the Maastricht criteria, which are designed to ensure that a new member fits the eurozone's monetary policy without disrupting stability.
First of all, inflation must be near the eurozone average, meaning the annual rate of price increases must not be more than one percentage point above the average.
The budget deficit must not exceed 3% of gross domestic product (GDP). Public debt must remain below 60% of GDP, and interest rates should be stable – not suddenly high, which would burden citizens and the economy.
Bulgaria has recently met these criteria on paper, but the question is whether it can maintain discipline when the euro becomes a common currency.
In the first years of this millennium, Bulgaria met these criteria "softly" – the lev exchange rate remained stable and inflation hovered around 2.5%. In 2024, public debt stood at 24.1% of GDP, and in mid-January 2025, it was expected to rise to around 25.1%.
This is well below the 60% limit, but inflation was 2.6%, i.e., 0.1 percentage point above the prescribed value. Nevertheless, these deviations were within tolerance, meaning that the macroeconomic indicators were considered satisfactory. However, meeting the criteria on paper is not the only challenge.
Divided public
The most important legal change took place on 1 February 2024, when the Bulgarian National Bank (NBB) was mandated to become part of the Eurosystem (the system of the European Central Bank (ECB) that runs the monetary policy of the Eurozone and prescribes minimum capital and liquidity standards for banks – Basel III standards) from the moment the euro becomes a valid currency.
The law on the NBB provides that the Bulgarian central bank implements the provisions of the ECB, which calls for standardised control of the situation in the banks.
Pro-European parties support the idea of harmonising all institutions with the eurozone, while Rumen Radev is in favour of the idea of a referendum
The law was passed by 167 votes to 48, as MPs from pro-European parties supported the idea of harmonising all institutions with the eurozone, while opposition groups called for a referendum because the cost of living would rise rapidly, as they claimed.
Citizens are divided. Half of them believe that the introduction of the euro should not take place without new consultations.
The country's president, Rumen Radev, is in favour of the idea of a referendum because he believes that the currency changeover needs wider support.
At the end of May, several thousand people gathered at protests in Sofia and other cities, fearing an increase in the cost of living.
Their biggest fear is that traders could initially round up prices to the nearest euro, as happened in Croatia when it switched to the euro in January 2023.
The base price index in Croatia briefly increased by 0.2 to 0.3% until the market adjusted.
Subsidies and economic growth
For many families in Bulgaria, such an increase can be an aggravating factor. The government has therefore announced the creation of a fund for basic food and energy subsidies.
This fund aims to mitigate the initial impact on household budgets, with disbursements commencing only in the second quarter of 2026, when the euro becomes a common currency. Until then, citizens can expect a temporary increase in food prices.
FDI could increase by three to five per cent in the first year after the introduction of the euro
The economy sees the euro primarily as an opportunity. Bulgaria has positioned itself as a major exporter of electronic components and parts for the automotive industry.
The elimination of currency risk—i.e., the elimination of conversion costs from lev to euro and vice versa—can lead to savings of around 1% per year for companies in the technology sector.
Analyses show that foreign direct investment could increase by 3% to 5% in the first year after the introduction of the euro, as investors from the eurozone gain more planning security in terms of costs and profits.
Challenges for banks
However, the banks in Bulgaria are struggling. The results of the stress tests carried out by the Bulgarian National Bank showed that some smaller banks had a higher level of non-performing loans than expected.
In preparation for the euro, all banks must increase their capital to an average of 10% of the value of risk-bearing assets.
This means that they will have to replenish their capital by the end of 2025 at the latest, which is a serious task for those with modest reserves.
In the event of a sharp fall in the value of securities or a slowdown in economic growth, these actors would be in trouble.
The average interest rate for home loans in Bulgaria could increase to around 4.25 per cent
The fact that the ECB can tighten monetary policy is a cause for concern. For example, if inflation in the eurozone does not fall below 2%, the ECB could raise the key interest rate by 25 or 50 basis points.
This would raise the average interest rate for home loans in Bulgaria to around 4.25%.
For those who have taken out a home loan in the past two years, a difference of one percentage point means several months of additional expenditure, which puts a strain on the household budget.
Small and medium-sized enterprises, which account for around 60% of all economic subjects, complain that the increase in interest rates would make it more difficult to plan production expansion or investments in development.
A new reality for Bulgarians
The procedure for obtaining official authorisation for the introduction of the euro takes place in two stages.
The first is the submission of the so-called off-cycle report (a report outside the regular two-year system), which serves the EU to review the state of public finances and the banking sector immediately before the introduction of the euro.
Bulgaria submitted such a request on 24 February 2025, and in May and June the Commission reviewed the application of the law and the status of the banks.
The euro will be a new reality for Bulgarians. The transition to a common currency brings benefits, but also obligations
The second step is the decision of the Council of the European Union, which is taken by qualified majority. If it is confirmed that all conditions are met, the euro will be the only valid currency in Bulgaria from 1 January 2026.
Many point to the example of Croatia, which switched to the euro in January 2023. The price increase was temporary, and in the long term, payment costs have fallen significantly and investor confidence has increased.
Bulgaria is also focusing on attracting new technology companies and investments.
The difference with Croatia, however, is that Bulgarians have been more vocal in their protests and put more pressure on politicians to provide additional guarantees for social stability.
By the end of September, politics and economics must be brought into harmony. The government must run a transparent campaign and ensure that the process is not stalled by challenges such as a change of majority in parliament or demands for an additional referendum.
If the budget deficit exceeds 3% or a new economic crisis emerges, the decision to adopt the euro could be postponed. Any new report or unexpected change in the global economy could postpone the plans for Bulgaria.
For the average citizen, switching to the euro means earning and spending in a currency used by millions of people in Western and Central Europe.
The price stability of basic products protects purchasing power in the long term, and savings become more secure. On the other hand, it also means a loss of flexibility – the government will no longer be able to easily change interest rates or devalue the currency to boost exports.
Now any decision by the ECB on interest rates will have a direct impact on the standard in Bulgaria.
The euro will be a new reality for Bulgarians. The transition to a common currency brings benefits – compliance with the strictest rules, lower business costs, and higher investments – but also obligations.
If Bulgaria emerges from this process as a success story, it will serve as a guide for all those wishing to join the eurozone. If it is confronted with problems such as unexpected price increases or falling investment, this will be a lesson for all those waiting to take a similar step.
The transition to the euro in Bulgaria will therefore be more than an economic decision – it will be a test of the state's and society's ability to adapt to the demands of modern times without major turbulence.
