Bulgaria next in line to introduce the euro

[eurocoin]

Pierre Moscovici, European Commmisioner for Economic and Financial affairs has said that Bulgaria will be the next country to introduce the euro when the time is ripe. That will still be at least 2 years from now. Bulgaria announced in January that it wants to join the eurozone.

[chrisild]

According to the current schedule, Bulgaria could become a euro country on 1 Jan 2024. According to this Spiegel article (from the latest print issue, here in an English version), some in the EU are not all that happy about the plans ...

[Figleaf]

Good article. On one side of the balance is the corruption that reminds people of how Greece got away with doctored stats. On the other side of the balance is that accession to the euro will bring government budget discipline and tame inflation, increase wealth and thereby be to the detriment of populism.

That makes the question one of risk analysis: how far can you trust future Bulgarian governments to stay within the limits. The obvious solution is politically difficult: giving the ECB real power to intervene in money creation and destruction. If the other member-states - or their finance ministries - would be willing to yield some power, the balance of risk could be changed enough to make Bulgaria's accession attractive. A far more painful solution would be to agree on a procedure to kick a member-state out of the euro. Doing nothing would solve nothing.

Peter

[eurocoin]

Of course in the meantime it has become clear that it is Croatia that will be first, not Bulgaria. Bulgaria as a country is not worth it to enter the eurozone and I foresee only trouble. Though as a collector, of course it will be interesting to see their euro coins.

[eurocoin]

The European Central Bank has recently adviced negatively about the introduction of the euro in Bulgaria. It has found that the country is not in compliance with the convergence criteria, due to a too high inflation, and that its legislation is not completely compatible. The negative assessment makes it difficult for Bulgaria to introduce the euro on 1 January 2024, as it is intending.

[Figleaf]

Doing nothing would solve nothing.

A chance to achieve something lost. This is of course not the moment to impose strict budgets, with large groups of Ukrainians in Bulgaria, but just identifying the problem and not offering even partial solutions is a waste of time. Hasn't it occurred to these stale civil servants that inflation is due to many factors (10 at last count), most (8 at last count) NOT related to finance? Don't they have the vision to see that helping Bulgaria get on its feet would resonate beyond Bulgaria and be another blow to Putin?

Peter, frustrated in France

[Offa]

Bang goes my cheap beer and food when I visit

[chrisild]

Don't they have the vision to see that helping Bulgaria get on its feet would resonate beyond Bulgaria and be another blow to Putin?

Sure, the euro has always been a political "project" too, but not primarily. Keep in mind that what applies to the EU in general also applies to its currency: Once a country has become a (European Union or euro area) member state, all the criteria that used to be relevant during the accession talks are no longer important. Sure, if a country - that some years ago made the mistake of wanting to get in - later wants to get out, it is welcome to leave of course.

But think of cases like Hungary (with regard to the EU), and until some time ago I would have added Slovenia (when it comes to the euro). In the latter case, things look better again, but I don't think enlarging any of the two only in order to piss the Russian regime off is a good idea.

[Figleaf]

I wasn't thinking or saying that the euro is the only solution. I was arguing that doing nothing is most certainly not going to solve anything.

Peter

[chrisild]

Bang goes my cheap beer and food when I visit

May well be so. It's called inflation, and that is currently an issue in several European (and North American) countries. Does not have much to Bulgaria or the euro though.

The country decided, back in 1997, to unilaterally tie the Bulgarian Lev to the Deutsche Mark at a fixed exchanged rate. That rate has not changed since then, except the "old lev" was replaced by the "new lev" at a fixed rate, and the mark was replaced by the euro at a fixed rate. But maybe you had your beer and food there before the mid-90s ...

@Figleaf: And all I was saying is that we should not introduce a special "Lex Bulgaria" when it comes to how and when the euro can be introduced in a country.

[chrisild]

What are Bulgaria's chances for 2024?

Hmmm. Judging from the latest convergence reports, that is quite unlikely. See the European Commission's report here (PDF, primarily p. 53–69). The ECB's report is here; hope the direct link works.

[Angus]

What's the latest on Bulgaria's chance of joining in 2024?  What would the next step be?

[eurocoin]

By the end of March, the Bulgarian treasury will launch a website on the introduction of the euro. The website will also contain a timeline. In July the final decision will be taken whether the country will introduce the euro on 1 January 2024. If so, from August Bulgarian retailers will have to indicate prices both in Lev and Euro.

In its last convergence report of June 2022, the ECB concluded that Bulgaria did not meet 2 convergence criteria. The inflation was too high (5.9% while it should be maximum 4.9%) and the Bulgarian legislation was not fully compatible yet.

[chrisild]

The euro introduction process may take some more time, or come to an end, we'll see. "Bulgaria's parliament will be dissolved on Wednesday after failing to properly elect a government, and an early general election is scheduled for 2 April." (Source: EurActiv) In a German forum the link to the German version of that story was posted; I found it interesting that apparently the Green Insurance Card system is the problem here. And of course there are parties that are against introducing the euro anyway. So who knows about the Bulgarian plans ...

[Figleaf]

To quote the article you linked to The changes in the Insurance Code seriously affect the financial interests of some Bulgarian companies from the insurance sector.

I suspect that by sitting on foreign claims for as long as possible or simply ignoring them, the Bulgarian insurers in fact enjoy a free loan from the green card system. If that loan is called in all at once, they'll have liquidity problems that they threaten to shove onto the shoulders of their Bulgarian clients.

I also suspect that if Bulgaria can in fact introduce the euro, this will remove an important break on EU insurers to start business in Bulgaria and that Bulgarian insurers are not waiting for such powerful companies.

And so, parties that have little in common blocked a EUR-accession related law for different reasons. Ironically, their action shows how Bulgarian consumers will profit from increased competition after the introduction of the euro.

I admire those rare politicians who let their country's interest prevail over the interest of their party and their personal interest.

Peter