Bulgaria is set to join the euro zone. Its citizens aren’t convinced

Bulgaria is about to develop into the twenty first member of the euro zone after receiving log out from the European Fee and European Central Financial institution final week — however not everyone seems to be satisfied the transfer is a good suggestion.

Bulgaria’s Prime Minister Rosen Zhelyazkov, member of the center-right GERB social gathering, has made becoming a member of the euro zone a precedence, arguing that it will enhance financial stability and progress.

Nevertheless, fears of upper costs and a lack of independence have stoked nationalist-party fueled protests in opposition to the nation’s euro ascension. A latest European Union survey confirmed that half of Bulgaria’s inhabitants is in opposition to adopting the euro.

Economists and consultants weighed in on the potential dangers to Bulgaria becoming a member of the euro, outlining what the japanese European nation might lose and acquire from the transfer.

“Essentially the most speedy concern is a spike in costs throughout the forex swap, as some companies could spherical up costs. Many Bulgarians fear that eurozone membership might erode their buying energy, particularly in poorer rural areas,” Valentin Tataru, an economist at ING who covers Bulgaria, instructed CNBC.

Nonetheless, he additionally famous Bulgaria’s forex has lengthy had a set trade fee to the euro and subsequently, “the transitional inflation bump needs to be gentle.”

The second key concern is what giving up Bulgaria’s forex, the lev, will imply for the nation’s independence and sovereignty — beliefs for which it has develop into symbolic in accordance with Andrius Tursa, central and japanese Europe advisor at Teneo.

“Its substitute with the euro could also be perceived by components of the inhabitants as a lack of nationwide management,” he instructed CNBC. As well as there are considerations about relinquishing management of financial coverage as nations within the euro zone are topic to choices by the ECB, Tursa added.

The Bulgarian Nationwide Financial institution (BNB) would for instance not solely be answerable for setting the nation’s rates of interest primarily based solely on how its particular person economic system is growing.

Nevertheless, “eurozone nations profit from decrease rates of interest because of the credibility of the ECB and diminished forex danger,” Tursa identified. Decrease rates of interest usually profit debtors as loans and mortgages develop into extra inexpensive.

Becoming a member of the euro zone and securing oversight from the ECB might enhance financial stability and progress prospects for Bulgaria, Jasmin Groeschl, senior economist for Europe at Allianz SE, instructed CNBC.

International funding might for instance improve, she prompt, and the nation’s gross home product can be anticipated to be boosted by euro zone membership.

“Deeper monetary integration would strengthen Bulgaria’s monetary system underneath the ECB’s oversight, enhancing financial stability,” Groeschl defined. “Adopting the euro would strengthen Bulgaria’s ties with the EU, enhancing its affect and credibility,” she added.

Key areas that underpin the economic system like commerce and tourism may be supported, Teneo’s Tursa stated.

A lot of Bulgaria’s key buying and selling companions are within the EU, with most of its exports going to members of the 27-state bloc in 2023 in accordance with knowledge from the nation’s statistics workplace. Key sectors embrace equipment and transport gear, manufactured items and meals.

Tourism has in the meantime develop into a significant contributor to the economic system as Bulgaria positions itself as each a summer time and winter vacation spot. Over 13 million foreigners visited the nation in 2024, official statistics confirmed.

“Bulgaria’s accession to the eurozone would facilitate commerce and tourism flows with different eurozone nations by eliminating the prices and burden related to forex conversion,” Tursa stated, including that this could be notably necessary on account of Bulgaria’s sturdy integration into EU provide chains.

One danger flagged by the economists and analysts are the political tensions surrounding Bulgaria’s euro adoption.

“Public opposition to euro adoption has already triggered notable protests, and within the medium time period, the problem might develop into a key driver of rising assist for populist and Euroskeptic political actions,” Teneo’s Tursa defined.

However regardless of native protests and considerations about euro zone ascension, at the very least in the long run the advantages for the nation outweigh any negatives, Allianz SE’s Groeschl argued.

“The trade-off includes shedding some financial autonomy in trade for deeper integration,” she stated. “Though Bulgaria would lose some financial coverage management and be topic to strict fiscal guidelines, the benefits of larger financial stability, diminished transaction prices and stronger integration with the EU market would usually outweigh these disadvantages.”

ING’s Tataru struck an analogous tone, saying that as a result of the lev is already tied to the euro, there shouldn’t be a significant shock.

“Becoming a member of the euro is among the most strategic steps Bulgaria can take to safe long-term prosperity and deeper European integration,” he stated.