From lev to euro: How Bulgaria - and other countries - join the eurozone

The European Commission and the European Central Bank gave the green light last week for Bulgaria to join the eurozone, bringing the single currency bloc one step closer to welcoming its 21st member.

The support from the two key institutions follows the release of separate reports that found Bulgaria meets the required economic, political and legal conditions for adopting the euro. Eurozone governments and the European Council will now consider Bulgaria's entry into the currency union, which could be finalised as soon as January 2026.

“Bulgaria’s euro area membership will not only mark a significant achievement for the country with important benefits for its economy, but will also reinforce the strength, resilience and voice of the euro area,” Eurogroup President Paschal Donohoe said in a statement. “This development reflects the enduring stability and attractiveness of our common currency.”

But what exactly does it take for countries to adopt the euro, and what impact might an expanded eurozone have on Bulgaria, Europe and the world?

The European Union mandates a set of standards known as convergence criteria that member states must fulfil in order to adopt the euro as their currency. Also referred to as the Maastricht criteria, the standards were established in the Maastricht Treaty of 1992.

The convergence criteria consists of set benchmarks around four economic principles: inflation, public finances, long-term interest rates and currency exchange rates.

“Joining the euro area is a demanding, rules-based process,” European Commissioner for Economy and Productivity Valdis Dombrovskis said at a press conference in Sofia. “[Bulgaria] has maintained fiscal discipline and achieved sustained economic growth while keeping price levels and interest rates in line with the convergence criteria.”

Last month, Bulgaria’s 12-month average inflation rate was 2.7%, according to the European Central Bank’s and the European Commission's convergence reports, a rate that fell below the mandated 2.8% benchmark. The government’s budget deficit stood at 3% of GDP last year and its gross debt-to-GDP ratio was 24.1%, both figures fulfilling the EU standards.

“Bulgaria has a large number of national fiscal rules at the general government and subnational levels,” the European Central Bank’s report stated, noting that it is the country’s “robust fiscal framework that has helped it to maintain a low debt ratio.”

The reports also found that Bulgaria’s long-term interest rate of 3.9% was below the benchmark of 5.1% and that the country’s current currency, the lev, fulfilled the exchange rate criteria.

“The broad-based analysis of underlying factors relevant for the sustainability of Bulgaria’s convergence suggests that sufficiently robust conditions are in place for the country to be able to maintain a sustainable convergence path in the medium term, thus supporting a positive assessment,” the European Commission’s report concluded.

Economists note that joining the eurozone, the world's largest common currency bloc, can provide several economic advantages for EU member states.

These include the elimination of exchange rate risks as well as price transparency and lower cross-border transaction costs, which can boost international trade and investment. Adopting the euro can also help improve borrowing conditions as eurozone countries can access lower interest rates on sovereign debt given their economy is backed by the European Central Bank, which dictates monetary policy across the bloc.

“The euro is a tangible symbol of European strength and unity,” European Commission President Ursula von der Leyen said in a statement. “Thanks to the euro, Bulgaria's economy will become stronger, with more trade with euro area partners, foreign direct investment, access to finance, quality jobs and real incomes.”

However, joining a common currency union does come with trade-offs. These include the loss of an independent monetary policy, a mandate to adhere to bloc-wide fiscal rules and the risk of being impacted by economic shocks that occur elsewhere in the union.

Recent European Union polling found Bulgarians are split on adopting the euro, with 50% saying they are against joining the eurozone. Across Europe, however, the euro enjoys its highest approval rating ever, with 74% of people in the EU and 83% of people in the eurozone supporting the single currency.

An expanded eurozone and enhanced European economic integration could strengthen the euro’s position as a prominent global reserve currency, experts say, especially amid the volatile standing of the US dollar in the global economy.

Currently, the euro is the world’s second most popular reserve currency, behind the US dollar. It is used in almost 40% of cross-border payments worldwide and in nearly half of all EU exports, according to the European Union.

In a speech last month, European Central Bank President Christine Lagarde said that ongoing geopolitical shifts “could open the door for the euro to play a greater international role,” stressing that Europe should seize the opportunity to strengthen its currency union.

A stronger euro in the global economy, the European Union notes, could help insulate Europe from economic shocks abroad, reduce dependence on other currencies and increase reliable access to finance for European businesses, among other advantages.

“Moments of change can also be moments of opportunity,” Lagarde added. “The ongoing changes create the opening for a global euro moment.”

Next month, the World Economic Forum will launch a new community, Leaders for European Growth and Competitiveness, which will consist of leaders from public, private, civil society and expert organisations.

The group will support the implementation of competitiveness-enhancing reforms starting in 2025. See here for more details.