Bulgaria’s Eurozone Accession sitecoreitem

Bulgaria's Eurozone Accession

November 4, 2025

As prepared for delivery

Gospodin ministŭr-predsedatel Zhelyazkov, ministŭr Petkova, upravitel Radev, skŭpi gosti: dobro utro. V polza na nashite mezhdunarodni gosti, shte govorya na angliĭski ezik.

Prime Minister Jeliazkov, Minister Petkova, Governor Radev, dear guests: good morning. In the spirit of Bulgarian hospitality and out of respect for our international guests, I will speak in English.

Dear Christine, dear Paschal, dear Valdis, what a pleasure to join you in Sofia on a happy occasion, at the cusp of Bulgaria's adoption of the euro. As the head of the IMF-the institution that played a crucial role in setting up Bulgaria's currency board in the late 1990s-and as a Bulgarian, I celebrate this hard-won achievement.

On January 1, 2026, Governor Radev-who has already been attending ECB monetary policy meetings for some time now-will obtain the right to vote at the ECB Governing Council, not only on monetary policy but on matters such as banking supervision, financial stability, payment systems, and the issuance of euro currency, including the digital euro.

Even if most ECB business is conducted by consensus and rarely by a show of hands, acquiring voting power is a hugely important step: Bulgaria is now fully empowered to help shape decisions that affect the euro area and, through the global role of the euro, the functioning of the international monetary system.

So, when we wish each other Happy New Year on January 1, it will indeed be a happy moment for Bulgaria's monetary policy journey. From the painful memories of the hyperinflation to the discipline of the currency boards, first to the deutschmark and then to the euro, from surrendering monetary policy sovereignty to the Bundesbank and later to the ECB, Bulgaria will now get to keep its price stability and take a seat at the decision-making table.

Entry into the euro area will go down in history as a key milestone for Bulgaria, ranking alongside its EU accession in 2007.

What should we expect and what more needs to be done?

To get a better sense of what the coming months hold in store, let us look at the experience of the last country to adopt the euro: Croatia, which made its leap in 2023:

• Rating agencies upgraded Croatia's sovereign ratings by multiple notches, pointing to the reduction of currency risk as well as newly gained access to European financial backstops.
• Croatia's sovereign borrowing costs fell, quickly converging to the euro area average, pulling down borrowing costs for its domestic private sector also-a boost for borrowers, yet also ushering in new financial stability risks.
• Tourism in Croatia, already flourishing, got an added boost as visitors were able to take advantage of the convenience of not having to convert money into unfamiliar national currency.
• Croatia did experience an inflationary "rounding effect" on prices upon euro adoption-a one-off price level jump of some 0.2-0.4 percentage points, not including anticipatory, kuna-denominated markups. This was less than people feared and in line with euro accession experiences elsewhere, even if Croatia was the first adopter during a period of high inflation.

Bulgaria is ready for the euro-and even more so given its longstanding experience with its currency board. Dual-currency pricing is in place ahead of January 1, price monitoring is underway, and a nationwide lev-to-euro information campaign is helping people and businesses prepare for all the aspects of switching to the euro. Unsurprisingly, there has been some nostalgia for the national currency-and some politicization of it.

But let us call it as it is: Bulgaria benefitted from European integration and will benefit further from joining the euro area. Bulgaria's Recovery and Resilience Plan with the European Commission has been upgraded, and we see tangible progress on reforms and investments. Economic momentum is strong. Unemployment is at a record low. Real incomes are rising.

Critically, fiscal discipline has kept Bulgaria's public debt among the lowest in the EU, at just 24 percent of GDP last year-a fraction of the EU average of 65 percent. This discipline has left Bulgaria with important room for countercyclical fiscal policy when future shocks strike.

I would argue that with such strong fundamentals-and provided policymaking remains prudent-Bulgaria can look forward to many of the same positive effects as Croatia saw with euro adoption, right down to seeing more foreign tourists opening their wallets on its beautiful beaches and across the country.

But rather than dancing my way into a street party, let me talk about what more needs to be done:

• First, the duty at home is to recognize that good monetary policy is a prerequisite, but not by a long stretch the sole ingredient, for income convergence with the EU;
• And second, there is the duty to Europe that comes with Bulgaria winning greater voice as a full-fledged member of the European family of nations.

Home front first.

Facts are facts: yes, life in Bulgaria has improved since it joined the EU, yet the country has not been a star performer in the Great European Convergence Machine.

When Bulgaria began its EU accession negotiations in the year 2000, in purchasing power terms its GDP per capita was less than one-third of the EU average; by 2024, it had risen to about two-thirds of the average. While it makes a real difference to people it was not and is not enough. From the Czech Republic to the Baltic states to Romania, others have done better.

The euro will help, but it does not on its own guarantee higher standards of living. No: the challenge goes on.

The task now is to take euro adoption, pair it with good policies, and catapult convergence to the next level. At a very minimum, let Bulgaria aspire for sustained higher growth levels to reach per capita income equal to the EU average within the next decade.

The next question, naturally, is: how?

Like others, Bulgaria faces short-term challenges: wage growth outpacing productivity growth, squeezing profitability and competitiveness and pushing up near-term inflation; booming credit expansion, including for mortgages, with housing prices rising fast; and other indicators of an economy that is currently operating hot.

And even more than others, Bulgaria faces difficult medium- and long-term challenges: population aging, brain drain, and infrastructure and defense needs that compound fiscal spending pressures. Growth, while higher than the EU average, is not enough to generate sufficient high-quality jobs and fiscal revenue.

The short answer to the question of how to do better, given all the challenges, is: with responsible policies aimed at protecting the economy from overheating, guarding economic and financial stability, and lifting private sector productivity, competitiveness, and growth.

Let me boil Bulgaria's domestic policy priorities at this current point in time down to three main tasks:

• Task number one: cyclically tighten fiscal policy. Fiscal discipline has served Bulgaria well over the decades, yet the priorities now are threefold: tempering public sector wage growth to cool domestic demand, increasing pension contributions to curb the deficit of the pension system, and ramping up high-quality public investment to help potential supply keep pace with demand.
• Task number two: be alert to financial stability risks. Stretched real estate valuations warrant close attention and may call for a further tightening of macroprudential policy to restrain credit growth and prevent overheating. The Bulgarian National Bank appropriately introduced several borrower-based measures in 2024. It should be prepared to tighten them.
• Task number three: accelerate structural and governance reforms. This is critical to lift productivity growth and durably lift real incomes. Priorities should include mobilizing untapped labor potential and attracting foreign talent to compensate for aging and emigration. Investments should focus on education and AI, and reforms on institution-building, transparency, and governance, including in state-owned enterprises.

Reforms are never easy, but progress is essential and-provided there is broad engagement, candid and persuasive communication, and strong steps to support those left behind-progress is achievable. Fiscal and structural reforms can work together to deliver a virtuous circle of faster growth and better public spending.

With good policies, euro adoption can increase both dynamism and resilience, including because-as the rating agencies recognize-new backstops kick in. Joining the Eurosystem means Bulgarian banks become eligible for ECB liquidity support via main refinancing operations and, in extremis, emergency liquidity assistance. In addition, adopting the euro means Bulgaria becomes eligible to join the European Stability Mechanism, the world's largest regional financing arrangement-it should do so promptly.

With privilege comes responsibility, so let me conclude with some thoughts on Bulgaria's duties to Europe.

Bulgaria's first duty, of course, is to decisively tackle its own shortcomings, especially in the area of governance-and it is Europe's duty to insist on progress.

Bulgaria's second duty is to actively promote deeper economic and financial integration in Europe-and doubly so given this time of profound global uncertainty that we are in, shaped by shifts and transformations in geopolitics, trade, demographics, and technology.

It is simply not good enough that the EU should be a zone of wealth, education, and talent that contents itself with real GDP growth of a little over 1 percent per year on average while sending far too many of its best ideas and far too much of its savings abroad so others may reap the benefits.

And indeed there has been plenty of talk about what Europe can and must do to rediscover its dynamism and lift its competitiveness-many words spoken, many reports written. Yes, progress is being made. But it is too slow.

In no place is this more obvious than in the idea of a European banking union-an area with clear relevance to both private cross-border risk sharing and monetary policy transmission. We see countries that feel they have submitted their banking systems to the high-quality oversight of the Single Supervisory Mechanism while not getting the cross-border banking privileges they expected in return; we see host nations still mistrustful of the larger jurisdictions; and we see some countries unbudgingly committed to strongly inward-looking banking industry structures.

All of this needs to change. Newer EU member states like Bulgaria, with their less advanced banking systems, should position themselves in a fourth category: as champions for change, pushing hard for the idea of a single European savings and investment union.

So here is my message to Bulgaria: use your voice-in the EU and now in the euro area. If you want more efficient banking and financial intermediation and better opportunities for startups, innovation, and growth-please-push for the completion of the EU single market and the single European financial system.

Let me finish with this simple message to my beloved Bulgaria at the eve of joining the euro: for the sake of the Bulgarian people and for the sake of Europe please make the best of it!

Blagodarya vi and thank you.