The Eurocentric: Bulgaria’s Grave Euro Mistake
Ibrahim Boran
Beginning January 1, 2026, Bulgaria will become the newest member of the eurozone, replacing the lev with the euro. While the European Union (EU) celebrates this as an achievement, its success will depend on careful regulation of the currency’s adoption. When Croatia joined the eurozone, consumers noticed that prices increased significantly, instead of following the fixed exchange rate. For Bulgaria, switching currencies next January is a significant risk to take, given the nation’s economic challenges. While nearly all EU member states are required to join the eurozone, Bulgaria is doing so sooner than it was obligated to.
Serious Economic Risks
While Bulgaria’s economy has undeniably grown significantly since becoming a member state in 2007, it still has far to go in order to achieve economic convergence with the other member states. Bulgaria remains the EU member state with the lowest GDP per capita and wages in the EU. While minimum wage is expected to increase to €618 (about $675) a month next year, this still remains the lowest in the EU as well. Bulgaria must avoid a repeat of Croatia’s experience, where some businesses used the euro changeover to justify sharp price hikes.
Croatia is the last member state to have adopted the euro on January 1st, 2023. Consumers are not impressed as they have been suffering from very high prices, particularly in grocery stores. The situation has deteriorated so significantly that while Slovenians used to come to Croatia to grocery shop, Croatians are now seeking cheaper prices in Slovenia. This signifies that there is a crisis in Croatia, particularly when wages are still higher in Slovenia. The average hourly labor cost in Croatia in 2024 for companies with ten or more workers was 16.5 euros, compared to 27.1 euros in Slovenia. This means that after taking into consideration wages and pension contributions that employers must make, labor is still significantly cheaper in Croatia, yet now Croatians pay higher prices at supermarkets.
Croatia’s struggles with prices at the grocery store cannot be completely blamed on the euro. Instead, it is also partially due to a lack of competition as a few chains dominate the market, leaving consumers with few options. However, consumers still insist that they noticed a significant increase when Croatia switched currencies. The European Central Bank was quick to claim the currency was not the culprit, yet Croatians were not blaming the currency itself but businesses taking advantage of the currency switch. The Croatian government warned businesses that failure to reduce inflated prices could result in the loss of energy subsidies, fines, or higher taxes, underscoring that prices diverged from the set exchange rate.
Croatia’s supermarket woes continue, and have led to boycotts. This spilled over to Bulgaria, which also faces high prices for groceries. This underlines the need for the Bulgarian government to strictly enforce the fixed exchange rate and not allow businesses including supermarkets to use the adoption of the euro currency as an opportunity to raise prices.
Legal Obligations To Use Euro
An interesting aspect of the debate over whether the remaining member states should adopt the euro is that all member states except Denmark are legally obliged to use the currency. This stems from the Maastricht Treaty which only granted an opt-out to Denmark and the United Kingdom after negotiations. This also means that if the UK were to renegotiate EU membership and reenter the bloc, the UK would also be legally required to adopt the euro as well. After Bulgaria joins, Czechia, Hungary, Poland, Romania, and Sweden are still obligated to adopt the euro.
An interesting loophole exists in the legal obligation to adopt the euro. EU member states can ‘accidentally’ miss the economic requirements. This is because while member states are required by the EU treaties to use the currency, it is not as simple as declaring the currency the new currency of a member state such as Bulgaria. Instead, Bulgaria first had to prove that it met certain economic requirements in order to be considered prepared to join the eurozone. Sweden, since it held a failed referendum regarding the euro currency in 2003, has not joined the currency. Sweden is still required to do so as the member state joined the EU in 1995, after the Maastricht Treaty was already adopted meaning that Sweden could not negotiate an opt-out of the currency. In the absence of a firm deadline, EU member states have the opportunity to time their euro adoption strategically, potentially manipulating economic conditions to meet the entry criteria.
A common reason for resisting eurozone membership is the loss of control over national monetary policy and, with it, the ability to manipulate the currency. This concern does not apply to Bulgaria, as EU rules require a country to spend at least two years in the Exchange Rate Mechanism (ERM II) before adopting the euro—effectively preventing currency manipulation during that period. This mechanism has existed since 1999, when the euro currency first came into existence. The mechanism is technically voluntary to join yet is required in order to adopt the euro. Bulgaria joined the ERM II back in 2020. At times, increasing or decreasing the value of a currency is done to achieve economic objectives, this is impossible for a member state to do so once it uses the euro. The European Central Bank controls the euro currency and given its status as one of the most independent banks in the world, member states do not have any ability to manipulate the currency.
As Bulgaria has a long road to economic convergence with wealthier EU member states, it should have delayed adoption of the euro currency. There are significant risks that Bulgaria’s economic growth will be hurt if companies take advantage of the adoption of the euro currency and increase prices for consumers, instead of simply converting prices based on the exchange rate. Despite having a legal obligation to join the eurozone, Bulgaria could have delayed this decision, ensuring that the economy is strong enough to absorb potential price increases that may negatively impact the purchasing power of Bulgarian consumers. Bulgarian politicians risk adopting the euro too soon in order to attempt to show the nation is fully integrating into the EU, only to negatively impact citizens.
