Bulgaria has passed an important milestone in adopting the euro, symbolizing the culmination of almost two decades of European integration. However, this momentous change takes place in the midst of unprecedented political turmoil that could very well eclipse the economic accomplishments that the country has achieved. The country’s progress in qualifying for the euro zone symbolizes victory and a warning at the same time.
Political instability undermines eurozone celebration efforts
Bulgaria has today become the 21st member state to adopt the euro as its common currency in Europe, following the accession of Croatia in 2023. The European Central Bank marked the event by illuminating its headquarters in Frankfurt in celebration of the important expansion of the eurozone membership. The pro-Euro billboards sponsored by government programs are visible in the Sofia metro and the streets of the Bulgarian capital, symbolizing the government’s commitment to European integration in the face of increasing local difficulties.
The adoption is the culmination of Bulgaria’s integration into Europe, after it gained membership of the EU in 2007. However, there is divided support regarding adoption, as half of the population is of the idea that it should maintain its original currency, lev. Memories of a financial crisis that left Bulgarian families devastated during the economic collapse of the 1990s are still fresh due to fears of inflation.
Government resignation brings about unprecedented transition challenges
The current government has recently resigned as a result of large-scale protests in November about taxation and spending measures, which has created a unique scenario where Bulgaria will have to manage its adoption of the euro without proper governance structures in place. The country has failed to have an updated budget structure, with political authorities estimating that an eighth election in five years appears to be the likely scenario.
Corruption concerns overshadow economic integration achievements
The Bulgarian economy boasts strong credentials, despite the presence of governance issues, and these continue to affect the country’s growth trajectory. The gross domestic product has increased fourfold to $110 billion since Bulgaria joined the European Union, and the debt-to-GDP ratio is less than 30 percent, one of the lowest in the EU. Wages are increasing at a higher pace in Bulgaria relative to the 27-nation EU.
Despite this, challenges associated with systemic corruption have continued to undermine public confidence and European Union relations. Bulgaria has been ranked only above Hungary among European Union member countries by Transparency International’s latest corruption perceptions index rankings. The European Union has been holding back recovery fund payments due to a lack of progress on anti-corruption reform and oversight of the top prosecutor’s office. Dozens of senior officials have been investigated, with only a few having been convicted.
Reform prospects depend on political stability restoration
The future of economic growth in Bulgaria is now inextricably linked to resolving its current political impasse and putting in place functional governance structures that will be able to implement reforms that will be required by Bulgaria’s future economic well-being. The European Commission has stated that it has not seen any interference of recent political events in procedures regarding the adoption of the euro, while it is suggested that any reversal of this process will amount to economic/geopolitical suicide.
Key reform priorities
- Improving anti-corruption agencies
- Enhancing judicial independence
- Increasing the level of transparency within
- Solving income inequality issues
Approximately 40% of Bulgarians would like to see a new government based on new political parties, according to a recent Alpha Research poll in December. This new political party movement could be initiated by the current president, Rumen Radev, who remains the most popular politician in the country, but has yet to express his intentions. The threat of political stagnation and instability jeopardizes the economic advantages that should accrue to Bulgarian citizens in the eurozone.
