Bulgaria’s Eurozone Accession
IMF News, November 4, 2025
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- Bulgaria’s Eurozone Accession
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- Published: November 4, 2025
Overview and significance
- Opening address by IMF Managing Director Kristalina Georgieva at the “Bulgaria on the Doorstep of the Eurozone” High-Level Conference, Sofia, Bulgaria.
- Euro adoption date and immediate implication:
- On January 1, 2026, Governor Radev will obtain the right to vote at the ECB Governing Council, including on monetary policy, banking supervision, financial stability, payment systems, and the issuance of euro currency, including the digital euro.
- Historical context:
- IMF involvement in setting up Bulgaria’s currency board in the late 1990s.
- Euro adoption ranks alongside Bulgaria’s EU accession in 2007 as a key milestone.
Expected economic benefits and lessons from Croatia
- Observed benefits from Croatia’s 2023 euro adoption:
- Rating agencies upgraded Croatia’s sovereign ratings by multiple notches, citing reduction of currency risk and access to European financial backstops.
- Sovereign borrowing costs fell, quickly converging to the euro area average, and borrowing costs for the domestic private sector also fell.
- Tourism received an added boost from convenience of no currency conversion.
- Croatia experienced 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.
- Bulgaria’s preparedness and immediate measures:
- Dual-currency pricing is in place ahead of January 1.
- Price monitoring is underway.
- A nationwide lev-to-euro information campaign is active.
Current economic conditions and risks
- Positive fundamentals:
- Economic momentum is strong.
- Unemployment is at a record low.
- Real incomes are rising.
- Public debt was just 24 percent of GDP last year, compared with the EU average of 65 percent.
- 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.
- Indicators of an economy operating hot.
- Medium- and long-term challenges:
- Population aging and brain drain.
- 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.
- Policy objective stated:
- At a very minimum, aspire for sustained higher growth levels to reach per capita income equal to the EU average within the next decade.
Domestic policy priorities (three main tasks)
- Task number one: cyclically tighten fiscal policy
- Temper public sector wage growth to cool domestic demand.
- Increase pension contributions to curb the deficit of the pension system.
- Ramp 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.
- Consider further tightening of macroprudential policy to restrain credit growth and prevent overheating.
- The Bulgarian National Bank appropriately introduced several borrower-based measures in 2024 and should be prepared to tighten them.
- Task number three: accelerate structural and governance reforms
- Mobilize untapped labor potential and attract foreign talent to compensate for aging and emigration.
- Prioritize investments in education and AI.
- Reform institution-building, transparency, and governance, including in state-owned enterprises.
- Complementarities:
- Fiscal and structural reforms can work together to deliver a virtuous circle of faster growth and better public spending.
- Specific financial access and backstops post-adoption:
- Bulgarian banks become eligible for ECB liquidity support via main refinancing operations and, in extremis, emergency liquidity assistance.
- Bulgaria becomes eligible to join the European Stability Mechanism and should do so promptly.
Duties to Europe and deeper integration
- Domestic responsibility:
- Decisively tackle shortcomings, especially in governance; Europe should insist on progress.
- European-level advocacy:
- Actively promote deeper economic and financial integration in Europe.
- Champion completion of the EU single market and the single European financial system.
- Push for progress on the idea of a European banking union and on creating a single European savings and investment union.
- Rationale:
- Greater integration improves private cross-border risk sharing and monetary policy transmission and supports startups, innovation, and growth.
- Broader critique:
- Current EU performance: real GDP growth of a little over 1 percent per year on average is insufficient given talent and savings outflows.
Key statistics and exact figures cited
- January 1, 2026 — Governor Radev obtains ECB Governing Council voting rights.
- Croatia adopted the euro in 2023.
- One-off price level jump on euro adoption observed in Croatia: 0.2–0.4 percentage points.
- Bulgaria public debt: 24 percent of GDP last year.
- EU average public debt: 65 percent.
- Bulgaria’s GDP per capita in purchasing power terms:
- At the start of EU accession negotiations in 2000: less than one-third of the EU average.
- By 2024: about two-thirds of the EU average.
- EU average real GDP growth cited as a little over 1 percent per year on average.
- Bulgarian National Bank borrower-based measures introduced in 2024.
Opening Address by IMF Managing Director Kristalina Georgieva at the “Bulgaria on the Doorstep of the Eurozone” High-Level Conference, Sofia, Bulgaria — November 4, 2025.