Analysis-Bulgaria’s euro zone entry threatened by election stalemate

By Tsvetelia Tsolova

SOFIA (Reuters) – Bulgaria’s longstanding political deadlock threatens to delay its plan to adopt the euro on Jan. 1, 2024, at a time when the eurosceptic and pro-Russian Revival party is increasingly vocal and Bulgarians themselves are deeply divided about the euro.

Joining the euro zone would help Bulgaria, the European Union’s poorest member state, attract more foreign investment and secure credit ratings upgrades that could reduce its debt financing costs, economists say. The Balkan country has long pegged its lev currency to the euro.

Nearby Croatia, which is similarly dependent on tourism revenues, is on track to adopt the single currency in January 2023. But Bulgaria, rattled by a series of elections that produced yet another hung parliament last month, has lost momentum in its euro entry plans, the Bulgarian central bank chief and rating agencies said.

Its main political parties support the 2024 target, but they have kept the polarizing issue on the sidelines, fearful of losing voters in the run-up to an Oct. 2 election.

At the same time, the nationalist Revival party, which has become the fourth largest faction in parliament, vocally campaigns against the euro, saying it would “destroy the economy.”

This strikes a chord with many Bulgarians amid an economic slowdown, who fear that switching to the euro would fuel already high inflation.

A Eurobarometer survey in June showed that 44% of Bulgarians were in favour of joining the euro — down from 54% in spring of 2021 — while 54% were against it, versus 44% the year before.

“If we adopt the euro, prices will certainly go up, but I doubt the salaries will,” said Desislava Alexandrova, 36, a young mother who was buying cucumbers in Sofia’s bustling Krasno Selo market with her 1-year-old baby.

“Thankfully, I am getting my maternity payment and my husband works, so we are relatively OK. But my parents, who are retired, are really struggling.”

Many people fear abusive price setting during the changeover to the euro could push up prices. A European Central Bank report which analysed the 2002 introduction of the euro in 12 countries found “no evidence of a significant impact on prices at the aggregate level as a result of the euro cash changeover.”

For many young Bulgarians in better-paid jobs, adopting the euro is the only way forward for the country which joined the EU in 2007.

“I do not see why we should not adopt the euro, especially as they plan to keep the current peg. It would help our tourism and will make it easier for Europeans to visit,” said Georgi Alexiev, 29, a self-employed architect.

HURDLES TO CLEAR

After last month’s election, the fourth in less than two years, Bulgaria faces difficult talks on forming a government. A further snap election cannot be ruled out, which could put at risk the adoption of laws…