Entering the eurozone is the main goal of the “Zhelyazkov“ cabinet, but it is not at all certain. Still, the signals for this to happen are positive and most likely on January 1, 2026, we will become members of the eurozone. What should we expect… Economist Dr. Plamen Ivanov speaks to FACTI.
- Mr. Ivanov, the eurozone, the eurozone. The cabinet is “for“ and this is a priority for it, we also see protests. But! Bulgaria is currently in a currency board. What will happen to it when we adopt the euro?
- The eurozone should really be a priority. We are terribly late with this accession. We have been in the EU since 2007. We have been in the ERM 2 system of rules for more than three years. Now we are also in Schengen. It is as if we are forcibly becoming a European country with European rules. Bulgaria is not just part of Europe, but one of the oldest historical countries, with an exceptional history and various stages of progress and decline over the centuries. And now, in 2025, it is as if we have to prove it to ourselves. The protests are complete nonsense, aimed at instilling tension, instilling some unprecedented fears and extracting some pseudo-nationalist voters.
The adoption of the euro as a unit of exchange is only an element of changing the entire structure, rules and way of running the economy in the country. The currency board played its role of stability and security at a very difficult time. It is not an exaggeration to say that it saved us from collapse. It is by no means an obsolete or unnecessary framework, rather we should develop it in a new format, use and preserve good practice and get on with it ourselves. This is necessary for all of us.
- What is changing?
- The regulation is changing, the bodies that exercise control over the system are changing, certain requirements are being increased and monitoring is being introduced every two years. External multinational monitoring, which is probably necessary for us. There are other changes in terms of the amount of debt and its ratio, inflation, the amount of capital government spending and their ratio to the rest, risk management in certain investments and partnerships, and we become part of the general policies of the ECB for the entire eurozone. In the economy, there is generally a fiscal and monetary policy, the currency board has so far regulated only one, and the introduction of systematicity and external control should have an effect on both. In the Bulgarian reality, so far, we have observed one policy in the last three years led by the Ministry of Finance, but a completely different one, far more conservative than the BNB. This difference should disappear.
- What does the currency board protect us from now and how much freer will business be without this fixed exchange rate of the euro?
- The fixed exchange rate will disappear because it will no longer make sense. Accordingly, the first thing that business will be freed from is currency conversion and the associated costs. In theory, the board protects us from disproportionate government spending, but we see that this is no longer being observed in the new budget. The board protects us from falling into a collapse like Venezuela and Argentina in recent history, currency devaluation or, more normally speaking, the depreciation of money and a sharp increase in prices, goods and services. Business will also become freer in that, already in Schengen, it becomes far more competitive throughout Europe. It now has the opportunity to be present on site, but without additional rules and regulations. Measurability becomes the same and quality becomes the leading factor, in addition to price. Stability and subjective factors in the assessment become the same. Investor interest should increase, as should our rating as a destination suitable for business - but the intervention of competent institutions is also important in this. The predictability of business processes becomes better. In practice, the overall amount of risk is reduced, in an economic sense, which is taken into account in planning - fiscal, currency risk, loss of stability, and political risk is also reduced - because the monitoring is external to the ECB, not local. One of the most interesting things that I personally expect with interest is the traceability of cash flows, which will become much easier and monitored by external regulators, outside of the national ones. With the adoption of the euro, corruption should become more difficult, and hence decrease. It should, but we are an inventive nation. Bulgarian business will adapt to a new environment of administrative services and processes. At least I hope that with the introduction of the euro we will have much stricter control over payments. In addition to the above, businesses have long been operating in euros, especially with foreign counterparties. The transition will be smooth and easy for most market participants.
- What challenges should businesses expect when we adopt the euro?
- There will be a two-price process, which will be confusing. This is valid for all areas of the economy. Then there will be a huge fear of speculation. Certain political parties are constantly instilling this fear, and this will have a severe effect on our economy. Every price will be contested, everywhere a problem will be sought as a result of the pressure exerted. However, real speculation will continue to exist, as it is currently, it will simply be in euros. In general, it will be more difficult for retail participants, where a seller and a client meet directly. There they will have to explain and defend a price, and then defend their profit. This will create tension, refusals, delayed payments and other similar nerves. For medium and large businesses, there will be no change at all, since there are mainly bank payments. For them, there will be a different way of reporting. The difference will be more severe for financial institutions and large businesses. There, the regulations will maintain the framework and monitor the implementation, there is no room for negotiations or compromises, as has been the case so far at the local level. For example, I am talking about European programs, subsidies or public-private partnerships, unfulfilled tax obligations and the like. Let me emphasize again that there will be no problem with lending. There will be no problem with people's mortgage loans. There will be no problem with salaries. There will be no problem with pensions. With pensions, the problem lies elsewhere, not in the currency unit.
- The “Zhelyazkov“ cabinet proposed a budget with a 3% deficit. Reality or just calculations… How do you view the budget?
- After the last budgets, this one is the least bad. But it is bad. The main "diseases" are the same. Inflated expenses, unclear revenues, high hopes, inflated administration, as well as a bunch of unrealistic promises.
Why is there a deficit at all, after a loan was planned???
Take out a loan in such a way that there is no deficit at all. And then do the "miracles" of Excel statistics. Unfortunately, they don't have much choice in the Ministry of Finance and they do what they can.
- What obstacles do you see in the implementation of this budget?
- The main thing is the lack of efficiency in implementation. There are no results. When there are capital expenditures, where are the results of them... When investments are planned, where are the results of them, what has been built... When you have an increased budget in this or that ministry, where is the efficiency of these funds... Perhaps there is a lack of follow-up control. And even more so the fear of follow-up control. But for years now there has been a lack of efficiency from the budget. When a family plans a loan - it is to live better, to buy something or to reduce their expenses. The budget does not give us this.
- Expenditures are about 6 billion leva more than revenues (note - 90 billion leva revenues and 96 billion leva expenses). The deficit is below 3%. But this means an increase in foreign debt. How long are we going to keep it like this…
- Well, there's not much left. We've passed 50% of GDP. The deficit is much larger. We can all see the inefficient spending. There are no results from the increased GDP. Measures were taken that increased inflation instead of reducing it. There is no pandemic anymore, but there are pandemic measures. Calculations are made after it is given to the most vocal requesters. There is a lack of specificity in the program or in the expenditure. I've already mentioned it, how you have debt and deficit at the same time. How expenses increase, but there are no results from the spending. How we pour billions into healthcare, and we continue to pay extra and the service doesn't change. How we pour billions into the police, and they have to go on strike and now get a salary increase. How you have a pension system, and there is no money for pensions. Well, it's complicated and there are circumstances. No, there is no. It is a question of solutions, but effective ones, not populist ones. Finances are not populism. They are numbers and they do not lie.
- Is it easier to make a budget with debt and when will the time come for tight belts?
- That time has come. It is certainly easier to do - with "having" it is easier to find a solution than with "not having". The budget must fulfill the specific goal for the specific year. Whether it will start with control over the result, whether with targeted programs, whether with a specific reform for a given structure this year, next year in another structure - all this is a question of politics. The budget is a sequence. We have seen how every prime minister and finance minister decides that the world starts with it and everything starts now. The budget is not for the state apparatus, expressed in institutions and administration - it concerns everyone and everyone. The fact is that we are not coping and are getting stuck. It may not be superfluous to intervene from outside, at least to control costs and risk management. But balanced intervention and with priority for the Bulgarian interest and our own decisions. The budget is a balance - do not give in, we will give in.
- Economists have a view of what will happen when we adopt the euro. What do ordinary people need to know. What will be the pros and cons for them…
- The truth is that there will be no significant difference. The euro will not solve problems, make us richer or pay off our debts. The euro is adopted with a system of rules and regulations - they should change the lives of ordinary people in the future. The introduction of the euro provides opportunities. Opens doors. Makes us competitive in new markets. Gives us opportunities to become part of the everyday life of the largest markets and segments. But everything depends on us, on our politicians, on the policies we pursue, on effective decisions, on how we exploit the euro so that it works for us. One thing is certain: if we do not change and stay like this, good days do not await us. It is important to have stable growth, security and predictability. To have investments outside and inside the country, our own and foreign. In the current situation, it is obvious that we cannot achieve it and are lagging behind. Incomes, education, healthcare, production, agriculture are lagging behind, foreign investors are bypassing us, industries are leaving us, literally our entire daily life is lagging behind. The introduction of the eurozone system gives us the opportunity to do this. Everything depends on us.