Bulgaria to become the 21st country to join the euro, deepening EU ties despite fears

SOFIA, Bulgaria (AP) — On New Year’s Day, Bulgaria becomes the 21st country to join the euro currency union, furthering its integration into the European Union. But the historic milestone arrives amid political instability and skepticism among ordinary people fueled by fears of price rises.

Supporters of switching to the euro from the old currency, the lev, are praising the move as one of the greatest achievements since the 1989 transition from a Soviet-style economy to democracy and free markets. They hope it will make the country more attractive for investors and strengthen its orientation toward wealthier Western Europe.

But many people are uneasy, in a country where corruption is rife and trust in the authorities is low. One fear is that merchants will round prices up or otherwise use the changeover to worsen inflation, at a time when inflation has rebounded to 3.7%.

An EU Eurobarometer poll from March showed that 53% of 1,017 people surveyed opposed joining the eurozone, while 45% were in favor. A separate Eurobarometer poll, taken between Oct. 9 and Nov. 3 on a similar sample, showed that about half of Bulgarians opposed the single currency while 42% were in favor. The margin of error was about plus or minus 3.1 percentage points for the March poll.

Some welcome the euro, others are wary

The government successfully completed the euro adoption process by beating inflation down to 2.7% earlier this year to comply with EU rules and win approval from EU leaders. But clearing that hurdle was followed by a new chapter of political chaos. The government resigned after less than a year in office amid nationwide anti-corruption protests. This left the country without a regular budget for next year and is hampering plans for long-overdue structural reforms and decisions on use of EU support funds. A new election — the eighth in five years — is expected to be held next spring.

Nevelin Petrov, 64, said he welcomed the euro. “Bulgaria is a full member of the European Union, and its rightful place is alongside the other developed and democratic European nations,” he said. “I am convinced that the adoption of the euro will contribute to the long-term prosperity of our country,” he said.

Others, like Darina Vitova, who runs a pedicure salon in Sofia, said things were moving too fast although she welcomed the change “in principle.”

“The standard of living and incomes in our country are far from those in the richest European countries, while prices here are rising and life for the average person will become more difficult,” she said. She acknowledges that when heading to the beaches in neighboring Greece, it will be more convenient to pay with the same “pocket money” she uses at home.

Bulgaria, with its 6.4 million people, is one of the poorest members of the 27-country European union. The average monthly wage is 1,300 euros ($1,530).

Countries that join the EU commit to the euro, but actually joining can take years and some members are in no hurry. Poland in particular has seen strong economic growth since joining the EU in 2004 without adopting the euro.

Pro-Russian politicians have fanned discontent

Opponents of joining have fed fears that the changes will allegedly lead to more poverty and loss of national identity. Social media has spread disinformation such as false claims that the euro could lead to confiscation of bank accounts. Nationalist and pro-Russian groups exploit these fears.

European Central Bank President Christine Lagarde has said that countries have experienced a slight, transient rise in prices of 0.2%-0.4% right after joining. Price rises can be more apparent than real, as cafe and hairdressers may put off printing new menus and price lists ahead of the change, so that increases are only delayed, not caused by the euro.

Anti-euro rallies in May and September were organized by the pro-Russian Vazrazhdane party but remained smaller than the mass protests that toppled the government. While the anti-euro protests were supported by older people based on economic anxiety, the mass protests that toppled the government appeared to represent a younger electorate fed up with corruption and eager to integrate with Europe.

Analyst say euro adoption is a strategic plus

Anti-euro disinformation spread by pro-Russian politicians and social media aim “to reduce support for the European Union, NATO and Ukraine,” said Dimitar Keranov, program coordinator for engaging Central Europe at the German Marshall Fund in Berlin.

Bulgaria’s European integration “is not in Moscow’s interest at all, so if it can somehow polarize society and weaken support for the European Union that’s what it tries to achieve," he said.

Euro adoption is another way to combat Russian influence, he said: “The further Bulgaria advances in its European integration, the harder it becomes for Russia to influence the country.”

Petar Ganev, an analyst at the Sofia-based Institute for Market Economics, says that that by stepping down the outgoing government has sent a signal of uncertainty to foreign investors.

“Instead of capitalizing on euro adoption as a strong and positive signal to the international community—investors, debt holders, and those investing in Bulgarian assets and economic activity—we risk sending the opposite message,” Ganev said in an interview with the Associated Press.

Ganev believes that eurozone membership should be regarded as an opportunity, an additional mechanism to address corruption and the rule of law, although it alone cannot resolve Bulgaria’s chronic cycle of elections and political fragmentation and instability.

Economic impact may be slight

Local economists think that joining the euro will not bring dramatic changes to Bulgaria’s economy. That is because the lev has been pegged since 1999 to the euro by law, at a fixed rate of 1 lev for every 51 euro cents.

The lev and the euro will be in dual use for cash payments for the whole month of January, but people will receive only euros in change.

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McHugh reported from Frankfurt, Germany. Valentina Petrova in Sofia contributed to this report