Bulgaria will remain fiscally disciplined after joining the eurozone and avoid the debt-fueled boom-and-bust cycles that hit some earlier entrants, central bank governor Dimitar Radev said.
“Fiscal discipline has been a cornerstone of our macroeconomic framework for more than 25 years, and this should remain unchanged,” Radev told POLITICO. “The convergence process should reinforce — not weaken — our long-standing commitment to fiscal stability.”
His comments come days after the European Commission and the European Central Bank gave final approval for Bulgaria to adopt the euro on Jan. 1, 2026, making it the 21st member of the currency union.
Eurozone entry will give Bulgaria, a country of 6.4 million, access to lower interest rates and international capital markets. But Radev dismissed fears that this would prompt excessive borrowing or risky fiscal policy.
“We are fully aware that joining the eurozone implies adopting a policy framework designed for the whole area,” he said. “The solution is to strengthen national policies, particularly in fiscal and structural domains, to ensure resilience under a common monetary regime.”
Challenges ahead
The ECB has warned that eurozone membership often exposes smaller economies to overheating, as bloc-wide interest rates can be too low for faster-growing members. Greece remains the most dramatic example of such a scenario.
Bulgaria, which has operated under a currency board since the late 1990s, has relied on strict fiscal policies and tax measures rather than monetary tools to maintain stability. The current reserve requirement for banks is 12%, and the interest on those reserves is zero — both set by the Bulgarian National Bank (BNB).
Those tools will be lost when Bulgaria enters the eurozone. The ECB’s reserve requirement is just 1%, meaning Bulgarian banks will have significantly more liquidity to lend. That could add fuel to an ongoing credit boom: mortgage lending rose 26% in the year to April, while consumer credit increased 14%.
“The key challenge is not whether we can borrow more, but whether we remain committed to using debt in a prudent and growth-oriented manner,” Radev said.
Inflation hurdles cleared
To qualify for eurozone entry, Bulgaria had to bring its inflation rate within 1.5 percentage points of the EU’s three lowest-inflation countries. After a spike to 4% earlier this year — triggered by the expiry of VAT holidays and other price controls — annual average inflation eased to 2.7% by April, helped by a fall in regulated prices.
Despite this progress, the European Commission flagged concerns about corruption and judicial independence in its latest convergence report.
The ECB also noted that Bulgaria’s fiscal council, which monitors government adherence to EU fiscal rules, needs further strengthening to ensure proper accountability.
“Monetary policy is common, while fiscal policies remain national,” Radev said. “We should not expect the ECB to tailor policy for individual economies — the responsibility lies with national authorities to align and adapt.”
Digital euro on the horizon
Bulgaria’s entry into the eurozone coincides with mounting debate over the introduction of a digital euro. Some banking groups have warned the initiative could trigger deposit flight and limit banks’ ability to lend.
Radev downplayed those concerns but said the digital euro requires “strategic thinking” around payments and technology. Bulgaria is actively participating in Eurosystem discussions and supports a model that safeguards privacy and financial stability.
“Any digital euro must respect European values, including the right to privacy,” he said, urging a “calibrated approach” to avoid creating a surveillance tool.
He added that Bulgaria’s currency board experience — with its emphasis on conservative reserve management — positions the country well to handle the transition.
Cautious path ahead
As Bulgaria prepares to join the ECB’s Governing Council, Radev signaled that the BNB will retain its conservative approach.
“I lead one of the more conservative central banks, and we have no intention of revisiting that stance,” he said.
While he avoided framing himself as either a monetary policy ‘hawk’ or ‘dove’, Radev said he would support policies that build resilience, reduce fragmentation and uphold price stability in the euro area.