Bulgaria's Transition to the Euro: The Expected Price Shock Didn't Come, The Real Problem Is Different

Bulgaria officially joined the euro area on 1 Ocak 2026, leaving behind the lev currency. Avrupa Merkez Bankası President Christine Lagarde welcomed the country to the 'euro family'. In the first six months of the transition, the massive price hikes many feared did not materialize. Bulgaristan Merkez Bankası President Dimitar Radev announced that euro banknotes and coins accounted for 70 percent of the cash in circulation as of the end of Ocak. This rapid transformation was seen as a significant step in the country's path to European integration.

Avrupa Merkez Bankası economists found that the transition had only a mild effect on inflation. Prices rose slightly, especially in service sectors like hairdressers and restaurants, but there was a decrease in energy and manufactured goods. Annual inflation fell from the 3,5 percent level in Aralık to 2,3 percent in Ocak, and then to 2,1 percent in Şubat. Some restaurant owners had to reprint their menus, but the overall picture was much more positive than expected. Price increases in rents and personal care services, however, remained above average.

Public support for the transition to the euro also increased. As predicted by ECB economists, support was observed to rise by approximately 11 points as people started using the euro. In a survey conducted in Şubat, support for the euro reached 54 percent, while the anti-participation rate was 53 percent in Mart of the previous year. Throughout 2025, thousands of people had taken to the streets against the change, with some carrying Russian flags. However, the smooth progress of the transition largely alleviated public concerns.

Economic indicators also gave positive signals. In mid-Mayıs, S&P Global revised Bulgaria's credit rating outlook to 'positive', linking it to the ECB liquidity support. Following the participation decision, Fitch and S&P had raised the rating to the BBB+ level. In 2025, growth came in at 3,1 percent, above the euro area average, while unemployment dropped to a record low of 3,5 percent. The Merkez Bankası calculated that companies saved approximately 500 million euro annually due to the elimination of exchange rate costs.

However, political developments overshadowed the economic optimism. Rumen Radev, who resigned from the presidency in Ocak, led his party to win 131 seats in the 240-seat parliament in the Nisan elections, enabling it to form a single-party government for the first time since 1997. During his election campaign, Radev had criticized the euro and questioned joining the euro area, which he described as a 'rich men's club'. After becoming Prime Minister, he announced that he would tighten price controls. With the war in the Middle East pushing energy prices up, inflation is expected to rise to 4,2 percent in 2026, and Radev's desire to resume Russian oil and gas imports could create tension with the AB.