Will Bulgaria introduce the Euro as a parallel currency in advance of its official accession to the Eurozone, currently planned for 2025? Or, on the contrary, would the Bulgarian public vote in a referendum and potentially postpone the adoption until 2043 at the earliest? If you follow Bulgarian public affairs, you might be aware that both of these options have been considered in the last couple of months. So, what is really going on with the plans for adoption of the common currency?
In the following piece we will cover the two radical ideas - that of Mr Vassilev and the Financial Ministry and that of Kostadin Kostadinov's Vazrazhdane party - one by one. Spoiler alert: it is unlikely that either of the two would materialize, at least not in the shape and form envisaged by their initiators.
Parallel Euro? Kind of, but not really
After Mr Vassilev muttered the news of the potential early introduction of the euro as a parallel currency, the news quickly spread, causing a commotion, to say the least. This was understandable - Bulgaria is on the home straight on the road to the eurozone, and with such actions, instead of aiding itself, it could torpedo the efforts made so far. Such solo performances are frowned upon in Brussels and especially in Frankfurt because they are defined as an attempt to circumvent the rules.
Mr Vassilev's idea is actually not so radical, but because it was poorly communicated, it could have seemed as such from the outside, rather raising eyebrows. In a nutshell, it is envisaged that retail outlets in the country that are willing and technically capable will be able to accept payments in both euros and levs from next year. But only if the country gets the green light from the European Commission and the European Central Bank (ECB) first.
What exactly is the idea?
"It is specifically about introducing the possibility of payment in euros for individuals. The main options being considered are card payments, for example in supermarkets and similar retail outlets," the Ministry of Finance told Capital Weekly. In fact, even now one can pay with a card that is linked to a euro account anywhere wherever there is a POS terminal. The main goal of this move would have been to allow a longer, smoother transition towards the euro.
Realistically, under such an approach, the euro would not exactly be an official currency in Bulgaria, insofar as it could only be used in dealings between private entities, but according to the Ministry "the possibility of payments related to public obligations will be considered." However, the ministry firmly stresses that this is not "unilateral euroization" and that "our goal remains to be a full member of the euro area." The opposite would have meant that Bulgaria would be contravening the basic rules of the eurozone, which would have been a problem.
Is the move agreed with the Commission and the ECB?
Back when the topic was first raised, Mr Vassilev assured that before anything concrete is done, it will be discussed with our European partners first. Now, his ministry has again assured that there will be no precipitous solo action and that a period of informal consultations with the EC and ECB is underway.
However, the very raising of the issue does rather a disservice to Bulgaria. Unofficially, representatives of the European institutions point out that the expectations for the new government are related not to extravagant moves, but concrete efforts towards meeting the requirements for the euro, for example, by showing real measures and the will to curb price growth.
As for the potential effects of the move, they remain questionable. Bearing in mind that the measure is voluntary, it is unlikely that many businesses, especially small ones, will rush to make such a change, which also requires costs, before they are sure that the goal of joining the eurozone on 1 January 2025 is actually achievable.
Would there be euro adoption at all?
How about the other radical idea: Vazrazhdane's call for a referendum that could rule the postponement of the euro adoption at least until 2043? The proposal, promoted under the banner of "saving the Bulgarian Lev," was signed by more than 600,000 people, of which more than 470,000 were declared authentic, so making it compulsory for the Parliament to vote on the proposal.
The MPs did just that last week. At last Friday's session, 99 MPs from WCC-DB, MRF and GERB voted "against" implementing the referendum, while 68 MPs from Vazrazhdane, BSP and TISP voted "for." 46 MPs decided to abstain, including 45 from GERB and one from WCC-DB.
So that's that, right? Not really
The parliamentary decision, however, does not mean that the referendum is dead. The leader of Vazrazhdane Kostadin Kostadinov called on President Rumen Radev to schedule the plebiscite despite the parliament's decision and said his party would appeal to the Constitutional Court.
It is within the powers of the Court to rule on whether the question that Vazrazhdane asked ("Do you agree the Bulgarian lev to be the only official currency in Bulgaria until 2043?") is admissible or unconstitutional. The decision of the National Assembly can be challenged before the Court either by the President, the Government, at least 48 MPs, the Presidents of the Supreme Courts or the Attorney General.
So far, Mr Radev refused to do so, despite expressing sympathy for the democratic rights of the half a million people who signed Vazrazhdane's call. This means that the clock is ticking for the radical anti-EU party if it really hopes to carry out the plebiscite in the next nation-wide elections - the local vote this autumn - as the Constitutional Court has to issue its ruling early enough so that the President can sign the decree on time.
Long story short - neither of the radical ideas is likely taking place, at least not any time soon.