Dimitar Radev, governor of the Bulgarian National Bank, sees new opportunities ahead, along with continued fiscal prudence.
Global Finance: Bulgaria is set to join the euro in January, a significant achievement for the country and the Bulgarian National Bank (BNB). What will be the biggest changes for the economy and for the average citizen?
Dimitar Radev: Euro area accession is indeed a strategic milestone for Bulgaria. It crowns years of consistent effort—macroeconomic convergence, institutional development, and responsible policymaking. For the economy, it means deeper financial integration, enhanced investor confidence, and greater resilience to external shocks. For the average citizen, the most immediate effects will be practical: elimination of exchange rate risk with our main trading partners, lower transaction costs and more transparent pricing. In short, membership opens new opportunities for sustainable growth and prosperity. However, I must emphasize that these benefits will fully materialize only if we continue the disciplined policies that have brought us to this point.
GF: Do you have any concerns about membership?
Radev: There are always risks, but they do not stem from the euro itself—they arise from how we manage our responsibilities within the euro area. The real risk lies in domestic complacency: the mistaken belief that euro membership can substitute for sound national policies. It cannot. On the contrary, participation in the euro area increases the need for fiscal discipline, structural reforms, and strong institutions.
GF: You have stated that Bulgaria will not follow Greece’s example and use lower interest rates to go on a spending spree. How can this be avoided if companies and individuals want to do so?
Radev: Bulgaria has a strong tradition of fiscal prudence, and our low debt-to-GDP ratio—among the lowest in the EU—is proof of that. In recent years, this discipline has been tested by political instability and global volatility, leading to some loosening of the fiscal stance that must now be addressed. It is important to note that pressure for higher spending rarely comes from households or businesses—it originates from political decisions. The temptation to use lower interest rates as a rationale for expansive fiscal policy is well known. That is why Bulgaria’s established institutional framework, anchored in fiscal rules and prudent oversight, is essential. I am confident that fiscal discipline will remain our guiding principle.
GF: Membership in the euro means the BNB loses one of its primary monetary weapons, bank reserve ratio requirements, which are currently set at 12% with no interest paid on these reserves. Is there an alternative you can use?
Radev: Yes, the institutional context will change. Reserve requirements will be harmonized with eurosystem rules, and the BNB will no longer determine them unilaterally. But it’s important to recall that, under our currency board arrangement—apart from reserve requirements—our ability to conduct active monetary policy has already been very limited. From this perspective, euro area accession is not a loss of autonomy, but a strategic upgrade. For the first time, we will have a voice in shaping the euro area’s monetary policy through participation in the ECB’s decision-making bodies. This is a substantial institutional gain. At the same time, the BNB retains full control over macroprudential policy, which remains a powerful and flexible tool. Our participation in the Single Supervisory Mechanism further enhances coordination and oversight. This transition is not about losing instruments—it is about modernizing and embedding them within a stronger and more integrated policy framework.
GF: One of the BNB’s most important tasks is and will remain bank regulation. What impact might euro membership have on Bulgaria’s banks?
Radev: Since 2020, Bulgaria has been part of the Banking Union through the close cooperation framework with the ECB, covering both the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism. Euro area membership will complete this integration. It brings higher standards of supervision, enhanced transparency, and greater consistency across the banking sector. Bulgarian banks are already subject to joint supervision under the SSM, and expectations—especially regarding capital strength and governance—will continue to rise. Some consolidation may follow, particularly among smaller or less competitive institutions. But this reflects broader market dynamics, not the euro itself. The BNB’s role remains unchanged: to safeguard financial stability, protect depositors, and promote the long-term soundness of the banking system.
