Dimitar Radev, Governor of the Bulgarian National Bank, believes that there are new opportunities in the future, in addition to continued financial prudence.
Global Finance: Bulgaria is set to join the euro in January, a major achievement for the country and the Bulgarian National Bank (BNB). What are the biggest changes that will occur to the economy and the average citizen?
Dimitar Radev: Joining the Eurozone is already a strategic milestone for Bulgaria. It is the culmination of years of sustained effort – the convergence of macroeconomics, institutional development, and responsible policy making. For the economy, this means deepening financial integration, enhancing investor confidence, and increasing resilience to external shocks. For the average citizen, the most immediate impacts will be practical: eliminating exchange rate risk with our major trading partners, lower transaction costs, and more transparent pricing. In short, membership opens new opportunities for sustainable growth and prosperity. However, I must stress that these benefits will only be fully realized 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, but rather from the way we manage our responsibilities within the euro area. The real danger is domestic complacency: the mistaken belief that euro membership can replace sound national policies. It is not possible. On the contrary, participation in the eurozone increases the need for fiscal discipline, structural reforms, and strong institutions.
GF: You mentioned that Bulgaria will not follow Greece’s example and use low interest rates to spend extravagantly. 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 this. In recent years, this discipline has been tested in the face of political instability and global volatility, which has led to some loosening of the fiscal stance that must now be addressed. It is important to note that pressure to increase spending rarely comes from households or businesses – it arises from political decisions. The temptation to use low interest rates as a justification for expansionary fiscal policy is well known. That is why a solid institutional framework in Bulgaria, based on fiscal rules and prudent oversight, is essential. I am confident that financial discipline will remain our guiding principle.
GF: Membership in the euro means that BNB loses one of its primary monetary weapons, which is the bank’s reserve ratio requirement, which is currently set at 12% without paying interest on these reserves. Is there an alternative you can use?
Radev: Yes, the institutional context will change. Reserve requirements will be aligned with the rules of the Eurosystem and will no longer be set unilaterally by BNB. But it is important to remember that under our currency board arrangements – reserve requirements aside – our ability to conduct active monetary policy was already very limited. From this perspective, joining the eurozone does not constitute a loss of independence, but rather a strategic upgrade. For the first time, we will have a voice in formulating the euro area’s monetary policy by participating in the decision-making bodies of the European Central Bank. This is a huge institutional gain. At the same time, BNB retains full control over macroprudential policy, which remains a powerful and flexible tool. Our participation in the Single Supervisory Mechanism further strengthens coordination and oversight. This transformation is not about losing tools, but rather about modernizing them and embedding them within a stronger and more integrated policy framework.
GF: One of the most important tasks of BNB is and will continue to be the regulation of banks. What impact might euro membership have on Bulgarian 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 Decision Mechanism. Eurozone membership will complete this integration. It provides higher standards of supervision, enhanced transparency, and greater consistency across the banking sector. Bulgarian banks are already subject to joint supervision under the social security mechanism, and expectations – especially with regard to capital strength and governance – will continue to rise. Some consolidation may follow, especially between smaller or less competitive institutions. But this reflects broader market dynamics, not the euro itself. BNB’s role remains unchanged: to protect financial stability, protect depositors, and enhance the long-term health of the banking system.
