Finance
Posted By Uma Rajagopal
Posted on December 16, 2024
BRUSSELS (Reuters) – Bulgaria might enter the euro zone and become the bloc’s 21st member on January 1, 2026, if it receives a green light from the European Commission and the European Central Bank in 2025.
European Union countries aspiring to adopt the single currency need to fulfill criteria in four areas: inflation, public finances, the exchange rate and long-term borrowing costs.
INFLATION
- Inflation in the candidate country needs to be close to that in the three best performing EU members for a period of one year before examination of the country’s bid. The upper limit for inflation is calculated as the average of the three best performers, plus 1.5 percentage point.
DEFICIT/DEBT
- A country’s budget deficit must be below the European Union’s limit of 3 percent of gross domestic product (GDP) in a sustainable way.
EXCHANGE RATE
- A candidate country’s currency must remain relatively stable against the euro over two years, in what is called the Exchange Rate Mechanism (ERM-2). The currency can appreciate, but should not devalue in a significant way.
LONG-TERM BORROWING COSTS
- Yields on long-term government bonds issued by the candidate country should not be more than 2 percentage points above the average of the three European Union countries with the lowest inflation, which were used for setting the price stability criterion. (Reporting by Jan Strupczewski)