“We have a methodology”: Zhelyazkov expects the EC and ECB to round inflation in favor of Bulgaria

“We have a methodology, and it will be acknowledged. And since our experts have worked according to this methodology, we believe that we have met the convergence criteria.” This is what Prime Minister Rosen Zhelyazkov said when answering a media question regarding the inflation criterion for joining the eurozone, given that in January it was off by 0.07% from the target.

The difference with the December performance of the indicator is only 0.03%, yet last month the Zhelyazkov cabinet refused to send a request to the ECB and the EC for extraordinary convergence reports, although many economists insisted that it should be done. At that time, the government's argument was the failure to meet the criterion by 0.1 percentage points.

According to arithmetic rules, rounding up is done when the figure is 5 or greater. In this case, the average annual inflation in Bulgaria in January was 2.6%, and to formally meet the criterion it must be at most 2.53%.

Zhelyazkov explained to journalists that the request was made "based on the understanding that we have covered the convergence criteria."

If the EC and the ECB still decide to issue positive reports - whether based on this rounding (which is not a formal possibility) or based on the exclusion of certain EU countries from the inflation ranking, the road to Bulgaria’s accession in the eurozone will be long.

Zhelyazkov expects the convergence reports to be ready in early June. After that, the opinions of the ECB and the EC will be considered at a meeting of Ecofin (the EU finance and economic ministers), then in the Eurogroup (the eurozone finance ministers), before being presented for a vote in the European Parliament.

So, there are many steps that should show whether Bulgaria is ready to introduce the euro from January 1, 2026," commented Zhelyazkov.

He reminded the opponents of the euro in Bulgaria that the country has, in a way, been part of the eurozone for 25 years now because of the Currency Board here, which means that the lev is not really a sovereign currency. Since 2021, Bulgaria has also been part of the ERM-2 mechanism (colloquially known as the "waiting room" of the eurozone).

The Bulgarian budget relies on the shadow economy

Regarding the state budget and the huge increases in VAT revenues (by nearly 34%) envisaged therein, Zhelyazkov said that the government is counting on making the country’s economy more transparent.

To achieve this planned revenue increase of 3 billion euros per year, "this will largely depend on the work of the revenue authorities."

You know that according to estimates, the gray sector in Bulgaria is about 30%. The goal that we have set is to reduce it by about 10% and in this way, we will answer these concerns," said Zhelyazkov.

According to the "Economy in the Light" index, prepared annually by the Bulgarian Industrial Capital Association (BICA), the share of the shadow economy in Bulgaria in the last 6 years has been firmly between 32 and 33% of the total. Historical data from the BICA composite index show that since its measurement began, the shadow economy has never decreased by one-third in one year. The record was in 2018 – when it decreased by 4.5%.

Translated by Tzvetozar Vincent Iolov