Bulgaria to join euro area on 1 January 2026

This will likely come with a one-time significant increase in inflation, at least based on other European countries.

When Germany converted to the Euro, the conversion rate was (IIRC) about ~2 DM to the Euro but from what I recall, a lot of everyday things went from costing 7 DM to 7 euro, effectively doubling in price. IIRC France was similar (ie ~6.5 francs to the Euro but 10 Francs went to 3 euro, etc).

I've tried searching for any studies on this to see if the effect was measured and, if so, whether it held with later countries joining the euro.

I'm a little surprised that the euro has been this stable for this long (going on 30 years). Finland debated leaving. IT's debated if there's even a legal mechanism to leave. We still have the problem that the ECB sets eurozone monetary policy with Germany and Greece being vastly different economies.

Even though the Bulgarian lev has been pegged to the Euro for decades at this point?

The Euro expansion is the mechanism the EU has to export inflation to other countries, similar to the way the US exports inflation with dollar trading across the world. When the easy expansion stops, this is when the debasement will start to occur. The US is already at this point, very soon the dollar will be less valuable as less trading is happening in USD.

Just as the Mark and the Franc were.

I don’t think those two are comparable economies to Bulgaria 20 years ago.

I was in Belgium the week the Belgian franc converted to Euros. I saw no price changes other than rounding up or down to the nearest Euro equivalent price. If memory serves some stores showed prices in both denominations for a while which would not have allowed for stealth inflation to happen.

The currencies were pegged for a period before then so other than niche cases there really weren’t opportunities for massive price increases.

> I've tried searching for any studies ... but from what I recall

I mean if you've tried to find evidence and can't, this feels a lot like you're simply misremembering?

Surely they were not pegged for decades given that the Euro was introduced in 1998 and they transitioned fully in 2002?

Covid sort of showed everyone how hard it is to survive as a small economy in the modern highly interdependent world.

One small disruptor to a core component of a small economy and they are standing outside the IMF to survive.

There are currently 50-60 small countries that depend on borrowing from the IMF (that too in dollars paying interest in dollars - given competition levels guess what dollar generating capacities small economies have? They end up economic vassals of larger systems or selling off national assets or being used in geopolitical games).

On the other hand look at China and India. They have more provinces/states than the EU and larger populations. Vastly differently economies spanning all those subunits. Yet you wont find any of those subunits complaining about their central bank setting monetary policy.

Why? Cuz look at the surroundings - Sri Lanka/Pakistan/Myanmar/Bangladesh/Thailand/Indonesia/even South Korea all at one point or another requiring the IMF to step in and bail them out when they ran into trouble.

The world is too complex and fast/ever changing and small economies are increasingly dependent on larger economies to manage the unknowns and unpredictability that lie ahead. Its almost become impossible to survive by themselves. Sort of like running a book store in the era of Amazon.

> Yet you wont find any of those subunits complaining about their central bank setting monetary policy

I mean and also the US, but the key difference here is that those are also cohesive countries where wealth transfers between different areas is the norm. Much less problematic if a policy is better for New York than Alabama if you know for sure that the federal government is going to make sure Alabama doesn't get screwed.

In the EU you have the opposite problem: policies that benefit rich countries will result in the rich countries complaining about how they support the other economies and moralizing.

I’m Belgian. This is correct. Even now, some people here still convert euros to francs to get a grasp on the value.

> Yet you wont find any of those subunits complaining about their central bank setting monetary policy.

This is ludicrously wrong of India, and I understand enough of human nature and economics that I’d be surprised if it were true of China, though it may be more suppressed.

Monetary policy is government policy. The ruling party is seldom uniformly popular across their entire domain. Perhaps you’re more familiar with US politics: broadly, rural is Republican, urban is Democrat. In India, the ruling party BJP has a lot of the north, but not so much of the south or east. Accordingly, you should expect dissent from regions with a different state government. And as for socioeconomic disparity between states, rich may complain if they seem to be subsidising poor, poor may complain if they don’t seem to be getting enough attention.

Thinking about it, the comparison really isn't that bad. West Germany had just reunited with the East, and France was definitely on a similar upward trajectory as Bulgaria is today.

The euro and prices: changeover-related inflation and price convergence in the euro area - https://ec.europa.eu/economy_finance/publications/pages/publ... (June 2009)

When the EU was formed, its members' economies were comparable.

The lev was pegged to the euro in 1999, Bulgaria was roughly 80% poorer than the EU leaders

(I'm using PPP figures from ChatGPT to make these comparisons, I don't know if I'm making any sense)

This feels odd to me. The only people I can really see doing this is ones that were 70+ when the Euro was introduced.

But is anyone asking for their own local currency or central bank? If not why not?

Wasn't the lev pinned to euro for years, at the stable rate of 1 lev = 0.5 euro? Why the switching to euro would affect inflation much?

Ofcourse they will complain but they also learn to stay rich and be a large power you have to pay attention to the needs of others. If you don't, others will step into that space and the less others depend on you, the less relevant you become. Its like a learning process that takes its own sweet time.

In some places I gather that pretty much happened during https://en.wikipedia.org/wiki/2016_Indian_banknote_demonetis.... (I happened to be in India at the time, but where I was it was more just extreme discontent with resignation, rather than threatening fracture.)

Missing piece of info: the official conversion rate is 1.95583 per euro. It will be extremely tempting for merchants to use 2:1 instead.

The situation was literally identical in Germany, where the official rate was also precisely 1.95583 to the euro (because the lev used to be tied to the DM at 1:1), but not so in most other European countries.

Did not happen in Germany either. Inflation and price hikes came but later. And had nothing to do with currency system but were overdue price adjustments or greed of companies.

It was pegged originally to the Deutschmark. If you look up a currency table the historic DEM has the exact same conversion rate as the lev will have.

It's pinned at 1.95583 to the euro, not 2. If a merchant has a product that sells for 2 lev today, and they sell it for 1 euro tomorrow, they just increased the price by a bit over 2%.

It's something that is pretty much taken as gospel in many countries that that happened

I've only checked the data for Italy but real inflation stayed pretty much constant while perceived inflation absolutely blew out of proportion.

So essentially people noticed some minority of shops raising their prices talking advantage of the little confusion around the exchange rate and never shut up about it since

exactly, Bulgarian here, born in Germany in 1988, so I lived with the DM and then experienced the Euro throughout my entire life, until 2023 when I decided to go back to BG. The Euro will make BG a debt slave on Germanys and France terms. Watch critical infrastructure being sold to China or who knows, just like Greece had to do it.

I remember the rounding up in Germany. But that was the extent of it. It was a one time event and wasn't difficult to absorb.

Finally, some quality fearmongering on Hacker News /s

Soon all the prices will be listed in both of the currencies and they will be kept as that for another six months after the adoption.

The country already experienced quite a bit of inflation last years, regardless of not being in the euro. I don’t see why the change of the currency that is already pegged to euro since the creation of Euro will cause any inflation beyond the rounding and the rounding is for 1:1.95583 and that often provides rounding sown incentive as 4.99 becoming 2.04 and 4.49 becoming 2.2957

A more realistic concern can be that Bulgaria might start borrowing irresponsibly. Currently Bulgaria's debt to GDP is just around %22, which is very low.

> I saw no price changes other than rounding up or down to the nearest Euro equivalent price

Dunno about Belgium but what I notice in French supermarkets is that prices aren’t rounded at all. 10k SKUs will have 10k different prices (ish).

Plain frozen pizza? 4,62 EUR.

Same with pepperoni? 4,92 EUR

Domestic 500mL beer? 1,14 EUR

Fancier beer? 1,81 EUR

I think there are other motives otherwise Bulgaria would say, no thank you. IMHO, the primary motivation is to establish/strengthen the single market and the economic cohesion of the EU. That inflation is a side effect of this (and part of the stabilization) might be the case.

Same in Germany. I remember the times, was a poor student. Restaurants took the opportunity to change prices, which everyone felt but did not influence the inflation. And that price hikes was overdue (at least that was the statements back then ... Which I found rationale)

Since Bulgaria was already in a currency board with the Euro, they already were a “debt slave”, so nothing changes there.

In the Netherlands there was a brief spike of inflation, but that was due to rounding up, definitely not converting 1 NLG to 1 EUR.

The inflation did correct itself the years after (aka lower than usual). The perception with many people still is that the euro made everything more expensive, but that's only based on feelings. The inflation numbers tell a different story.

Bulgaria is still around so are other countries without the deluded euro. lol

it seems you are not understanding how dent unions work. lol

Belgium had double denominations for about two years. My mother owned a business at that time and she used the occasion to correct the prices a bit bit that was only because she lagged a bit on inflation.

Plain frozen pizza? gesticulates annoyed in Italian ;-)

40,3399 BEF

They really hammered this in. It was even a question on my exams.

I did that a while ago and stopped immediately because it's scary and irrelevant. My parents house was wrote expensive at the rule they bought it at 600.000 Bfr. Now it's being valued at 600.000 euros. That's a factor 40 over about 30 years. When euro landed a beer cost about 45 Bfr, a bit over a euro. Now I pay €2,5. It's hard to compare prices over that period of time.

we want to say NO THANK YOU by holding a referendum, but they wont let us. xaxa

The discontentment arose because it was extremely poorly planned, and failed to address the very problems it was 'trying' to solve. It is very unlikely for a state government to implement a local currency and introduce more friction to an already painfully bureaucratic system; it is a politically disastrous move.

> Monetary policy is government policy. The ruling party is seldom uniformly popular across their entire domain.

If by monetary policy you are referring to fiscal policy, you're pretty much spot on. There's always in-fighting between states and lots of complaining about the central/federal government favoring certain states over others.

In many places people wouldn't ask because it's completely unrealistic to get it. Regions struggle to get a bit more independence from the central government. An own currency is completely unrealistic. Your argument doesn't work.

The Bulgarian lev has been fixed to the value of the German mark and later the Euro since 1997, lol.

No, in your example this will be a reduction of the price.

That supports my argument.