Elias Spirtounias, AmCham Greece: Bulgaria Will Benefit From the Eurozone Accession

Mr. Elias Spirtounias, Executive Director, AmCham Greece, Introduction Remarks at the “Bulgaria in the Eurozone Conference: What is Next for Business”, April 5, 2023, Sofia

Dear Ministers, Dear Business Executives, Dear Ladies and Gentlemen.

It is an honor for me and the American-Hellenic Chamber of Commerce to participate in this very high-level meeting discussion about the adoption of Euro by the State of Bulgaria and what the impact for its economy and business would be.

First, I want to thank AmCham Bulgaria, my counterpart Ivan Mihaylov and his excellent team for their invitation and also for setting up this very interesting and also important event which highlights the commitment of AmChams in addressing with an open and straightforward way crucial issues at stake, very vital for the economy and business environment.

Such a crucial issue is the adoption of Euro by Bulgaria replacing the current national currency, the lev.

Last week I read some articles regarding the expectations and the concerns for this change. The majority of Bulgarian business, almost 60%, is anticipating that this transition will benefit their business and the economy in general. However, part of the society, almost 60%, sees this transition with a reservation and some kind of fear, perhaps because there is a lack of information and knowledge for this subject. In Greece back in 2000 the numbers were almost the same despite the fact the majority of Greeks were and still are in favor of EU.

From our experience in Greece, I can assure you that there are many more benefits than any drawbacks or adjustment difficulties from such a transition and their balance depends on how well prepared the state will be for it and at the same time how efficiently the public will be prepared, accordingly. In addition, in the long run, the level of the benefits will depend on how artfully the governments would implement their fiscal policies.

Bulgaria by joining the European Monetary Union, would enjoy several benefits, including lower inflation, higher levels of FDI, easier access to and operation in international markets, improved credibility, higher integration into the financial markets and harmonization with regulatory frameworks, rise in tourism and greater political stability to name a few. More analytically:

  1. Currency stability and control of inflation: By adopting the Euro, your country can benefit from the European Central Bank’s monetary policy, which aims to maintain price stability and control inflation. The ECB interest rate policy together with the access to broader financial markets and free movement of capital may lead to an inevitable rise in competition among the local banks and help tame inflationary pressures, while participation to the single currency may shield the national economy from abrupt fluctuations. In Greece after a long period of fluctuation the inflation was stabilized in low levels.
  2. Increasing level of FDI: The adaptation of Euros provides a stable and more attractive environment for investors and as a result an increase of foreign direct investment (FDI) in the country. This is because the Euro is a widely accepted and stable currency, which provides a level of confidence to investors. In Greece, the FDIs increased significantly by almost 65% to 75%
  3. Increased international trade: By joining the Eurozone, Bulgaria will become a part of a larger economic bloc with a single currency, which made it easier for the businesses to trade with other countries in the Eurozone without having to deal with currency exchange rate fluctuations and associated transaction costs. The single market of more than 300 million consumers would become a much easier accessible market for you.
  4. Higher credit rating of the country: Adopting the Euro can improve the credit rating of Bulgaria by providing greater economic stability and reducing currency risks. This can make it easier for the country to access international capital markets and attract foreign investment. In Greece the period after the adoption of Euro, the 10yrs bond yield was equivalent to the German one,
  5. Lower borrowing costs: Joining the Eurozone would allow to access cheaper borrowing rates since it will be perceived as being part of a larger, more stable economic region.
  6. Improved fiscal discipline: As a member of the Eurozone, you will have to comply with some performance criteria regarding inflation and national debt despite the fact that currently all these  have eased due to the circumstances. That would eventually help the members to follow a prudent fiscal policy and manage their finances more effectively. 
  7. Increased tourism: The euro adoption will make much easier for tourists from other Eurozone countries to travel to Bulgaria without having to worry about currency exchange rates. In Greece we observed an increase of tourism by almost 70%.
  8. Greater political stability: Monetary bonding with sovereign Eurozone countries would certainly contribute political stability and provide for closer political relations, also benefiting from other member states’ policies.

I am sure that most of you already know what I just mentioned. However, you might not know what my country has faced during the economic crisis and what the situation would have been had we not been a member of the Euro family. Someone might argue that we would have had the flexibility of devaluating our national currency and as such increase our competitiveness and our exports, but I can tell you this wouldn’t happen. And the reason is that we had a very introvert economy and a negative trade balance.  So, you can imagine what the situation would be when prices in many products would have gone up including oil and gas. Yes, we had to adopt 3 bailouts and very strict programs but that was mainly due to our irresponsible fiscal policies. And that is why I mentioned that in the long run the benefits would depend on the fiscal discipline.

Another impediment that might arise from the adoption of Euro is the speculation that will almost certainly develop during the price conversion process and this is something that needs to be taken care of so that the public does not face a problem. In Greece the government put in place a very thorough process but was it not strictly monitored and it had its effects for a while with the increase of the cost of living in the first years after the Euro’s adoption.

Nevertheless, of all the above, my country has admittedly benefited by entering into the Eurozone and I am sure Bulgaria would benefit as well. At the end you can learn from the experience of other countries such as Greece and Croatia and pave an easier path.

Thank you.