Christine Lagarde has said Bulgaria could experience a short-lived rise in measured inflation when it adopts the euro on 1 January 2026, largely due to retailers rounding prices during the conversion from lev to euro.
Speaking at a conference in Sofia on 4 November, the European Central Bank (ECB) President described concerns about price effects as “entirely legitimate”, while emphasising that the uplift seen in previous changeovers has typically been modest and temporary.
Lagarde cited Croatia’s experience as a recent comparator. When Zagreb joined the single currency in 2023, the changeover effect added around 0.4 percentage points to headline inflation, consistent with the 0.2–0.4 percentage point range observed in past adoptions, she said. Croatia’s case occurred at a time of already elevated inflation, reinforcing the ECB’s message that any rounding-related effect is a one-off rather than a new inflation trend.
Public opinion remains divided in Bulgaria ahead of the changeover. Surveys have shown roughly half of Bulgarians sceptical about euro adoption, with concerns centred on sovereignty and the potential for opportunistic pricing by retailers. Lagarde addressed those worries directly, arguing that uncertainty typically diminishes after accession as households and firms adjust to the new currency framework. She identified the greater risk for new members as the possibility of losing momentum on economic reforms once inside the euro area, thereby foregoing part of the longer-term gains associated with membership.
Bulgaria enters the final weeks before adoption with inflation higher than the euro area average. Annual price growth stood at 4.1% in September, compared with inflation in the euro zone that is broadly close to the ECB’s 2% target. That gap highlights the challenge of managing perceptions during the switchover period. The ECB’s guidance, however, is that rounding effects should be contained and temporary, provided implementation is disciplined and communication remains clear.
The institutional steps enabling Bulgaria’s entry have been completed. Following favourable convergence assessments from the European Commission and the ECB in early June, euro area and EU finance ministers advanced the process through June and July. On 8 July, the Council adopted the final legal acts required for the changeover, confirming the irrevocable conversion rate of 1.95583 leva to the euro and paving the way for the 1 January 2026 start date. Bulgaria will become the 21st member of the euro area.
Authorities in Sofia have framed adoption as the culmination of a long alignment with the single currency. Bulgaria’s currency board has for years pegged the lev to the euro, anchoring monetary conditions to the ECB’s policy stance. Entry into the euro area removes residual exchange-rate risk in cross-border transactions and integrates Bulgarian banks and firms more fully into euro capital markets. It also brings participation in the Eurosystem’s decision-making and access to common financial backstops. These structural factors are among the reasons cited by proponents when arguing that the longer-term benefits outweigh near-term administrative and pricing frictions.
The government has worked with retailers and consumer protection bodies to mitigate rounding risks during the dual-pricing phase. Experience from earlier entrants suggests the intensity of monitoring and enforcement, alongside transparent dual display of prices before and after 1 January, can limit opportunistic mark-ups. The data from Croatia in 2023, frequently referenced by the ECB, indicate that while some sectors saw noticeable rounding, the aggregate effect was contained and faded as competitive pressures reasserted themselves.
Lagarde’s remarks in Sofia formed part of a broader set of messages from international institutions ahead of the changeover. The IMF, whose Managing Director Kristalina Georgieva also addressed the 4 November event, has previously pointed to euro adoption as a means of reinforcing policy credibility and financial stability, while underscoring the importance of continued reforms to tackle domestic structural constraints. The ECB has made a similar point, warning that the benefits of membership are maximised when governments maintain progress on fiscal discipline, governance standards and market-efficiency measures after entry.
For households, the practical impact will be most visible in the first weeks of 2026 as prices, wages and contracts convert at the fixed rate. For firms, treasury operations and accounting systems will complete the transition to euro units, ending conversion costs and rounding spreads in day-to-day business with euro area partners. Banks will integrate fully into the Eurosystem’s payments and collateral frameworks, and Bulgaria will join the Single Supervisory Mechanism’s structures already in place through prior close-cooperation arrangements. Combined, these changes are expected to reduce transaction frictions and deepen cross-border trade and investment links over time.
While the headline risk for the coming months is a short, rounding-related bump in measured prices, the precedent from recent changeovers and the legal architecture now finalised suggest the effect should be limited. The policy focus will then revert to Bulgaria’s domestic reform agenda inside the euro area, the area Lagarde identified as decisive for securing the full dividend from membership.
Bulgaria Edges Closer to Eurozone Membership Amid Inflation Concerns and Political Disputes
