From the article: … It seems like the question is whether a floating currency would be better, but for a small country that isn’t rich, maybe not.
From the article:
Thousands of protesters gathered on a central square in downtown Sofia to protest government plans to adopt the euro and to demand a referendum on the new currency. The European Union has given the green light for Bulgaria to adopt the euro starting Jan. 1.
The protesters, led by civic groups, nationalist and pro-Russian parties known for their opposition to the euro, declared that after the rally they intended to set up a tent camp on the central square, dubbed “Town of the lev,” after the name of the national currency.
…
During its almost two decades-long EU membership, Bulgaria has been plagued by political instability and corruption that have fueled euroscepticism among its 6.4 million citizens.
Now, scores of false claims by opponents of the eurozone have been published on social networks feeding fears of economic changes that they say could bring more poverty.
Economists say joining the euro will not bring massive change to Bulgaria’s economy in the short run. That’s because the government has pegged the currency to the euro by law, at a fixed rate of 1 lev for every 51 eurocents.
It seems like the question is whether a floating currency would be better, but for a small country that isn’t rich, maybe not.
For Bulgaria with a Euro-pegged currency, the issue at hand isn't monetary policy or currency. It's simply a matter of European integration or not. I'd say it looks like a non-starter from the...
For Bulgaria with a Euro-pegged currency, the issue at hand isn't monetary policy or currency. It's simply a matter of European integration or not.
I'd say it looks like a non-starter from the outside: Russia will not acknowledge Bulgaria and its autonomy in a way to be reliably trusted in the next decades as things look today.
Therefore, the obvious choice is EU-integration. Having the Euro seems like a no-brainer for Bulgaria.
If Bulgarias currency was free-floating, as with all things currency, it depends. On the world economy, on who you are, on whether we're looking at employment, investment, for government/public spending, for interest rates, purchasing power and so on.
The timing (and therefore rate of the peg) is also determining in many respects.
We have an interesting real world EU example here:
Neither Sweden nor neighboring Denmark have the Euro. They both have their own small country currency: The Krone. However, the Danish krone is pegged to the Euro, the Swedish krone is not.
Early reports this summer are that the Danish krone is so strong that tourists from both Sweden and Norway are coming in much lesser numbers than usual, potentially a tourism industry problem for some size in Denmark.
I think arguments can be made that small currencies are becoming less and less invested in. As international economic order has deteriorated under Trump and Chinese market exclusions the last years, I don't think we can expect small currencies to function as the have in the first 20 years of this millennium.
The Swedish krona seems to be up versus the euro compared to the last year and the Norwegian krone is fluctuating in the same range since 2023. More generally, though, a "weaker" currency helps...
More generally, though, a "weaker" currency helps tourism and exports - it's a country-wide sale. This is a useful thing to do if it's needed to boost the economy, and not possible for countries or regions of countries that don't have their own floating currency. They have to get through a local recession some other way.
A downside is that whether there is a sale or not isn't fully under the country's control and unexpected currency swings can be extremely disruptive.
Looking directly at DKK to SEK from 2017 (where the Trump and China shenanigans starts), then again from the full scale war in Ukraine from 2022, we see the long-term trend that squeezes the...
Looking directly at DKK to SEK from 2017 (where the Trump and China shenanigans starts), then again from the full scale war in Ukraine from 2022, we see the long-term trend that squeezes the Non-Euro currency.
The trend for DKK to NOK follows a similar pattern, and NOK being a heavily oil and gas currency, that's rather unexpected with the huge increase in Brent Crude oil, and natural gas prices ( the Dutch TTF EUR/MWh being the most relevant measure), we might expect the Norwegian kroner to have strengthened itself.
However, quite the opposite has happened: volatility and interest rates means that the global currency markets are demonstrably avoiding at least these two currencies: A more uncertain world means a smaller currency is riskier.
I agree with your analysis on tourism and exports.
However, when you don't control your currency, you don't control central bank interest rates, and that can create a host of issues in internal markets. Smaller countries are almost never self-reliant in multiple sectors, and so they're also reliant on well-functioning world trade to be in the best economic position domestically.
Probably worth specifying here that Denmark is the only country in ERM II that has the possibility of an opt-out - Bulgaria does not, and (IIRC) so won't any of the countries that haven't met the...
Probably worth specifying here that Denmark is the only country in ERM II that has the possibility of an opt-out - Bulgaria does not, and (IIRC) so won't any of the countries that haven't met the convergence criteria yet (including Sweden) when they finally decide to enter the ERM. But I'm not knowledgeable enough on this particular topic so I'll leave any specifics up to someone else to add/correct.
What I am actually hoping is that Bulgaria is not doing the same bullshit Greece did, i.e. faking a lot of data in order to join the euro, which really only caused (and still causes) economic trouble to Greece up to this day.
From the article:
…
It seems like the question is whether a floating currency would be better, but for a small country that isn’t rich, maybe not.
For Bulgaria with a Euro-pegged currency, the issue at hand isn't monetary policy or currency. It's simply a matter of European integration or not.
I'd say it looks like a non-starter from the outside: Russia will not acknowledge Bulgaria and its autonomy in a way to be reliably trusted in the next decades as things look today.
Therefore, the obvious choice is EU-integration. Having the Euro seems like a no-brainer for Bulgaria.
If Bulgarias currency was free-floating, as with all things currency, it depends. On the world economy, on who you are, on whether we're looking at employment, investment, for government/public spending, for interest rates, purchasing power and so on.
The timing (and therefore rate of the peg) is also determining in many respects.
We have an interesting real world EU example here:
Neither Sweden nor neighboring Denmark have the Euro. They both have their own small country currency: The Krone. However, the Danish krone is pegged to the Euro, the Swedish krone is not.
Early reports this summer are that the Danish krone is so strong that tourists from both Sweden and Norway are coming in much lesser numbers than usual, potentially a tourism industry problem for some size in Denmark.
I think arguments can be made that small currencies are becoming less and less invested in. As international economic order has deteriorated under Trump and Chinese market exclusions the last years, I don't think we can expect small currencies to function as the have in the first 20 years of this millennium.
The Swedish krona seems to be up versus the euro compared to the last year and the Norwegian krone is fluctuating in the same range since 2023.
More generally, though, a "weaker" currency helps tourism and exports - it's a country-wide sale. This is a useful thing to do if it's needed to boost the economy, and not possible for countries or regions of countries that don't have their own floating currency. They have to get through a local recession some other way.
A downside is that whether there is a sale or not isn't fully under the country's control and unexpected currency swings can be extremely disruptive.
Looking directly at DKK to SEK from 2017 (where the Trump and China shenanigans starts), then again from the full scale war in Ukraine from 2022, we see the long-term trend that squeezes the Non-Euro currency.
The trend for DKK to NOK follows a similar pattern, and NOK being a heavily oil and gas currency, that's rather unexpected with the huge increase in Brent Crude oil, and natural gas prices ( the Dutch TTF EUR/MWh being the most relevant measure), we might expect the Norwegian kroner to have strengthened itself.
However, quite the opposite has happened: volatility and interest rates means that the global currency markets are demonstrably avoiding at least these two currencies: A more uncertain world means a smaller currency is riskier.
I agree with your analysis on tourism and exports.
However, when you don't control your currency, you don't control central bank interest rates, and that can create a host of issues in internal markets. Smaller countries are almost never self-reliant in multiple sectors, and so they're also reliant on well-functioning world trade to be in the best economic position domestically.
Probably worth specifying here that Denmark is the only country in ERM II that has the possibility of an opt-out - Bulgaria does not, and (IIRC) so won't any of the countries that haven't met the convergence criteria yet (including Sweden) when they finally decide to enter the ERM. But I'm not knowledgeable enough on this particular topic so I'll leave any specifics up to someone else to add/correct.
What I am actually hoping is that Bulgaria is not doing the same bullshit Greece did, i.e. faking a lot of data in order to join the euro, which really only caused (and still causes) economic trouble to Greece up to this day.