Bulgarian Finance Ministry announces blueprint for adoption of the Euro in 2024

On 21 October 2022, the Bulgarian Ministry of Finance (MF) announced its blueprint for adopting the Euro under a future Euro Adoption Act (EAA). This blueprint closely follows the main guidelines under the National Euro Changeover Plan of the Republic of Bulgaria adopted by the Council of Ministers on 22 May 2022 and aims to “to ensure the smooth and transparent introduction of the Euro in the Republic of Bulgaria”.

According to the MF the following principles will apply under a future EAA:

• Strict adherence to the legacy conversion rule – Bulgaria has been pegged to the Euro since its adoption in 1999 with a fixed exchange rate of BGN 1.95583 for EUR 1 with the conversion maintenance being a non-negotiable principle for the Bulgarian public and political establishment;
• Rounding principle – introducing rounding principles to maintain fair rounding under the conversion rules;
• Continuation of legal instruments and automatic recalculation of amounts from BGN to EUR – statutory continuation of legal instruments (i.e. contracts in any form) and automatic conversion of BGN to EUR amounts in compliance with conversion and rounding rules;
• Minimising the costs of introducing the Euro – outlining the rules for the distribution of the costs incurred in connection with the adoption of the Euro by budgetary institutions and private individuals;
• Consumer protection – outlining the principle that consumers should not be placed in a financially less favourable position than they would have been if the Euro had not been introduced;
• Avoiding harm to individuals and legal entities – posing an effective ban on entities (including credit institutions, PIs, EMIs and other financial service providers) to increase the price of goods or services for consumers upon the introduction of the Euro without a valid commercial reason.

Under the Changeover Plan, Bulgaria has adopted a “Big Bang” scenario for the introduction of the Euro in Bulgaria (i.e. the date of adoption of the Euro would coincide with the introduction of the Euro as the official unit of payment) when Euro banknotes and coins would become official means of payment from the date of membership in the Euro area. The use of the national currency together with the Euro will be allowed for a period of up to six months after the changeover. As a result of this swift introduction, the EAA blueprint outlines certain rules for the changeover including:

• Rules and terms for the physical exchange of BGN to EUR;
• A period of double marking of prices of goods and services, with double marking starting within one month from the date of the decision of the Council of the EU for the entry of Bulgaria into the Eurozone and ending 12 months from the date of the adoption of the Euro;
• Conversions of salaries, pensions, financial instruments (including shares and bonds);
• Update of IT systems, accounting standards, tax documents, fees, penalties and indexes in connection with the introduction of the Euro.

The EAA blueprint imposes obligations on all institutions, central governmental bodies and municipalities for implementing a thorough review of any legal acts that must be aligned with the pending adoption of the Euro. These offices must also adopt control measures, infringement reporting procedures and a detailed outline of the scope of sanctions for breach of any changeover rules and procedures.

When the Changeover Plan was adopted in May 2022, the MF aimed at the ambitious date of 1 January 2024 for the adoption of the Euro in Bulgaria. Due to ongoing political uncertainty in Bulgaria and inflationary pressure in the EU, this date remains a rather distant possibility, but the adoption of the EAA blueprint by the MF suggests that the government is still operating according to this schedule. More clarity is expected by the end of the year when it will be known whether Bulgaria will have a functioning parliament or whether there will be another round of general elections.

For more information on the adoption of the Euro in Bulgaria and how this could affect your business, contact your client partner or local CMS experts: Elitsa Ivanova and Konstantin Stoyanov.