The Eurozone – Objectives, Criteria, and Bulgaria’s Participation
Changing the national currency is an important step for every country joining the Eurozone.
What the Eurozone represents, what its advantages are, and how it functions—read in the sections below.
What Is the Eurozone
The Eurozone is part of the European Union’s economic integration, in which a common currency—the euro—is used.
The union includes EU member states that have adopted the euro and follow a unified monetary policy determined by the European Central Bank. Each of these countries meets specific economic and legislative requirements.
Difference Between the Eurozone and the European Union
It is important to distinguish between EU member states and those in the Eurozone.
The EU comprises 27 countries, while the Eurozone includes only those that use the euro as their official currency.
Joining the EU does not automatically mean joining the Eurozone.
Main Objectives of the Eurozone
The Eurozone aims to ensure economic stability, growth, and price predictability.
Its objectives include:
- Facilitating cross-border trade
- Reducing currency exchange costs
- Maintaining inflation control within the Eurozone
- Coordinated monetary policy
This significantly supports economic activity across the European Union.
Advantages of the Euro
Eurozone countries benefit from numerous economic and practical advantages that come with adopting the euro.
Some of the main benefits include:
- Elimination of exchange rate risk
- Lower international transaction fees
- Online shopping without additional currency-related charges
- Participation in the decision-making processes of the European Central Bank
Eurozone membership provides overall economic stability and improved euro-area governance for member states.
Eurozone Membership Criteria
To join the Eurozone, every country must meet economic and legal requirements.
These requirements, known as the economic convergence criteria, include:
- Budget deficit below 3% of GDP
- Government debt below 60% of GDP
- Stable exchange rate (participation in ERM II)
- Controlled inflation
- Acceptable long-term interest rates
These convergence criteria are monitored through convergence reports that outline each country’s progress on its path to Eurozone membership.
The Eurozone and Bulgaria
Bulgaria is in the final stage of preparation for Eurozone membership and the introduction of the new currency.
The country participates in the ERM II exchange-rate mechanism, fulfills the convergence criteria, and has adopted a National Plan for the Introduction of the Euro.
The transition from the lev to the euro will allow Bulgaria to take part in shaping euro-area policies and gain access to the common resources of the Eurosystem.
How Monetary Policy Works in the Eurozone
The Eurozone’s monetary policy is centralized and managed by the European Central Bank.
Its goal is to maintain price stability and control the money supply through tools such as interest rate adjustments and open-market operations.
The Role of the Eurozone During Economic Crises
The Eurozone has mechanisms for support during periods of economic instability.
The European Stability Mechanism (ESM) was created to provide financial assistance through rescue loans under specific conditions.
Following the 2008 crisis, the Eurozone strengthened fiscal discipline and banking supervision.
The Eurozone and the Economic Union
The Eurozone is part of the broader economic framework of the European Union.
It applies a common monetary policy, while fiscal policy remains the responsibility of national governments—regulated by EU rules.
Achievements of the Eurozone
Since its creation, the Eurozone has contributed to financial regulation, stability, and economic integration.
Its key achievements include:
- Low inflation rates after the adoption of the euro
- Stable currency and exchange rates
- Enhanced competitiveness and low unemployment in Eurozone countries
- Easier access to capital markets as part of the common European economy
These factors create favorable conditions for investment in member states.
The Maastricht Treaty
The legal foundation of the Eurozone is established in the Maastricht Treaty.
Signed in 1992, it introduced the euro, defined the convergence criteria for Eurozone enlargement, and set the institutional framework for euro-area governance.
Frequently Asked Questions
What is the Eurozone?
A group of EU countries that use the euro as their sole currency.
How are decisions made in the Eurozone?
Through the European Central Bank, the Eurogroup, and national central banks.
What rights do Eurozone member states have?
Participation in the common monetary policy, the application of the euro, and economic coordination.
What obligations do member states have?
Compliance with EU fiscal rules and financial discipline.
Which are the main institutions of the Eurozone?
The ECB, the European Commission, national central banks, and the Eurogroup.