ECB President Confident in Bulgaria’s Eurozone Progress

Sofia: Bulgaria has made progress in meeting the convergence criteria for joining the eurozone, according to European Central Bank (ECB) President Christine Lagarde.

Speaking at a press conference, she noted that the assessment primarily falls under the European Commission’s jurisdiction but emphasized that the process in Bulgaria is advancing. Lagarde highlighted that the ECB’s role is limited to evaluating inflation convergence while also monitoring fiscal position and sustainability. Based on discussions with Bulgarian authorities, she expressed confidence that the country is on the right track.

At the press conference following the ECB meeting, Lagarde announced that the central bank had unanimously decided to cut its three key interest rates by 25 basis points. She stressed that there was no debate over the appropriateness of the decision, which had been put forward by ECB Chief Economist Philip Lane. Lagarde also clarified that the Governing Council had not considered a larger 50-basis-point reduction.

She reiterated that the ECB’s monetary and interest rate policy remains in constrained financial conditions and cautioned that it was too early to discuss ending the rate-cutting cycle. Future decisions on monetary policy, she said, would depend on economic data gathered in the coming weeks and months. Lagarde pointed out that the eurozone economy remains weak in the short term, citing fragile consumer confidence and declining output.

Although household incomes have risen in real terms, Lagarde noted that consumers have not yet been sufficiently encouraged to increase spending. She remained optimistic about a potential recovery, citing the solid labor market, low unemployment, and expectations of improved working conditions and higher incomes, which could strengthen consumer confidence and spending. More accessible credit should also support consumption and investment, while exports could contribute to growth—provided that trade tensions do not escalate.

However, Lagarde warned that increased global trade frictions could hamper eurozone growth by slowing exports and weakening the broader economy. She also said that inflation projections remain uncertain due to ongoing geopolitical tensions, including the wars in Ukraine and the Middle East, which could drive up energy prices. The ECB expects inflation to fluctuate in the short term before stabilizing around its 2% target over the medium term.

Discussing tariffs, Lagarde cautioned that their introduction could have a negative global impact. She dismissed the idea of imposing tariffs as “completely unrealistic,” arguing that such a move would only heighten economic uncertainty. She also pointed out that the effects of tariff adjustments would depend on various factors, including whether they are applied universally or at different rates across countries. Additionally, she warned of potential trade diversions and the risk of retaliatory measures from affected nations.

Towards the end of the press conference, Lagarde expressed confidence that none of the central banks within the ECB’s General Council would hold bitcoin as part of their foreign exchange reserves. She emphasized that reserves should be “liquid, safe, and secure” and should not be associated with risks such as money laundering or other criminal activities.