New Year, New Currency for Bulgaria

Bulgarians began withdrawing euros for the first time on Thursday after the former communist nation joined the euro currency as its 21st member. Cash machines in the capital, Sofia, dispensed brand new euro banknotes, replacing the lev, which will still be in use for cash payments in January, the AP reports. However, people will receive only euros in change.

• The country of nearly 6.7 million people was one of the poorest when it first became a member of the European Union in 2007. Joining the European single-currency system means deeper EU integration after its 1989 transition from a Soviet-style economy to democracy and free markets. However, the historic milestone arrives amid political instability, with the conservative-led government forced to resign earlier this month following nationwide anti-corruption protests, and skepticism among ordinary people, fueled by fears of price rises.

• Membership is expected to promote cross-border trade and investment, and the Bulgarian government pressed for years to get in. Yet polls show the changeover is taking place against a background of widespread skepticism among ordinary people.
• In the run-up to the big switch, price tags and bank accounts have had to show both currencies, at the fixed rate of 51 euro cents to the the lev. Bank accounts will automatically be converted. Until June 30, old money can be exchanged for no fee at banks, post offices and the Bulgarian Central Bank, and indefinitely at the central bank.
• Membership means Bulgaria is part of a much larger economic entity—the eurozone, with its internationally used currency and central bank that sets interest rates across the currency union.
• A single currency means that, for example, Bulgarians can vacation in neighboring EU and eurozone member Greece and not have to exchange money or come back with leftover bills and coins they can't spend at home.
• Companies that trade with the rest of the eurozone will no longer have to bear the costs of currency exchange, savings worth an estimated 1 billion levs per year, according to the Bulgarian National Bank. Bulgaria also gets a seat on the European Central Bank's governing council—and a voice in decisions on interest rates and monetary policy.
• Countries that join give up some economic policy tools, in that interest rates are set by the ECB in Frankfurt, and they can no longer devalue their currency to gain competitiveness or trade advantage. However, Bulgaria gave that aspect of economic sovereignty up long ago because it fixed the lev's exchange rate to the euro.

• Bulgaria officially committed to joining the euro and swapping out its national currency, the lev, when it joined the EU in 2007. That's typically the case, though two countries—Britain, which has since left the EU, and Denmark— got opt outs. A third, Sweden, shelved the issue after voters said no in a referendum. The Czech Republic, Hungary, Poland, and Romania have not taken the steps needed to join the eurozone.
• The EU's Eurobarometer poll from March showed that 53% of 1,017 people surveyed opposed Bulgaria joining the eurozone, while 45% were in favor. Much of that resistance appears to come from fears that inflation will increase as merchants round prices up during the changeover. Some also fear the loss of the currency as a symbol of national sovereignty.