SOFIA — The euro is more than just a currency: it’s a geopolitical insurance policy in a fragmenting world. That was the message the EU’s most senior economic leaders sent to a skeptical Bulgarian public during a pro-euro charm offensive in Sofia on Tuesday. Bulgaria is due to adopt the euro on Jan. 1, 2026, but only about half the population supports joining the single currency. Fears about inflation and centralization of power in Brussels and Frankfurt — exacerbated by alleged Russian disinformation campaigns — have turned many against the project. In a push to ease these concerns, Economy Commissioner Valdis Dombrovskis and European Central Bank President Christine Lagarde each stressed the geopolitical benefits of joining the euro. “Bulgaria is joining the euro … at a point when there is more volatility, at a time when we have more shocks, one after the other, compounded, and at a time where the global order, as we have known it, is more fragmented, and when friends are probably fewer,” said Lagarde, adding: “It’s important to close ranks and to be together.” Lagarde said that during the financial crisis, the single currency had proved a defensive shield against shocks and depreciation. Dombrovkis said that, in itself, the adoption of the euro could help Bulgaria compensate for growing geopolitical risks in investors’ eyes. “In Baltic countries, despite being geopolitically exposed, the borrowing costs were lower than in Poland, and to a large extent investors assessed that [the euro] is a stabilizing factor,” he said. Bulgaria’s accession to the euro has been planned for more than a decade, but as the date got nearer, it has spawned conspiracy theories and populist politics, alongside more justified concerns about the currency changeover. Investigative reports have identified Russian-funded social media campaigns to undermine support for the euro. Last April, the far-right party Revival, which arranged several anti-euro protests over the last year, signed a deal with Vladimir Putin’s Russia United. The percentage of Bulgarians who support the euro has slightly increased in the last few months. | Nikolay Doychinov/Getty Images Asked about Russian influence on public opinion about the euro, Dombrovskis said: “It is not a secret that Russia is waging a hybrid war against Europe and European member states. It is provocation, acts of sabotage, violation of European airspace, meddling in political processes in the European Union, also in other countries, and it is spreading disinformation.” The percentage of Bulgarians who support the euro has slightly increased in the last few months, reaching 51 percent according to a survey cited by Finance Minister Temenuzhka Petkova — up from 45 percent earlier in the year. European Stability Mechanism chief Pierre Gramegna highlighted risks coming from Washington’s new approach to monetary policy and cryptocurrencies: “The U.S. administration is changing its position on so many topics, including on finance and currency, that being part of a large bloc is a huge advantage,” he said, adding people in Bulgaria are not fully conscious of this. “The risk entailed in the digital currencies can be faced better if we are in the euro area,” he said.

BRUSSELS ― Carlos Cuerpo wants eurozone members to wake up and lead Europe to financial union. The 44-year-old Spanish economy minister — who on Friday entered the race to head up the powerful group of eurozone countries known as the Eurogroup — is calling for a major shake-up of a body he says has become all talk and no action. “Going forward, the Eurogroup should be more about decisions,” Cuerpo, a socialist, said in an interview with POLITICO, where he outlined his proposal for sweeping changes to the body. Cuerpo argued that groups of countries ― as opposed to all the EU’s 27 states ― should lead the way to integrate Europe’s financial markets, a long-held ambition in Brussels that has repeatedly struggled to get off the ground. “If you cannot go in terms of reducing fragmentation from 27 to one, you might have to go in different steps and reduce the fragmentation by putting groups of countries together.” This is a major rupture from the incumbent Eurogroup President Paschal Donohoe, whom critics accuse of prioritizing broad consensus over actual decisions in his two terms in office. To everyone’s surprise, in October, Cuerpo launched a “coalition of the willing” ― known as the European Competitiveness Lab ― to finally make progress on a decades-old project to create U.S.-style financial markets in Europe. The EU’s biggest countries ― Germany, France, Italy, Poland, Luxembourg, the Netherlands and Spain ― have signed up to the initiative, boosting Cuerpo’s leadership credentials. He said he will empower this scheme if he’s elected as Eurogroup president. “I expect that all 27 member states would be members of the competitiveness lab at some point.” The Spaniard, however, faces an uphill battle to defeat Donohoe in next Monday’s secret vote by the eurozone’s 20 finance ministers. While many officials praised Cuerpo’s soft skills and “encyclopedic knowledge” of the European economy, others feel alienated by his more radical ideas, such as doubling the size of the EU budget or issuing common debt for defense. Donohoe is the odds-on favorite to secure a third term as he hails from the powerful center-right European People’s Party and appeals to small countries who will tip the balance of the election. Lithuanian socialist Finance Minister Rimantas Šadžius, is unlikely to make it past the first round of voting, according to several officials. | Oliver Hoslet/EPA The third candidate, Lithuanian socialist Finance Minister Rimantas Šadžius, is unlikely to make it past the first round of voting, according to several officials with knowledge of the voting procedures. A simple majority — 11 votes — is necessary to be elected as president. THE EUROGROUP’S MIDLIFE CRISIS The Eurogroup is a club of 20 eurozone ministers who meet every month to coordinate economic policy. During its heyday, it steered the eurozone through the rumble-tumble of the sovereign debt crisis, but lost influence as the euro area stabilized and a more inclusive EU-wide group of 27 finance ministers gained power. The Eurogroup has become a “bland working group” or a “think tank,” according to two EU diplomats, who, like others in the story, were granted anonymity to speak freely. A group of countries — including Spain — have questioned the usefulness of holding monthly meetings in Brussels in an informal report that was seen as mildly critical toward Donohoe’s presidency. Faced with this criticism, Cuerpo said he wants to breathe new life into stalled Eurogroup projects such as creating an EU-wide financial and banking union and strengthening the role of the euro. “We need to be very efficient in coming up with deliverables, otherwise we might be late to the party,” compared to other foreign countries. “Eurogroup needs to have a voice for these new times that actually requires us to face new challenges and call for a revamped Eurogroup.” THE ITALIAN VETO One of the thorniest issues is Italy’s veto over a plan to use money from the European Stability Mechanism — a bailout fund for countries introduced during the eurozone crisis — to rescue failing banks. Populist parties in Italy oppose ratifying the reform over the ESM’s lingering association with strict bailout conditions during the eurozone meltdown. Rome, however, is open to using these funds to provide cheap loans for defense — something that Cuerpo has endorsed in the past. In a sign of détente, Cuerpo said that “we have to help Italy help us on this [ratifying the ESM],” although he shied away from questions on using these funds for defense. “[We need] to provide the right narrative, which is sometimes also an important element around how the ESM can help us going forward in these new challenges as well.” This story has been updated to reflect Carlos Cuerpo’s formal job title as minister of economy, trade and business.

BRUSSELS ― The policies of U.S. President Donald Trump have given Europe a window of opportunity to fulfill a long-held dream of challenging the dollar’s supremacy in global finance, according to European Central Bank leader Christine Lagarde. Speaking to EU leaders during a summit on Thursday, Lagarde said a single EU financial market can attract investors searching for alternatives to the dollar and U.S. financial markets, according to an EU diplomat and an EU official aware of the talks behind closed doors. Lagarde reportedly drew attention to recent trends in global financial markets, notably a tendency of foreign investors not to reinvest money in U.S. Treasury bonds as their existing holdings mature. Net purchases of Treasuries by foreign investors have fallen well short of expectations this year and turned negative in January for only the second time in over four years. Analysts have commented that investors are unsettled both by Trump’s willingness to launch a trade war and by his intention to make a temporary tax cut permanent at a time when U.S. public finances are on an unsustainable trajectory. Trump’s enthusiastic embrace of cryptocurrency has also raised questions about his long-term plans for the dollar. At the same time, however, Trump’s encouragement of private digital currencies linked to the dollar, so-called stablecoins, may expand and entrench the greenback’s dominance, European Stability Mechanism head Pierre Gramegna said last week. Both Gramegna and the ECB see this as a potential threat to Europe’s own monetary sovereignty. Jacopo Barigazzi contributed to this report.

Mujtaba Rahman is the head of Eurasia Group’s Europe practice. He tweets at @Mij_Europe. Donald Trump’s return to the White House is now the main issue occupying senior minds across Europe’s capitals — and rightfully so. Trump 2.0 creates risks for the EU across a range of issues, including security, trade, and the bloc’s stance on China. But the immediate concern is what happens with Ukraine, particularly given Trump’s stated aim of ending the conflict in “24 hours.” In this regard, the bloc has already agreed on one early priority: It must do everything possible to convince Trump that Ukraine should enter any negotiations from a position of strength, and that a bad deal for Ukraine would make him look weak on the international stage — much like Afghanistan did for President Joe Biden, or Syria did for former President Barack Obama. While this line of argument is being pushed by NATO Secretary-General Mark Rutte and several EU leaders, presenting Trump with this angle alone is unlikely to sway him. Therefore, the bloc has also begun discussing an “offer” it hopes might make Trump more sympathetic. But if the EU wants to seriously influence Ukraine’s negotiations it has to be willing to pay for it. The bloc’s biggest concern is that negotiations over Ukraine’s future might turn into a “mini Munich.” That they would not only involve immediate territorial losses for Ukraine but also risk further Russian advances in the country’s east, a big wave of Ukrainian refugees to the EU and a mindset of appeasement that would exclude Kyiv’s NATO membership and possibly jeopardize its push to join the EU too. Such a turn would be a major strategic setback for the EU and greatly test its cohesion. It’s also much more likely to happen if Ukraine start talks from a position of weakness — which is why putting a lot more money on the table is important. Officials believe the recently brokered €50 billion G7 loan will last Ukraine until the end of 2025. So, the purpose of any fresh money would be to signal support for Ukraine in 2026 and possibly 2027. In the EU’s eyes, such an offer could also give Trump the “win” he needs — U.S. pressure forcing the bloc to shoulder more of the financial burden for Ukraine, as well as for its own security and defense. Yet, stumping up more cash is no easy task. France’s government recently fell as it tried to pass a budget for 2025. Germany’s upcoming February elections and subsequent coalition negotiations will complicate Berlin’s ability to sign off on decisions of major fiscal consequence. Moreover, seven member countries are in an excessive deficit procedure; there is only around €5 billion left for defense in the existing EU budget; and since the next EU budget will only run from 2028 onward, it cannot help address what can be done now. Officials believe the recently brokered €50 billion G7 loan will last Ukraine until the end of 2025. | Kirill Kudryavtsev/AFP via Getty Images However, the bloc is exploring a range of different options to organize more money for Ukraine. One idea is to simply lend Kyiv money at concessional interest rates and longer repayment periods against the so-called headroom in the EU budget. Another is to augment the EU’s ability to borrow against this headroom, with member countries providing a fiscal guarantee. Such a template would be modeled on the EU’s €100 billion SURE facility, which was established to support furlough schemes during Covid-19. Other possibilities include the European Stability Mechanism (ESM), which retains a lending capacity of €422 billion. But a previous attempt to make the ESM useful to member countries during the pandemic failed, as no member drew down any of the cheap cash that was on offer. Repurposing unused NextGenerationEU funds is another option, since only 41 percent of the €650 billion post-Covid Recovery and Resilience Facility has been used so far. But while the target is €300 billion by the end of the year, the facility is due to expire by the end of 2026 and is unlikely to be extended. The main issue, however, is that all these options are technically and politically complicated, as they require the involvement of the EU’s 27 national parliaments — at least to some degree. Furthermore, as ever larger sums of money for Ukraine will invariably involve more weapons purchases from the U.S., it will inevitably face opposition in some EU capitals, even if they recognize the need for more pragmatism in the short and medium term. An emerging compromise on the European Defense Industry Program, which would enable a greater percentage of euros to be used for non-EU military procurement, demonstrates this growing pragmatism. And some policy-makers in Brussels want to go even further, citing former U.S. Secretary of State Mike Pompeo’s “lend-lease” plan as a possible model to follow. Such a scheme would allow Ukraine to use billions of euros to borrow U.S. military equipment without any restrictions. Further still, some member countries want to create one overall package combining billions for Ukraine with the EU’s own security and defense and trade concessions — such as buying more U.S. LNG and agricultural products, as well as more alignment with the U.S.’s tougher stance on China. Such a package is a useful idea. Not only would it send a stronger signal to both Trump and Russian President Vladimir Putin, it could also help maintain intra-EU cohesion, marrying the concerns of member countries more worried about trade with those more anxious about security. The logic is simple: Spending even more on EU security and defense would result in even greater fiscal transfers to the U.S., thus securing even more concessions when it comes to tariffs. Overall, the EU’s institutions and member countries are clearly alive to the challenge a second Trump administration presents. More money for Ukraine now seems inevitable, and it will undoubtedly make the front end of the bloc’s broader approach. As one senior EU official said: “The choice is the following: Trump’s plan or Putin’s plan — unless we have the guts to propose an alternative that we need to be willing to pay for.” And the EU’s moment of truth is fast approaching.