Bulgaria joined the eurozone on January 1, becoming the currency union’s 21st member. The euro replaced the Bulgarian lev, with a final exchange rate set at 1 euro = 1,96 levs as of Dec. 31. President Rumen Radev said in his New Year’s statement: “The introduction of the euro is the final milestone in Bulgaria’s integration into the European Union — a place that we deserve with the achievements of our millennial culture and the civilizational contribution of our country.” The Bulgarian central bank’s governor, Dimitar Radev, has taken a seat on the table with the Governing Council of the European Central Bank. “I warmly welcome Bulgaria to the euro family and Governor Radev to the ECB Governing Council table in Frankfurt,” ECB President Christine Lagarde said in a statement on Thursday. People will still be able to pay in levs for about a month, but they will start getting their change in euros. Until June 30, old money can be exchanged for no fee at banks and post offices, and indefinitely at the Bulgarian Central Bank. Public opinion, however, remains mixed. According to a Eurobarometer poll from March, 53 percent of 1,017 Bulgarians surveyed opposed joining the eurozone, while 45 percent were in favor. A majority also felt Bulgaria was not ready to introduce the euro. The main fear was concern over “abusive price setting during the changeover.”  Bulgaria joined the European Union on January 1, 2007. In an official EU survey from May, 58 percent of Bulgarians said the country has benefited from its EU membership.

Less than 24 hours before EU leaders descend on Brussels for vital talks on financing Ukraine’s war effort, Belgium believes negotiations are going in reverse. “We are going backward,” Belgium’s EU ambassador, Peter Moors, told his peers on Wednesday during closed-door talks, according to two diplomats present at the meeting. The European Commission and EU officials are in a race against time to appease Belgian concerns over a €210 billion financing package for Ukraine that leverages frozen Russian state assets across the bloc. Belgium’s support is crucial, as the lion’s share of frozen assets lies in the Brussels-based financial depository Euroclear. Bart De Wever, the country’s prime minister, refuses to get on board until the other EU governments provide substantial financial and legal safeguards that protect Euroclear and his government from Russian retaliation — at home and abroad. One of the most sensitive issues for Belgium is placing a lid on the financial guarantees that currently stand at €210 billion. Belgium believes that the guarantees provided by other EU countries should have no limits in order to protect them under any scenario. Talks looked to be going in the right direction. The Belgians backed a Commission pitch for EU capitals to cough up as much as possible in financial guarantees against the Ukrainian package — only for Belgium’s ambassador to drop a bombshell at the end of the meeting. “I just don’t know anymore,” one diplomat said, on condition of anonymity in order to speak freely. A spokesperson for the Belgian permanent representation declined to comment. Another key demand from Belgium is that all EU countries end their bilateral investment treaties with Russia to ensure Belgium isn’t left alone to deal with retaliation from Moscow. But to Belgium’s annoyance, several countries are reluctant to do so over fears of retribution from the Kremlin. Moors said during the meeting that any decision on the use of the assets will have to be taken by De Wever, according to an EU diplomat. Belgium is pushing the Commission to explore alternative options to finance Ukraine, such as issuing joint debt — a position that’s gained traction with Bulgaria, Italy, and Malta. European Commission President Ursula von der Leyen cautiously opened the door to joint debt during a speech at the European Parliament in Strasbourg on Wednesday morning. “I proposed two different options for this upcoming European Council, one based on assets and one based on EU borrowing. And we will have to decide which way we want to take,” she said. But joint debt requires unanimous support, unlikely given Hungarian Prime Minister Viktor Orbán’s threats to veto further EU aid to Kyiv.  Moors proposed a possible workaround on Tuesday by suggesting triggering an emergency clause — known as Article 122 — that would nullify the veto threat. The Commission and Council’s lawyers rebuffed the Belgian pitch at the same meeting, saying it was not legally viable. The idea was first proposed by the president of the European Central Bank, Christine Lagarde, during a dinner of finance ministers last week, but has been challenged by Northern European countries. De Wever is expected to suggest this option during the meeting of EU leaders on Thursday.

The Bank of England is set to cut interest rates on Thursday, after lower-than-expected inflation figures and signs of a weakening jobs market. Headline inflation slowed to 3.2 percent in November, from 3.6 in October, the Office for National Statistics said on Wednesday. That was the lowest since March and a much clearer drop than predicted by analysts, who had forecast a rate of 3.5 percent. “A cut tomorrow should be a no-brainer, with another to follow in February,” Peel Hunt chief economist Kallum Pickering said via social media, pointing to “No growth since summer, a labor market that is rapidly cooling, and a big downside surprise to inflation across the board in November.” The news comes only a day after labor market data from the ONS showed the unemployment rate rising to its highest level in over four years in October. The economy has struggled for growth in the second half of this year, after a sugar rush in the first quarter in which exporters rushed to get their goods to the U.S. before President Donald Trump could impose trade tariffs. The hangover from that — and the lingering uncertainty over the global economic outlook caused by Trump’s trade policy — has been severe. But at the same time, an unwelcome rise in inflation has stopped the Bank of England from cutting interest rates more quickly to support the economy. A raft of hikes in government- controlled prices such as energy bills and rail fares meant that inflation was rising for much of the year, leading it to peak at 3.8 percent in September. That was also partly due to companies passing on increases in labor costs due to a 6.7 percent hike in the National Living Wage and an increase in employers’ National Insurance contributions. Panmure Liberum chief economist Simon French said the wide range of goods and services now showing softening price trends showed that demand is now so weak that companies are having to absorb those price increases themselves instead. The government will be particularly relieved to have seen politically sensitive food prices, which have been a constant bugbear for the last couple of years, making the biggest contribution to the slowdown in inflation in November. Prices for clothing and footwear and for discretionary services such as restaurants and hotels also fell slightly. “As Christmas gifts go, this is a most welcome one,” said Danni Hewson, head of financial analysis at AJ Bell. “It’s the time of year when people put a few more things in their supermarket trolley, so news that food and alcohol inflation has fallen will be a boon for cash-strapped families.” The Bank has consistently said that inflation would fall once those factors passed out of the annual calculations, given that the underlying weakness of the economy. However, with the worst bout of inflation in half a century still fresh in everyone’s minds, it has been forced to keep the pace of policy easing “gradual and cautious”. Peel Hunt’s Pickering said that the scale of the slowdown could be enough to have some members of the Monetary Policy Committee voting for a half-point cut in the Bank Rate to 3.5 percent on Thursday. However, the consensus remains for a quarter-point cut to 3.75 percent. The pound still fell over half a cent against the dollar in response to the numbers, as traders penciled in more scope for easing next year, while the government’s borrowing costs in the bond market also fell.

PARIS — French lawmakers formally approved the country’s 2026 social security budget on Tuesday, handing Prime Minister Sébastien Lecornu an important political victory and offering some optimism to skittish markets worried France isn’t serious about getting its public finances in check. The bill, which covers state health care and pensions spending, was expected to pass after having already been approved by the National Assembly, France’s more powerful lower legislative chamber, last week, but its rejection by the Senate over the weekend forced another vote. The conservative Senate rejected the measure in part over concerns the legislation does not sufficiently bring down the budget deficit. As part of a compromise to ensure his government’s survival, Lecornu approved a measure in the law that suspends until 2027 the controversial law passed in 2023 that raised the retirement age for most workers from 62 to 64. The government now faces the more arduous task of passing a state budget for next year, which is a separate piece of legislation. The National Assembly’s first attempt to pass a state budget ended with all but one MP voting against the bill, which MPs had saddled with untenable and sometimes conflicting amendments. Lawmakers from both branches of parliament will on Friday attempt to forge a compromise text during a U.S.-style conference committee in what one National Assembly official described as a “make or break” moment. France is highly unlikely to face a government shutdown similar to what happened in the United States earlier this year as lawmakers can approve a measure carrying the 2025 budget over into next year. But such a stopgap would exacerbate the worrying financial outlook in the European Union’s second-largest economy. France’s current fiscal plans for 2026 are now projected to carry a budget deficit to 5.3 percent of gross domestic product, significantly higher than the 4.7 percent of GDP deficit initially proposed by the government and welcomed by the European Commission. Lecornu said in October that whatever fiscal plans lawmakers agree on should not carry a budget deficit for 2026 that exceeds 5 percent of GDP.

PARIS — The French Senate laid the groundwork for a dramatic, consequential week of fiscal planning for 2026 on Monday by passing its own version of next year’s state budget rife with spending cuts.   The Senate and France’s more powerful lower house, the National Assembly, must now find a compromise in a process akin to a U.S.-style conference committee set to take place Friday. If that process fails it will considerably diminish the chances of France getting a new budget wrapped by the end of the year. One National Assembly official told POLITICO the meeting will be “make or break.” Political paralysis also prevented France from getting its 2025 state budget passed before the end of last year; Prime Minister Sébastien Lecornu warned in November that a repeat failure was a “danger that weighs on the French economy.” The country is highly unlikely to face a government shutdown similar to what happened in the United States earlier this year, however, as lawmakers can approve a measure carrying the 2025 budget over into next year. But such a stopgap would exacerbate the worrying financial outlook in the European Union’s second-largest economy.   Lecornu managed to secure a consensus on next year’s social security budget, but the state budget is proving more difficult. The National Assembly’s first attempt ended with all but one MP voting against a bill saddled with untenable and sometimes conflicting amendments. The opposition Socialist Party, which backed the social security bill and is in somewhat of a kingmaker position, is leaning toward voting against this version of the state budget because its members feel France’s wealthiest households won’t be subject to sufficient tax hikes, party leader Olivier Faure said last week. 

U.S. President Donald Trump’s top envoy to the EU told POLITICO that overregulation is causing “real problems” economically and forcing European startups to flee to America. Andrew Puzder said businesses in the bloc “that become successful here go to the United States because the regulatory environment is killing them.” “Wouldn’t it be great if this part of the world, instead of deciding it was going to be the world’s regulator, decided once again to be the world’s innovators?” he added in an interview at this year’s POLITICO 28 event. “You’ll be stronger in the world and you’ll be a much better trade partner and ally to the United States.” Puzder’s remarks come as the Trump administration launched a series of blistering attacks on Europe in recent days. Washington’s National Security Strategy warned of the continent’s “civilizational erasure” and Trump himself blasted European leaders as “weak” and misguided on migration policy in an interview with POLITICO. Those broadsides have sparked concerns in Europe that Trump could seek to jettison the transatlantic relationship. But Puzder downplayed the strategy’s criticism and struck a more conciliatory note, saying the document was “more ‘make Europe great again’ than it was ‘let’s desert Europe’” and highlighted Europe’s potential as a partner.

BRUSSELS — Belgium is demanding that the EU provide an extra cash buffer to ensure against Kremlin threats over a €210 billion loan to Ukraine using Russian assets, according to documents obtained by POLITICO. The cash buffer is part of a series of changes that the Belgian government wants to make to the European Commission’s proposal, which would be financed by leveraging €185 billion of frozen Russian state assets held by the Brussels-based financial depository Euroclear. The remaining €25 billion would come from other frozen Russian assets, lying in private bank accounts across the bloc — predominantly in France. Belgium’s fresh demand is designed to give Euroclear more financial firepower to withstand Russian retaliation. This cash buffer would come on top of financial guarantees that EU countries would provide against the €210 billion loan to protect Belgium from paying back the full amount if the Kremlin claws back the money. In its list of amendments to the Commission, Belgium even suggested increasing the guarantees to cover potential legal disputes and settlements — an idea that is opposed by many governments. Belgium’s demands come as EU leaders prepare to descend on Brussels on Dec. 18 to try and secure Ukraine’s ability to finance its defences against Russia. As things stand, Kyiv’s war chest will run bare in April. Failure to use the Russian assets to finance the loan would force EU capitals to reach into their own pockets to keep Ukraine afloat. But frugal countries are politically opposed to shifting the burden to EU taxpayers. Belgium is the main holdout over financing Ukraine using the Russian assets, amid fears that it will be on the hook to repay the full amount if Moscow manages to claw its money back. The bulk of this revenue is currently being funneled to Ukraine to pay down a €45 billion loan from G7 countries, with Euroclear retaining a 10 percent buffer to cover legal risks. | Artur Widak/Getty Images In its list of suggested changes, Belgium asked the EU to set aside an unspecified amount of money to protect Euroclear from the risk of Russian retaliation. It said that the safety net will account for “increased costs which Euroclear might suffer (e.g. legal costs to defend against retaliation)” and compensate for lost revenue. According to the document, the extra cash buffer should be financed by the windfall profits that Euroclear collects in interest from a deposit account at the European Central Bank, where the Kremlin-sanctioned money is currently sitting. The proceeds amounted to €4 billion last year. The bulk of this revenue is currently being funneled to Ukraine to pay down a €45 billion loan from G7 countries, with Euroclear retaining a 10 percent buffer to cover legal risks. In order to better protect Euroclear, Belgium wants to raise this threshold over the coming years.

BRUSSELS — France and Italy can breathe a sigh of relief after the EU’s statistics office signaled that the financial guarantees needed to back a €210 billion financing package to Ukraine won’t increase their heavy debt burdens. Eurostat on Tuesday evening sent a letter, obtained by POLITICO, informing the bloc’s treasuries that the financial guarantees underpinning the loan, backed by frozen Russian state assets on Belgian soil, would be considered “contingent liabilities.” In other words, the guarantees would only impact countries’ debt piles if triggered. Paris and Rome wanted Eurostat to clarify how the guarantees would be treated under EU rules for public spending, as both countries carry a debt burden above 100 percent of their respective economic output. Eurostat’s letter is expected to allay fears that signing up to the loan would undermine investor confidence in highly indebted countries and potentially raise their borrowing costs. That’s key for the Italians and French, as EU leaders prepare to discuss the initiative at a summit next week. Failure to secure a deal could leave Ukraine without enough funds to keep Russian forces at bay next year. The Commission has suggested all EU countries share the risk by providing financial guarantees against the loan in case the Kremlin manages to claw back its sanctioned cash, which is held in the Brussels-based financial depository Euroclear. “None of the conditions” that would lead to EU liability being transferred to member states “would be met,” Eurostat wrote in a letter, adding that the chances of EU countries ever paying those guarantees are weak. The Commission instead will be held liable for those guarantees, the agency added. Germany is set to bear the brunt of the loan, guaranteeing some €52 billion under the Commission’s draft rules. This figure will likely rise as Hungary has already refused to take part in the funding drive for Ukraine. The letter is unlikely to change Belgium’s stance, as it wants much higher guarantees and greater legal safeguards against Russian retaliation at home and abroad. The biggest risk facing the Commission’s proposal is the prospect of the assets being unfrozen if pro-Russia countries refuse to keep existing sanctions in place. Under current rules, the EU must unanimously reauthorize the sanctions every six months. That means Kremlin-friendly countries, such as Hungary and Slovakia, can force the EU to release the sanctioned money with a simple no vote. To make this scenario more unlikely, the Commission suggested a controversial legal fix that will be discussed today by EU ambassadors. Eurostat described the possibility of EU countries paying out for the loan as “a complex event with no obvious probability assessment at the time of inception.”

French Prime Minister Sébastien Lecornu scored a key political victory Tuesday after lawmakers approved next year’s social security budget by just 13 votes. The bill must still be approved by the French Senate, but its passage in the more powerful National Assembly is a positive sign for the future of Lecornu’s minority government and to financial markets worried about France’s ability to rein in its spiraling budget deficit. Lecornu will have little time to celebrate, however, as there still remains the matter of the state budget, a separate piece of legislation where compromise has proved arguably more contentious.  Just one lawmaker in the 577-strong National Assembly backed the budget during an earlier vote on part of the state budget. This developing story will be updated

The European Parliament could have an early say in the race for the European Central Bank vice presidency, a win for lawmakers after years of pushing for more influence over the EU’s top appointments. Eurozone finance ministers will begin the process of selecting a successor to Luis de Guindos on Thursday, according to a draft timeline seen by POLITICO and an EU diplomat who separately confirmed the document’s content. The deadline for submitting candidates will be in early January, although an exact date is still to be agreed.  According to the document, members of the Economic and Monetary Affairs Committee will have the right to hold in-camera hearings with all the candidates in January before the Eurogroup formally proposes a name to the European Council for appointment. This would mark a break with the past, when MEPs only got involved in the process after ministers had already had their say. Involving the Parliament at an earlier stage could influence the selection process, for example by giving it the chance to press for adequate gender balance in the list of candidates. This had been one of the Parliament’s demands in its latest annual report on the ECB’s activities. “The Parliament will play a stronger role this time,” the diplomat told POLITICO. So far, only Greece is considering proposing a woman for the vice president slot: Christina Papaconstantinou, who is currently deputy governor at the C. Finland, Latvia, Croatia and Portugal are all set to propose male candidates. The candidate picked by ministers will return to lawmakers for an official hearing, which should take place between March and April, according to the document. MEPs have limited power over the final appointment, but they will issue a nonbinding opinion, which is then adopted through a plenary vote. The new vice president will be formally appointed by the European Council in May, before taking office on June 1. So far, only Greece is considering proposing a woman for the vice president slot. | Aris Messinis/Getty Images The vice president’s position is the first of four to come up for rotation at the ECB’s Executive Board over the next two years. It wasn’t immediately clear if the other three appointments — including the one for a new president — will give the lawmakers the same degree of influence. CORRECTION: This article was updated on Dec. 9 to correct the spelling of the surname of the deputy governor of the Bank of Greece.