In a world increasingly defined by unpredictability, structural shifts are replacing what once were seen as passing disturbances. Geopolitical tensions are intensifying, trade relations are being reshaped by political motives, and financial sanctions have become more focused and frequent. According to Bulgarian National Bank Governor Dimitar Radev, this new reality demands a strategic rethink. In a recent commentary for OMFIF–State Street Global Advisors, he laid out a comprehensive framework tailored to this volatile era and outlined how euro adoption can serve as a cornerstone of Bulgaria’s response.

Understanding the Framework for Stability
Radev outlines five core assumptions shaping his view. First, instability is not fleeting - it is built into the global system. Political and economic institutions must no longer brace for temporary shocks but prepare for enduring disruption. Second, resilience needs to trump short-term forecasting. It’s not enough to spread out risk; policy and governance systems must be structured for agility and adaptation.

Third, policy coordination - across institutions and borders - is more critical than ever. Managing reserves in isolation no longer works; all fiscal, monetary, and stability tools must align. Fourth, the concept of strategic autonomy must evolve. It’s not only about owning assets, but being able to use them when needed, especially in times of crisis. That includes evaluating alternative reserve holdings and strengthening participation in regional monetary frameworks like the euro area.

Lastly, focus must remain on long-term challenges: aging populations, the shift toward greener economies, and technological transformation. These aren't tomorrow’s problems—they’re today’s realities, and public investment strategies must reflect that.

How This Translates to Bulgaria’s Needs
Bulgaria, like its neighbors in Central and Eastern Europe, may not yet feel the direct impact of rising global trade friction. But as a country tightly linked to European supply chains, it is vulnerable to ripple effects from slower growth in eurozone economies. Shifting trade routes, unpredictable supply hubs, and falling global demand - already visible in energy markets - carry both risks and unknowns for Bulgaria’s medium-term growth outlook.

There’s already been some relief via declining oil prices, helping curb inflationary pressure in energy-reliant economies like Bulgaria. But broader inflation trends and investment implications remain murky, adding to the case for a more structured economic shield.

Rethinking Reserve Management
Global conditions have changed the calculus for managing foreign exchange reserves. With higher market volatility, subdued global growth, and a more fractured geopolitical environment, traditional assumptions no longer apply. Confidence in the U.S. dollar has helped maintain its global dominance, but early signs suggest that trust is slowly shifting. Gold, in particular, is regaining favor as a strategic asset - not just for financial stability but also for protection from geopolitical upheaval.

These developments spotlight the growing importance of the euro as a stable reserve currency. For Bulgaria, this underscores the urgency of completing its eurozone accession—a long-standing national goal now given added weight by today’s uncertain world.

Five Benefits of Euro Adoption
Radev outlines five direct benefits of adopting the euro. First, Bulgaria’s monetary policy would be integrated into the framework of the European Central Bank, boosting policy credibility and overall economic predictability. Second, the switch would remove currency exchange risk and provide a buffer against speculative attacks. Third, the move would elevate investor trust and bring Bulgaria into deeper financial alignment with Europe.

Fourth, eurozone membership unlocks access to critical financial backstops like the European Stability Mechanism, a major advantage in times of crisis. And fifth, in a world where disorder is increasingly the norm, Bulgaria would gain institutional support and crisis-response tools, boosting its resilience at both national and regional levels.

Preparing for a Post-Adoption Strategy
Currently, Bulgaria’s reserve holdings reflect the structure of its currency board. About 90% of reserves are in euro, the rest in gold. The framework is conservative, with assets held to high credit standards and short-term maturity - an approach that has proven effective during periods of turbulence.

Looking ahead, euro adoption will open the door to a more modern reserve strategy. New legislation already allows for expanded flexibility in how the Bulgarian National Bank operates. Once the euro becomes legal tender, the central bank plans to diversify its reserves beyond the euro, broaden the range of instruments it can use - including ETFs - and ease some of its credit rating thresholds.

These reforms will not be rushed. Each step will be cautiously evaluated to ensure consistency with the Bank’s priorities: safeguarding capital and maintaining liquidity. But the foundation is already being laid, with new infrastructure, additional counterparties, and deeper expertise in the pipeline.

A Strategic Imperative
In an increasingly multipolar world, where fragmentation may well define the future of global finance, central banks must stay nimble. Traditional guiding principles - safety, liquidity, and returns - remain, but the surrounding risks now call for sharper geopolitical awareness and institutional foresight.

For Bulgaria, this means upholding the stability provided by the currency board while embracing a more dynamic, longer-term strategy in the eurozone context. As Radev concludes, the upcoming changes are not just necessary - they offer a timely and strategic opportunity to better position Bulgaria for a rapidly evolving global order.