SOFIA — Has Bulgaria slashed key state-controlled prices to massage down inflation numbers and help it qualify for euro membership?
In April, the country announced (rather surreptitiously) a highly unexpected 82.8 percent cut in daily fees for hospital treatment. Even the presenters on state TV confessed the reasons behind the move were a mystery. So what is the Bulgarian government up to?
Sofia is now on track to receive a green light next month to adopt the European single currency on Jan. 1, 2026, but only passed the inflation test by the skin of its teeth — and the plunging health costs played a vital role in that.
Those reduced healthcare costs have shifted attention to Bulgaria’s control over prices set at the state level and how those impact consumer price indices.
“The only reason Bulgaria has qualified is, if you look at the inflation data, due to state-administered prices,” a former Bulgarian government official familiar with the data told POLITICO. “It is well known that statistical data was adjusted to show results more favorable than reality — especially in sectors like postal services, transport and healthcare.”
While healthcare is the big factor, rail fares were also cut by over 9 percent, and postage costs were reduced by nearly as much. In all, the reductions in state-set prices helped push the harmonized index of consumer prices [HICP] down by 1.2 percentage points in April compared with March, bringing Bulgaria within the required limits.
Steve Hanke, a professor of applied economics at Johns Hopkins University and the economist who designed Bulgaria’s currency board in the late 1990s, said the data raised red flags.
“I think there’s a high probability that [the inflation data] has been manipulated,” Hanke told POLITICO in emailed comments. “Given my experience as an advisor to the president of Bulgaria (1997–2002) and my observations of the machinations surrounding Bulgaria’s application to formally enter the eurozone, I would not trust inflation data that have been thrown up as far as I could throw them.”
Any discussion of the data used to bind the former Soviet satellite more tightly to the heart of the EU quickly becomes politically charged. Pro-Kremlin, anti-EU politicians have long accused the administration of cooking the books to rush the country into the eurozone before it is ready, running the risk of importing western European prices.
Bulgaria’s government has said the sudden shift in the hospital prices was unrelated to euro convergence, but technocrats, economists and even — most importantly — the European Commission note the critical role of state-set prices in meeting the inflation target.
Making the grade
To make the grade for single currency convergence, Bulgarian inflation was required to fall within 1.5 percentage points of the average of the three EU countries with the lowest inflation rates.
Economists estimate that the drop in hospital prices alone subtracted 0.89 percentage points from the overall 12-month inflation rate, which came in at 2.7 percent, narrowly clearing the threshold for euro entry (it was in fact just below the reference value of 2.8 percent for the price stability criterion.)
The European Commission openly acknowledges the importance of April’s reduction in the cost of a daily hospital stay from 5.8 leva (€2.97) to 1 lev, given its weight in the core index of prices.
“The drop in April 2025 of the annual HICP inflation rate was largely due to a substantial reduction in hospital fees,” the European Commission said in its convergence report on Bulgaria. “In April, hospital fees were reduced from 5.8 BGN to 1 BGN, that led to 2.9 percentage points decline in annual services inflation.”
Bulgaria has long been seen as a strong contender for euro membership due to its tight budgets and the fact its currency is pegged to the euro under the strong management of a currency board established in 1997. Inflation, however, has recently been a bugbear.
“The pick-up in inflation in Bulgaria in 2025 is of a temporary nature and mainly reflects increases in January 2025 in a mix of taxes and administered prices, partially offset by the lowered hospital fees in April,” the European Commission added.
Overall, Bulgaria’s official announcement of HICP inflation for April 2025 put the average rate for May 2024 to April 2025 at 2.7 percent compared with the same period 12 months earlier. Breaking the figures down by sector, prices for health services fell by more than any other category, dropping 11.5 percent.
Funding the hospitals
Nobody is disputing the importance of the lower hospital costs in bringing down the inflation numbers, given their weighting in the index.
The question is what that means in practical terms, and whether the 82.8 percent cut is an entirely painless change for Bulgarian hospitals that are often in a poor state of repair. The sums involved are modest — particularly relative to their weight in the inflation index — but they still leave gaps that need to be filled.
At a public level, Bulgaria has not explained the rationale for slashing the hospital fee. When contacted by POLITICO, the Bulgarian health ministry said it “supports all policies aimed at reducing the financial burden of healthcare services on households,” noting that the initiative aligns with recommendations from the Council of the EU.
In a letter sent to the health ministry after the fee was cut, a number of medical associations clubbed together to urge the government to reverse its decision, stating they opposed the change and the manner in which it was imposed.
“We understand from media reports that the reduction in the [hospital stay] fee is being presented as a measure to improve access to healthcare. However, it does not address the structural problems within the system and carries a number of serious risks,” the letter said. It added that the fee “although symbolic, is a source of revenue for medical facilities, of particular importance for [those in] remote areas.”
For example, for St. Ekaterina University Hospital in Sofia, the annual loss in revenue from the price drop is estimated at around 40,000 leva (€20,451) according to Bulgarian media.
In fact, Bulgaria’s health system is so inadequate that many people already have to pay out of pocket.
“At 34 percent [of all health costs], out-of-pocket payments, primarily for pharmaceuticals and direct payments for services not in the benefits package, are the highest in the EU, where the average is 15 percent,” the OECD said in a 2023 country report.
‘Disinformation and rumors’
Bulgaria’s finance ministry pushed back strongly against claims that hospital price adjustments were motivated by euro adoption targets, noting it “has always been a reliable partner in providing statistical financial information and will not allow any disinformation and rumors to undermine the authority of the institutions in Bulgaria.”
A spokesman for the National Statistical Institute added that “the NSI only provides statistical data, while decisions are made by other institutions.”
Atanas Pekanov, an economist and a former deputy prime minister in Bulgaria’s caretaker government, said state pricing was not unusual. “There are state-controlled prices in many EU countries. These are not prices that were until recently market-based, and now all of a sudden the state controls them. These are the services [whose prices] the state has always decided,” he told POLITICO.
He said that Bulgaria might have met the criteria earlier if inflation in other euro countries had not been artificially capped via emergency measures. “At least we haven’t received any warning or recommendation by European institutions that, well, you are treating your debt in some hidden way,” Pekanov said in a separate exchange.
Still, Hanke, who designed the Bulgarian currency board, was wary of Sofia’s inflation claims. He previously developed a formula to estimate the optimal growth rate of the money supply needed to maintain price stability. That benchmark, in Bulgaria’s case, is currently around 6.3 percent.
“Since April 2023, Bulgaria’s annual money supply growth rate has been well above 6.3 percent per year. Given the elevated growth rate of the money supply, it looks like Bulgaria’s inflation data have been doctored to look somewhat better (read: lower) than true inflation measures would indicate,” Hanke said.
The final decision on Bulgaria’s accession — including setting the conversion rate — is expected to be taken by the Council on July 8.
Boryana Dzhambazova contributed reporting.
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