CEE Perspective Weekly Digest - Issue 8

Digital euro negotiations enter technical phase as trilogues begin

Negotiations on the Digital Euro Regulation have entered a new phase, with the first trilogue discussions now underway between the European Parliament and the Council. The latest negotiating text indicates that discussions are increasingly centred on the practical implementation of the framework rather than its underlying objectives. While important policy choices remain to be agreed, the negotiations place growing emphasis on operational arrangements, governance, implementation timelines and market preparedness ahead of the potential introduction of a digital euro.

Digital Euro negotiations: Where do the institutions converge?

Source: Based on the latest Digital Euro trilogue negotiating text (European Parliament–Council), July 2026.

A key feature of the latest negotiating text is the increased focus on operational preparedness. The European Parliament proposes additional safeguards before the first issuance of the digital euro, including public communication of the envisaged launch date, preparatory work on the rulebook and infrastructure, pilot testing in real-life conditions and a roll-out period of at least 24 months to allow payment service providers, merchants and users to prepare. The text also introduces new provisions on governance, liability and transparency, reflecting an increasing focus on how the digital euro would function in practice. 

The Council's position likewise provides greater operational clarity on the role of payment service providers in distributing and managing digital euro accounts and services, while maintaining the ECB's central responsibility for issuing the digital euro. Taken together, the latest negotiating text suggests that the remaining discussions are increasingly centred on implementation choices, governance arrangements and operational design rather than the overall objective of establishing a digital euro framework.

Differences remain over fees, merchant compensation and governance, but these increasingly concern the design and operation of the framework rather than the objective of establishing a digital euro itself. 

With further trilogue meetings scheduled for 10 and 30 September, negotiations are expected to focus on refining these technical aspects ahead of a final political agreement. While important issues remain unresolved, the current state of play points to gradual convergence between the institutions on the core architecture of the digital euro. 

What it means for CEE markets

For Central and Eastern Europe, the negotiations highlight a broader trend that extends well beyond the digital euro itself: the EU is increasingly redesigning its payments architecture around common European infrastructure. Together with initiatives such as the Instant Payments Regulation and the Financial Data Access (FiDA) framework, the digital euro forms part of a wider strategy to create a more integrated, resilient and strategically autonomous European payments ecosystem. Even for non-euro-area Member States, these reforms are likely to shape future investment decisions by banks, fintechs and payment service providers as interoperability with euro-area infrastructure becomes increasingly important. 

The negotiations also underline that implementation capacity could become an important competitive differentiator across the region. Larger banking groups and internationally active payment providers are generally better placed to absorb the operational and technology investments required to support the digital euro, while smaller domestic institutions may face proportionately higher costs. This means that, for many CEE markets, the commercial design of the framework - including the distribution model, compensation arrangements and the allocation of responsibilities between the ECB and payment service providers - may ultimately prove more significant than the introduction of the digital euro itself. As the legislative process progresses, these operational details will determine whether the reform strengthens competition across the Single Market or reinforces the advantages of larger cross-border financial institutions. 

ECON rapporteur reshapes PEPP review around consumer trust and market uptake

The European Parliament's rapporteur, Stéphanie Yon-Courtin (Renew) published her draft report on the review of the Pan-European Personal Pension Product (PEPP), proposing a noticeably different approach from the European Commission in several key areas. While supporting the objective of making PEPPs a more attractive cross-border retirement savings product, the draft places greater emphasis on strengthening consumer confidence, improving transparency and creating a stronger European identity for the product, rather than introducing new supervisory requirements. 

One of the most significant changes is the removal of the Commission's proposed value-for-money framework. Rather than requiring providers to demonstrate value for money before a PEPP can be registered, the rapporteur proposes strengthening existing product oversight and governance requirements and aligning them with the Retail Investment Strategy framework. The draft also introduces a new "EuroPension Product" label for the Basic PEPP, aiming to create a clear and recognisable EU-wide brand that could increase consumer trust and improve the product's visibility across Member States. 

The report also proposes several measures to improve accessibility and cross-border uptake. These include transforming EIOPA's public register into a consumer-facing digital platform, making digital advice the default option for Basic PEPPs while preserving access to face-to-face advice, expanding transfer possibilities between PEPPs and national personal pension products, and introducing a more cautious approach to tax incentives centred on non-discrimination rather than harmonisation. The draft further clarifies that workplace PEPP auto-enrolment should complement, rather than replace, existing second-pillar occupational pension schemes, reinforcing PEPP's role as a third-pillar retirement savings product. 

The deadline for amendments is 21 September 2026. The draft report will be discussed in the ECON Committee on 2 September and 15 October, with committee adoption and a decision on opening interinstitutional negotiations expected on 1 December 2026. 

What it means for CEE markets 

The draft report is particularly relevant for Central and Eastern Europe, where voluntary retirement savings markets remain unevenly developed and cross-border pension products have so far seen limited uptake. By shifting the focus from additional regulatory requirements towards consumer trust, digital accessibility and greater product visibility, the rapporteur appears to be addressing some of the practical barriers that have limited the commercial success of PEPP since its introduction. A stronger emphasis on portability, digital distribution and a recognisable EU-wide "EuroPension Product" brand could make the framework more attractive in Member States where domestic third-pillar pension markets are still relatively small or fragmented.

At the same time, the draft reinforces the complementary nature of PEPP within national pension systems. By limiting workplace auto-enrolment arrangements to situations where no second-pillar occupational pension scheme exists, the report seeks to avoid competition with established occupational pension systems while preserving flexibility for Member States with less developed workplace pension coverage. For CEE countries, where pension systems differ considerably in terms of funded pillars and voluntary savings, this approach provides greater scope to adapt the PEPP framework to national circumstances while supporting the broader objective of expanding long-term retirement savings.

Romania halves budget deficit to 2% of GDP in the first half of 2026

Romania's consolidated general government budget deficit narrowed to 2.0% of GDP in the first six months of 2026, down from 3.64% in the same period a year earlier, according to the Ministry of Finance. In nominal terms, the deficit fell by almost RON 28.8 billion to RON 41.0 billion, reflecting stronger tax collection, higher absorption of EU funds and tighter control of current expenditure.

The improved fiscal performance comes as Romania seeks to restore confidence among investors and credit rating agencies while continuing its fiscal consolidation efforts under the EU's Excessive Deficit Procedure. The Ministry said the latest figures reinforce the country's commitment to reducing macroeconomic imbalances while maintaining public investment.

Bucharest Stock Exchange surpasses €100 billion in market capitalisation

The Bucharest Stock Exchange (BVB) exceeded €100 billion in total market capitalisation for the first time at the end of 2025, reaching RON 537.7 billion (€108 billion) across the regulated market and the AeRO multilateral trading system, according to PwC Romania's latest study on Bucharest Stock Exchange valuation multiples. The milestone was driven by a 49% increase in the regulated market's capitalisation compared with 2024, while the BET index gained 46%, marking its strongest annual performance since 2009. 

Despite the record valuation, the report notes that the BVB's market capitalisation still represented only 27.7% of Romania's GDP at the end of 2025, remaining below the levels observed in several regional markets, including Croatia, Greece and Hungary. The findings highlight both the rapid growth of Romania's capital market and its continued potential for further development. 

UniCredit: CEE economies remain resilient despite fiscal and geopolitical headwinds

Central and Eastern European economies are expected to continue outperforming much of Western Europe, although growth is likely to remain moderate over the coming years, according to UniCredit's latest Quarterly Updates. 

The bank forecasts GDP growth of between 2% and 3% across most CEE countries in 2026, supported primarily by resilient domestic demand, private consumption and continued absorption of EU funds. At the same time, Germany's fiscal stimulus and higher defence spending are expected to provide additional support to the region's export-oriented manufacturing sector, although structural challenges, including the automotive industry's restructuring and competitiveness pressures, are expected to continue weighing on growth. 

The report nevertheless highlights growing fiscal risks across several CEE economies. UniCredit expects fiscal deficits to remain elevated in 2026, reflecting continued energy support measures and higher defence expenditure, with political uncertainty slowing fiscal consolidation efforts in countries including Romania, Poland, Slovakia and Hungary. The bank also warns that a renewed increase in energy prices or weaker economic growth could bring sovereign credit rating risks back into focus for the region's higher-deficit economies.

On monetary policy, UniCredit expects central banks to follow increasingly differentiated paths. Hungary's central bank is projected to continue gradually lowering interest rates, while the Czech National Bank could deliver one further rate increase before eventually reversing course in the second half of 2027. By contrast, the National Bank of Poland, the National Bank of Romania and the National Bank of Slovakia are expected to keep policy rates unchanged until the second half of 2027, when renewed disinflation could create room for modest rate cuts. Overall, the report suggests that while CEE economies remain relatively resilient, investors will continue to monitor fiscal sustainability, inflation developments and the pace of monetary easing across the region. 

OECD calls for structural reforms to strengthen Hungary's long-term growth

The OECD's latest Economic Survey of Hungary argues that while inflation has eased and economic growth is expected to gradually recover from 2026, the country's long-term outlook will depend on addressing structural challenges, including population ageing, fiscal sustainability and weak productivity growth. The OECD expects private consumption to remain the main driver of growth in the near term, supported by strong real wage growth, while investment should gradually recover as EU funds are released and external demand improves. At the same time, it warns that increasing pension and climate-related spending will require additional fiscal space and recommends reforms to improve the sustainability of public finances. 

For investors and businesses, the report highlights the importance of improving Hungary's business environment and strengthening domestic SMEs. The OECD recommends simplifying regulation, improving access to finance, supporting innovation and digitalisation, and making better use of foreign direct investment by increasing linkages between multinational companies and local suppliers. It also calls for greater regulatory stability and stronger public integrity measures to encourage private investment and boost productivity. 

While the recommendations are country-specific, many of the challenges identified -including demographic pressures, productivity gaps, SME financing constraints and the need to attract more private investment - are shared across Central and Eastern Europe. The report reinforces the importance of structural reforms alongside EU initiatives aimed at mobilising capital and strengthening the region's long-term competitiveness. 

Bulgaria launches €30 million defence and deep-tech investment fund

Bulgaria's Fund of Funds launched a tender to select a fund manager for a new Strategic Technologies and Defence Fund, which will channel more than €30 million in public equity financing into early-stage and growth companies developing strategic and dual-use technologies. The instrument will support businesses operating in areas such as digital and deep technologies, clean technologies, biotechnology and defence, with individual investments of up to €5 million. The Fund aims to back at least 15 companies by the end of 2030.

The initiative forms part of Bulgaria's efforts to strengthen its innovation ecosystem and industrial capabilities in line with the EU's competitiveness and strategic autonomy objectives. It also reflects the growing role of public investment vehicles in mobilising private capital for high-growth technology sectors across Central and Eastern Europe. 

Bulgaria increases pensions by 7.8% from July

Bulgaria increased state pensions by 7.8% from 1 July 2026 under the country's annual "Swiss rule" indexation mechanism, with the adjustment applying to all employment-related pensions granted by the end of 2025. The minimum old-age pension has risen from €322.37 to €347.51, while survivor's pensions, disability pensions and other employment-related minimum pensions have also been adjusted accordingly. The increase extends to the social old-age pension, which now stands at €183.81, resulting in higher payments for several pension supplements linked to that amount. 

The annual indexation reflects Bulgaria's efforts to preserve pension purchasing power amid inflationary pressures and demographic challenges, while highlighting the continued importance of automatic adjustment mechanisms in ensuring the adequacy of retirement incomes across Central and Eastern Europe. 

Bosnia and Herzegovina records 4.2% annual inflation in June

Consumer price inflation in Bosnia and Herzegovina stood at 4.2% year-on-year in June 2026, according to the Agency for Statistics of Bosnia and Herzegovina. Housing and utilities (+10.5%) and transport (+17.5%) recorded the largest annual price increases, while food and non-alcoholic beverages (-0.5%) and clothing and footwear (-7.2%) were the only categories to register annual price declines. On a monthly basis, the overall price level fell by 1.1%, driven largely by lower food and transport prices.

This August, CEE Perspective is launching Conversations with the Experts, a new event series bringing our community closer to the people whose work and experience offer a deeper understanding of the economic and financial developments shaping Central and Eastern Europe. Alongside our monthly webinars, the series will feature senior representatives from multilateral institutions, regional experts, economists, market practitioners and other leading voices from across Europe. Each conversation will focus on a timely issue and create space for a more direct and in-depth exchange on its implications for the CEE region. 

For the inaugural edition, we will welcome a high-level representative from the European Investment Bank for a discussion on one of the region’s most pressing priorities. It will be a valuable opportunity to hear directly from one of Europe’s leading financial institutions and add some substance to the quieter summer calendar. The guest, topic and registration details will be announced shortly. Stay tuned.

• EBA launches consultation on reporting framework updates: The European Banking Authority (EBA) published a draft technical package for version 4.4 of its reporting and disclosure framework and is inviting stakeholder feedback until 24 August 2026. The package introduces reporting changes linked to IFRS 18, updated Pillar 3 ESG disclosures, the Fundamental Review of the Trading Book (FRTB), resolution planning, and new reporting requirements for the Anti-Money Laundering Authority (AMLA). It also continues the transition to the EBA's new Data Point Model (DPM 2.0). The final technical package is expected to be published in September 2026.

•       ESMA consultation closes - Money Market Fund stress testing: ESMA's consultation on revised Guidelines on stress test scenarios under the Money Market Fund (MMF) Regulation closes on 6 August. The updated guidelines will inform the annual common stress-testing parameters used by EU money market funds and are relevant for fund managers and supervisors.

•      EBA consultation deadline - Specialised lending exposures: The European Banking Authority's consultation on amendments to the Regulatory Technical Standards for specialised lending exposures under the Capital Requirements Regulation closes on 7 August. The proposals update the supervisory slotting criteria to reflect CRR3 and aim to improve risk sensitivity and consistency across the EU banking sector, giving institutions time to prepare for implementation from late 2026 and 2027.