The European Central Bank and the European Commission said on Friday that Bulgaria and Croatia have been accepted into the Exchange Rate Mechanism, known as ERM-2 — a mandatory stage for joining the euro.

This starts the currency bloc’s first expansion in five years.

The two countries will also join the bloc’s banking union, putting their biggest banks under the ECB’s supervision from October 1.

“The Commission welcomes the decision to include the Bulgarian lev and the Croatian kuna in the Exchange Rate Mechanism II (ERM II),” said the EC.

“It also welcomes the ECB Governing Council’s decision on close cooperation with both countries, marking their entry into the Banking Union.

“The decision of the ERM II parties represents an important milestone in Bulgaria and Croatia’s efforts to join the euro area.

“Both member states must now participate in the mechanism without severe tensions and, in particular, without devaluing their currency central rate against the euro on their own initiative, for at least two years before they can qualify to adopt the euro.

“The Commission will continue to encourage and support the efforts of the Bulgarian and Croatian authorities to complete the process of joining the euro area.”

Ursula von der Leyen, President of the European Commission said: “The euro is a tangible symbol of European unity, prosperity and solidarity.

“This decision recognises the important economic reforms already undertaken by Bulgaria and Croatia while confirming the continued attractiveness of Europe’s single currency.

“We will continue to stand with both countries as they take their next and final steps towards joining the euro area.”