In the meantime, some Bulgarian leaders tried to negotiate the establishment of a Bulgarian Uniate Church. The movement for union with Rome led to the initial recognition of a separate Bulgarian Catholic Millet by the Sultan in 1860. The Sultan issued a special decree  for that occasion. Although the movement initially gathered some 60,000 adherents, the subsequent establishment of the Bulgarian Exarchate reduced their number with some 75%. The Bulgarian "Church Struggle" was resolved finally with a Sultan decree in 1870, which established the Bulgarian Exarchate.  The act also instituted the Bulgarian Orthodox Millet - an entity combining the modern notion for a nation with the Ottoman principle of Millet. It also turned the Bulgarian Exarch into both a religious leader and an administrative head of the Millet. The new entity enjoyed internal cultural and administrative autonomy. However, it excluded non-Orthodox Bulgarians and, thus, failed to embrace all representatives of the Bulgarian ethnos. Scholars argue that the millet system was instrumental to transforming the Bulgarian Exarchate into an entity that promoted ethnoreligious nationalism amongst Orthodox Bulgarians. On 11 May 1872 in the Bulgarian St. Stephen Church in Constantinople, which had been closed by the Ecumenical Patriarch's order, the Bulgarian hierarchs, celebrated a liturgy, whereafter the autocephaly of the Bulgarian Church was declared. The decision on the unilateral declaration of autocephaly by the Bulgarian Church was not accepted by the Patriarchate of Constantinople. In this way, the term phyletism was coined at the Holy pan-Orthodox Synod that met in Istanbul on 10 August. The Synod issued an official condemnation of  ecclesiastical nationalism, and declared on 18 September the  Bulgarian Exarchate schismatic.

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