EC recommends opening excessive deficit procedure against Bulgaria
Bulgaria’s ballooning Budget deficit has prompted the European Commission to recommend on June 3 the Council of the EU to open an excessive deficit procedure against the country, as part of its European Semester Spring Package assessment of EU member states’ economies.
The EU requires its member states to keep Budget deficits at or below three per cent of gross domestic product. Bulgaria reported 3.1 per cent deficit in 2025, but the data cited by the Commission, from the EU statistics body Eurostat, was 3.5 per cent.
It was still within the three per cent ceiling set in EU fiscal rules as some of Budget shortfall fell under the national escape clause for defence, which allows EU member states to exceed the deficit in order to boost their defence spending.
Projections for this year, however, put Bulgaria well in excess of that allowance – at 4.1 per cent and rising to 4.3 per cent in 2027 – prompting the Commission to make its recommendation.
Should the Council of the EU adopt a decision establishing the existence of an excessive deficit, it allows the EU to make recommendations on how to redress the Budget imbalance and deadlines to do so, which the member state has to implement in time or risk, in the case of euro zone members, which Bulgaria is as of January, a fine of up to 0.05 per cent of GDP.
Bulgaria has kept within EU fiscal rules as it aimed to join the euro area, but “in recent years, public expenditure has increased, particularly in the areas of pensions and public sector wages,” the EC’s country report said.
“These increases have often been financed through short-term or ad-hoc measures rather than stable, structural measures. This has reduced the predictability of fiscal policy and heightened fiscal risks, especially as further structural spending pressures are emerging,” the EC said.
Bulgaria’s ageing population and additional spending related to strengthening national and collective defence capabilities is likely to add further strain to public finances, while tax revenues remain significantly below the EU average as a share of GDP, the EC said. Bulgaria has a flat 10 per cent income tax rate, one of the lowest in the EU.
“In the absence of policy adjustments, these factors will make it more difficult to maintain fiscal discipline,” the EC said.
Bulgaria is yet to adopt a Budget for 2026, after the package proposed by the Rossen Zhelyazkov government triggered large-scale protests that led to that Cabinet’s resignation in December and early parliamentary elections in April, the eighth in five years, which gave former president Roumen Radev’s Progressive Bulgaria coalition an outright majority in Parliament.
Radev’s government is yet to table a 2026 Budget package, but Finance Minister Gulub Donev said on June 3, before the European Commission’s announcement, that the Cabinet was working on the package and aimed to table it in Parliament by end-June.
The Government would not “run away from difficult decisions” necessary to bring the deficit down, Donev said, projecting that the 2026 Budget deficit, “without changing current policies, without taking measures to consolidate state spending,” would reach 7.4 per cent of GDP.
He blamed preceding governments for the large deficit Bulgaria faces this year, saying that some expenses were delayed and some revenues collected in advance in 2025, raising the question whether Bulgaria would have complied with EU’s deficit rules last year.
Donev said that the Cabinet would take the necessary measures, even if they are unpopular, to reduce the deficit, focusing primarily on reducing spending, but gave no specific details. He did say that the Cabinet did not intend to raise taxes or introduce new taxes.
(Entrance to the Berlaymont building, headquarters of the European Commission. Photo: EU Audiovisual Service)
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