Bulgaria must halve its budget deficit by 2029

By 2029, Bulgaria must cut its budget deficit nearly in half. The EU Council has placed the country under the Excessive Deficit Procedure (EDP), the formal correction regime for governments that spend beyond the EU's common fiscal limits (BTA, Council). Sofia must submit a consolidation plan — a blueprint for shrinking the deficit through spending restraint, tax rises, or both — by 15 October 2026 and bring its deficit below 3% of GDP by the decade's end. The decision constrains Bulgarian budget politics for the next three years.

The EDP is not a fine or a punishment. It is a monitored correction path under Article 126 of the EU Treaty: the Commission identifies the breach, the Council confirms it, and the country gets spending limits and regular checkpoints. For Bulgaria, which adopted the euro in January 2025, the later stages can include financial sanctions. Brussels now has leverage.

How tight the straitjacket gets

Bulgaria's planned deficit for 2026 is 5.4% of GDP under the EU's general-government measure, which covers central government, local authorities and social-security funds (BTA). Almost double the threshold.

Under the EU's reformed fiscal rules, Brussels will judge Bulgaria mainly by how fast spending grows, not only by the final deficit number. The Council has capped annual net spending growth at 4.2% in 2026, 3.4% in 2027 and 2028, and 3.2% in 2029 (24 Chasa). Progress checks come every six months (Digi24). If the Commission judges Sofia has not acted, the Council can tighten terms.

Who pays for the correction

Budget proposals from the finance ministry already show where the squeeze lands. On labour income: a higher earnings ceiling for social-security contributions (the income cap on which payroll charges are calculated), civil servants paying part of their own insurance, and a new minimum-wage formula. On consumption: higher road vignettes and cigarette prices. On capital income: a dividend-tax rise from 5% to 10% (Fakti).

None of this is law yet. But the distributional logic is visible. Higher payroll contributions squeeze take-home pay and raise hiring costs. Vignette and tobacco-tax increases hit lower-income households harder, because fixed charges eat a bigger share of a smaller budget. The dividend-tax doubling is the only measure aimed at capital owners.

Bulgaria's independent Fiscal Council has warned that the 2026 draft relies on minor spending tweaks and debt financing rather than structural savings, projecting public debt at €51.1bn, or 35.7% of GDP, by end-2028 (Fakti). That is well below the EU's 60% reference, but it is climbing steadily.

The Romanian warning

Romania shows what happens when correction drags. Bucharest has been under the EDP since 2020, and its deadline has already slipped to 2030. The ECB notes Romania is not projected to bring its deficit below 3% before end-2027 (ECB). An adviser to Romania's central bank governor warned that deficit cuts should come voluntarily, before markets or institutions force the pace, noting that interest payments alone had reached roughly 3% of GDP (Agerpres).

German coverage reads Bulgaria's case as routine rule application after euro entry, not special treatment (FAZ). Inside a monetary union, Bulgaria cannot restore competitiveness by weakening its currency. Wage, tax and spending choices carry the full weight of adjustment instead.

The test comes on 15 October, when Sofia submits its corrective plan alongside the 2027 draft budget. The question is whether the government offers durable savings or another round of accounting moves that dress up one year's numbers while borrowing from the next. Pensioners, low-wage workers, public-sector employees and small firms will all feel the spending caps differently. Until that distributional picture sharpens, the EDP is a Brussels number. Inside Bulgaria, it is a budget that someone has to live with.