EU targets Bulgaria’s 3.5% deficit on June 3

Bulgaria joined the eurozone on January 1, 2025. Seventeen months later, the European Commission will formally open an Excessive Deficit Procedure (EDP) against it on June 3, the disciplinary process triggered when a country's budget deficit exceeds 3% of GDP. No country has gone from entry to enforcement this fast. The honeymoon barely outlasted a calendar year.

The deeper story is who the EU's fiscal rules actually discipline. Eurostat confirmed Bulgaria's 2025 deficit at 3.5% of GDP (Economic.bg, BTA). The Commission forecasts it worsening to 4.1% in 2026 and 4.3% in 2027 (BTA). Among the ten EU countries currently under or entering EDP proceedings, roughly 37% of the bloc, Bulgaria has the lowest deficit. Romania sits at 7.9%. France at 5.1%. Slovakia at 4.5%.

Same Deficit, Different Treatment

Germany ran a deficit of €119.1 billion in 2025, roughly 3.5% of GDP, according to Destatis. The IMF projects it worsening toward 4% by 2027. Yet Germany faces no EDP. It activated the National Escape Clause (NEC), a provision allowing up to 1.5 percentage points of extra deficit for defence spending, and the Council approved it without objection. Bruegel noted that the Commission approved Germany's fiscal plan "without rigorously assessing the assumptions."

Bulgaria activated the same NEC in July 2025. With the defence derogation applied, its 2025 deficit would fit within the 3% limit. For Germany, the clause blocks the procedure entirely. For Bulgaria, it merely softens it. This is not new. No founding EU state has ever been sanctioned under the Stability and Growth Pact (the fiscal rulebook that sets the 3% ceiling). When France and Germany breached the same rules in the early 2000s, they lobbied successfully for looser enforcement.

Greece, whose deficit hit 15.1% in 2009 after years of statistical fraud, now chairs the Eurogroup. It ran a 1.7% surplus in 2025 (European Commission). As Slovakia's Institute for Financial Policy observed: "The traditional division of EU states into responsible and irresponsible no longer holds."

What Broke in Sofia

Bulgaria's fiscal gap did not appear overnight. The country held eight elections in five years. It entered the eurozone with a caretaker government, no adopted budget, and spending commitments locked in by law. Automatic pension and public wage increases pushed staff costs to €12.4 billion in 2025, absorbing 30% of revenue.

PM Radev, who took office in May 2026, accused predecessors of "financial tricks," pulling forward tax payments and extracting extraordinary dividends from state firms. Former Finance Minister Klisurski countered that Eurostat verified all data. Economist Shteryo Nozharov puts the disputed manoeuvres at roughly €900 million. Both positions can coexist: the accounting was legal but made the fiscal trajectory look healthier than it was.

What Comes Next

The June 3 report opens a process. Bulgaria gets six months to present corrective measures. The reformed EDP framework extends the correction timeline from four to seven years for countries committing to structural reforms, a path Sofia could use if it forms a stable government. Fines have never been imposed on anyone.

The real leverage is the possible suspension of EU structural funds, money Bulgaria depends on with GDP per capita at roughly 60% of the EU average. The country has absorbed just 53% of its Recovery and Resilience Facility allocation, with all disbursements due by year-end. A separate risk lurks off the official books. Lukoil's trading arm Litasco has filed a €3 billion arbitration claim against Bulgaria over the state takeover of its refinery assets. If Bulgaria loses, a one-off hit worth roughly 3% of GDP would make the deficit picture dramatically worse.

Submitting a credible correction plan requires a functioning government and an adopted budget. Bulgaria has neither. When ten countries breach the same ceiling and only the newest, smallest member draws the spotlight, the rules start to look less like economics and more like hierarchy.