Sofia’s 5.7% deficit breaks domestic rules

Bulgaria’s 2026 budget fight starts with a broken domestic rule. Committee material reported by Infobusiness/BCCI puts the planned consolidated deficit, the gap between what the state spends and takes in, at 5.7% of GDP in 2026. Bulgaria’s Public Finance Act reportedly caps the deficit at 3%, making the draft a legal test before it becomes a Brussels problem, Fakti reported. The plan says the gap would narrow to 3.8% in 2027 and 3.0% in 2028; the government is promising to repair the breach later, not avoid it now, according to Infobusiness/BCCI.

Low debt masks the credibility problem. The draft puts state debt at €37.7bn, or 30.1% of GDP, by end-2026, rising to 35.2% in 2028; the EU debt reference value is 60% under Article 126 TFEU. Sofia can borrow before debt itself becomes dangerous. The cost comes through trust: a rule stops anchoring expectations if politicians move it when spending pressure rises.

Low Debt Is Not a Free Pass

Dimitar Radev, governor of the Bulgarian National Bank, gave the warning in plain terms: the draft deepens a negative budget trend visible since 2020, rather than reversing it, BTA reported. A deficit has a bill attached. The state must raise money from lenders today, taxpayers tomorrow, or cuts later.

The government’s strongest case is that a sudden return to the 3% ceiling could force abrupt cuts, delayed investment, or tax pressure. The draft instead promises a slower correction, as Infobusiness/BCCI reported. That argument is credible only if the deficit is temporary and the political system can deliver the correction.

The risk grows if the shortfall is built into the budget. Fiscal Council member Lyubomir Datsov was cited as saying the deeper problem is a structural deficit of about 4% by the Commission’s estimate; in plain terms, that means the gap would remain even after normal economic ups and downs, Fakti reported. Growth alone then cannot fix it. The state must either trim promises, raise revenue, or keep borrowing.

Who Pays If Trust Weakens

The winners are visible now: people and institutions that avoid cuts in current public spending. The losers appear later. Future taxpayers cover interest and repayment, businesses may face dearer loans if state borrowing absorbs more money, and households carry the risk of higher taxes or tighter services.

The inflation risk is less certain. A larger deficit can add pressure when demand is already strong, because the state keeps spending above durable revenue. The public record does not prove this draft has lifted prices or yields, the interest investors demand to hold government bonds. The precise point is narrower: it weakens the anchor investors and Brussels would use to judge the next budget.

EU rules give Brussels a route to formal scrutiny when the 3% deficit reference value is breached, as the Commission’s guidance and the Council’s note set out. The record does not show a case over this draft. It shows why Sofia has made that risk easier to raise.

The euro question is the signal after the test. ECB and Commission convergence material tie euro entry to budget sustainability, and a 5.7% target in 2026 would not rewrite earlier assessments; it would create a new credibility problem after Bulgaria had supposedly proved discipline (ECB, Commission, Infobusiness/BCCI). That is why the domestic cap matters beyond domestic law.

Romania matters because investors compare budget paths across the region. Digi24 reported, citing Romania’s central bank, that Romania’s EU-accounting deficit was 7.9% of GDP in 2025 and that the Commission’s spring forecast saw 6.2% in 2026, leaving Bucharest the more exposed south-eastern EU case. Bulgaria is still in a better position. The comparison also shows how quickly the conversation can move from one annual budget to a country’s whole budget direction.

Bulgaria can afford some extra borrowing. It cannot make a 3% rule optional without paying in credibility, even if the bill does not arrive immediately. Sofia now has to prove that the 2026 breach is a bridge back to discipline, not a rewrite of discipline.