Bulgaria’s Deficit Draws EU Discipline

Bulgaria entered the euro area in January. By June, Sofia was already publishing a 2026 draft budget with a consolidated deficit of 5.7% of GDP (BNR, Forbes Bulgaria). The EU limit is 3%. The European Commission has moved to open an excessive deficit procedure, the formal route used when a member state’s public finances remain too far outside the rules (European Commission).

For Irish readers, the mechanics will feel familiar enough. Entry to the euro is supposed to signal fiscal credibility. Bulgaria got there partly with legal, temporary accounting measures. Its first budget under the new currency now shows what those measures had been concealing.

The money that was already spent

Bulgaria qualified for the euro partly by bringing future money into the present: collecting bank taxes early and pulling state-enterprise dividends forward into the entry year. The effect was to move hundreds of millions of euros into the qualifying period. It worked once. It could not work twice.

That is why the 2026 budget matters. Released on 24 June, it puts spending at 45.3% of GDP and revenues at 39.9%. Finance Minister Galab Donev has promised to bring the deficit down in stages, to 3.8% in 2027 and 3.0% in 2028 (BTA). On the EU’s own general-government measure, however, Bulgaria remains above 3% through 2028 (European Commission).

Commissioner Valdis Dombrovskis has confirmed that the excessive deficit procedure will go to EU finance ministers for a formal vote (Fakti). Once that happens, Sofia gets binding recommendations and regular monitoring. If progress is not shown, the EU’s fiscal rules allow escalation up to financial sanctions (Regulation (EU) 2024/1263).

Brussels now watches spending, not just the final number

The rules have changed since Ireland’s own years under close fiscal surveillance. Under the reformed framework in force since 2024, a government cannot simply promise that the deficit will fall later. Brussels sets a ceiling on the growth of nationally financed spending, excluding interest costs and cyclical movements (Regulation (EU) 2024/1263).

The idea is to watch the part of the budget ministers control directly. Growth can flatter a deficit number. Accounting can move it around. Spending tells a cleaner story.

Sofia’s draft combines new revenue measures with some restraint: a 10% tax on gambling winnings, road vignettes made 30% more expensive, higher social-security ceilings, and new personal contributions for civil servants (Forbes Bulgaria). Restrictions on automatic public-pay increases are expected to save more than €560 million (Sega). Trade unions are already resisting.

But the scale is the problem. These measures run to hundreds of millions. The deficit gap is more than €7.2 billion (Investor.bg). Revenue measures alone will not close it.

Who carries the cost

The burden is not abstract. Civil servants face new contributions. Higher earners will pay on a raised social-security ceiling. Drivers will pay more for road use. Gambling winners face a new tax. Bulgaria’s largest trade union, CITUB, says wages and pensions did not create the deficit and should not be made to pay for the correction (BTA).

The budget figures support the point. A gap between spending of 45.3% of GDP and revenue of 39.9% did not appear because of recent pay rises. It reflects a wider mismatch between the state Bulgaria has budgeted for and the revenue base it has built.

Sofia does have one real cushion: public debt of about 30.1% of GDP, well below the EU’s 60% reference level (Fakti, Investor.bg). This is not yet a debt crisis. It is a spending-driven deficit arriving at an awkward moment, just as Bulgaria is trying to prove it belongs inside the euro’s fiscal club.

Romania shows what happens when slippage hardens. Its deficit reached 9.3% in 2024, with far higher debt and a correction path now stretching to 2030 (Eurostat).

The Council decision is due within weeks. Sofia has written down a correction path. The harder part begins now: collecting the money, holding spending, and proving that the promised return to 3% in 2028 rests on something sturdier than the one-off fixes that helped get Bulgaria into the euro.