EU moves on Bulgaria’s 3.5% deficit

Bulgaria entered the eurozone on January 1, 2025. Seventeen months later, on June 3, the European Commission will open an Excessive Deficit Procedure against it, the EU's formal budget discipline process for countries whose deficits breach 3% of GDP. No country has moved from euro entry to enforcement this quickly.

Eurostat has confirmed Bulgaria's 2025 deficit at 3.5% of GDP (Economic.bg, BTA). The Commission expects the gap to widen to 4.1% in 2026 and 4.3% in 2027 (BTA). Yet among the ten EU states now under, or entering, EDP proceedings, roughly 37% of the bloc, Bulgaria has the lowest deficit. Romania is at 7.9%. France is at 5.1%. Slovakia is 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 that it will move towards 4% by 2027. Germany, however, faces no EDP. It used the National Escape Clause, which allows an extra 1.5 percentage points of 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 clause in July 2025. If the defence derogation is applied, its 2025 deficit would fall within the 3% limit. For Germany, the clause stops the procedure. For Bulgaria, it only cushions the blow.

That is the old politics of the Stability and Growth Pact, the EU rulebook built around the 3% deficit ceiling. No founding EU state has ever been sanctioned under it. When France and Germany breached the same rules in the early 2000s, they successfully pushed for softer enforcement.

Greece, whose deficit reached 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 put it: "The traditional division of EU states into responsible and irresponsible no longer holds."

What Broke in Sofia

Bulgaria's deficit did not arrive as a sudden surprise. The country held eight elections in five years. It entered the eurozone with a caretaker government, no adopted budget, and spending promises already locked into law. Automatic increases in pensions and public wages pushed staff costs to €12.4 billion in 2025, taking up 30% of revenue.

PM Radev, who took office in May 2026, accused his predecessors of using "financial tricks", including bringing forward tax payments and extracting extraordinary dividends from state firms. Former finance minister Klisurski said in response that Eurostat had verified the data. Economist Shteryo Nozharov estimates the disputed manoeuvres at roughly €900 million.

Both things can be true. The accounting may have been legal, while still making Bulgaria's fiscal path look steadier than it was.

What Comes Next

The June 3 report starts the process rather than ending it. Bulgaria will have six months to submit corrective measures. Under the reformed EDP framework, countries that commit to structural reforms can stretch the adjustment period from four years to seven. Sofia could use that route, if it can form a stable government.

Fines have never been imposed on any country. The sharper instrument is the possible suspension of EU structural funds, which matter heavily to Bulgaria while its GDP per capita sits at about 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.

There is also a large risk outside the official deficit numbers. 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, the one-off cost would be worth roughly 3% of GDP and would make the deficit picture far worse.

A credible correction plan needs a functioning government and an adopted budget. Bulgaria has neither. When ten countries breach the same ceiling and the newest, smallest eurozone member draws the attention, the rules begin to look less like neutral economics and more like hierarchy.