Sofia’s Deficit Breaches Fiscal Rules

Bulgaria’s 2026 budget row begins at home, before Brussels gets a look in. Committee material reported by Infobusiness/BCCI puts the planned consolidated deficit, the gap between state spending and revenue, at 5.7% of GDP next year. Bulgaria’s Public Finance Act reportedly sets the ceiling at 3%, which means the draft is first a domestic legal problem and only then a European one, Fakti reported.

The government’s answer is to promise repair later. The plan says the deficit would fall to 3.8% in 2027 and 3.0% in 2028, according to Infobusiness/BCCI. That is a familiar fiscal bargain: tolerate the breach now, trust the correction afterwards.

Bulgaria’s low debt makes the politics easier, but it does not remove the problem. The draft puts state debt at €37.7 billion, or 30.1% of GDP, by the end of 2026, rising to 35.2% in 2028. The EU debt reference value is 60% under Article 126 TFEU, so Sofia has room to borrow before debt itself looks dangerous. The cost is credibility: a rule loses force if politicians treat it as flexible when spending pressure rises.

Low Debt Is Not a Free Pass

Dimitar Radev, governor of the Bulgarian National Bank, put the warning plainly. The draft deepens a negative budget trend visible since 2020 rather than reversing it, BTA reported. A deficit is not an accounting mood. It means the state must raise money from lenders today, taxpayers tomorrow, or cuts later.

The government’s strongest argument is that forcing the deficit back to 3% immediately could mean abrupt cuts, delayed investment, or higher taxes. The draft instead offers a slower correction, as Infobusiness/BCCI reported. That case holds only if the deficit is genuinely temporary and the political system can deliver the promised tightening.

The danger is that the shortfall has become part of the structure of 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 English, that is the gap left even after normal economic ups and downs are stripped out, Fakti reported. Growth alone then will not close it. The state has to trim promises, raise revenue, or keep borrowing.

Who Pays If Trust Weakens

The winners are clear in the short term: the people and institutions spared cuts in current public spending. The losers are less visible at first. Future taxpayers carry interest and repayment costs, businesses may face dearer credit if state borrowing absorbs more money, and households live with the risk of higher taxes or tighter services later.

The inflation risk is harder to prove from the public record. A larger deficit can add pressure when demand is already strong, because the state keeps spending above durable revenue. But the available material does not show that this draft has already pushed up prices or yields, the interest investors demand to hold government bonds. The narrower point is that it weakens the anchor investors and Brussels would use to judge the next budget.

EU rules give the Commission 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 such a case over this draft. It shows why Sofia has made the question easier to raise.

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

Romania matters because investors look across the region, not just at a single capital. Digi24 reported, citing Romania’s central bank, that Romania’s EU-accounting deficit was 7.9% of GDP in 2025, while the Commission’s spring forecast saw 6.2% in 2026. Bucharest remains the more exposed south-eastern EU case. Bulgaria is still in a better position, but the comparison shows how quickly an argument about one annual budget can become a judgement on a country’s whole fiscal direction.

Bulgaria can afford some extra borrowing. What it cannot do cheaply is turn a 3% rule into an optional target. Sofia now has to prove that the 2026 breach is a bridge back to discipline, not a new definition of discipline.