EU Orders Bulgaria To Fix Deficit

For Malta, which has just seen its own EU deficit procedure dropped, Bulgaria’s problem is familiar: euro membership does not remove Brussels’ budget discipline. It makes it harder to treat as distant. The Commission has decided to recommend an excessive deficit procedure for Bulgaria just after euro adoption, turning its first euro-year budget into a repair timetable.

The deficit, the annual gap between state spending and revenue, rose from 3.0% of GDP in 2024 to 3.5% in 2025. The Commission now forecasts 4.1% in 2026 and 4.3% in 2027 in its 2026 European Semester Spring Package. Bulgaria joined the euro area on 1 January 2026, Eurostat says, and Fakti reported from Luxembourg that the Commission still intends to move ahead.

Debt, the accumulated stock of past borrowing, gives Sofia some space. Public debt is rising but remains well below the EU’s debt benchmark. The pressure is on the yearly deficit. Commission Executive Vice-President Valdis Dombrovskis also narrowed Bulgaria’s defence argument: 2025 military spending can be treated under the escape clause, the EU allowance that softens the assessment for extra defence outlays, but the 2026 breach is no longer fully explained by defence spending, BTA reported.

The Budget Math Lands In Sofia

The number that now matters is net expenditure. That means state-funded spending after items such as EU money and some temporary costs are stripped out. Regulation 2024/1263 makes it the main spending gauge.

Prime Minister Galab Donev told parliament the Commission had referred to a 0.5% of GDP reduction in net expenditure. He said roughly 76% of spending went to salaries, social payments and pensions, with around 24% for investment, BTA reported.

That is where the politics starts. With 76% tied to wages and benefits, office savings will not be enough. Sofia has to choose among slower payroll growth, changes to pension indexation, tougher tax collection, procurement cuts, delayed investment, new borrowing, or some combination of these.

Each choice sends the bill somewhere different. Public employees, pensioners, suppliers, construction firms, taxpayers and future budgets all sit on different sides of the same calculation.

Tax Collection Is The Cleaner Route

Donev’s preferred route is to collect more money without raising headline taxes. He has promised action against the shadow economy, meaning business kept off the books, and better tax collection while saying basic taxes and social-security contributions will not rise. His list also includes administrative mergers, moving services online, spending limits and wage-control tools, with most effects in 2027-2028, Investor.bg reported.

That route rewards compliant firms, because competitors taking cash off the books lose part of their price advantage. Administrative savings hit another group. Public workers may face fewer posts or reorganised offices. Citizens may pay indirectly if merged services become slower or harder to reach.

Croatia shows why digital tax control appeals to governments. Its fiscalisation system, the digital recording of invoices and receipts, has processed more than 56 million e-invoices across over 325,000 businesses, including 96,000 small taxpayers using a free app, Poslovni reported.

For Bulgaria, that suggests hidden activity can be made visible without raising tax rates. The design matters. If small firms carry most of the paperwork, the political cost rises quickly.

Borrowing Markets Are Watching

Romania shows the harder edge of delay. Termene reported a 7.9% deficit in 2025 and public debt at 59.3% of GDP, the kind of mix that can push up borrowing costs, meaning the interest investors demand to lend. Malta shows the other end: proceedings were dropped after the deficit moved sustainably below the limit, Bluewin reported.

Bulgaria has more room than Romania because its debt remains lower. But the structure of its budget makes the repair concentrated. The next budget has to show how much comes from tax collection, wages, pension formulas, procurement, investment timing or borrowing.

The excessive deficit procedure makes the arithmetic public. Sofia still chooses whose income, services or margins absorb it.