Bulgaria Must Split Coal Firms

Bulgaria's deputy prime minister Atanas Pekanov told parliament last week that Sofia has 45 days left to complete every unfinished reform in its EU recovery plan (Fakti). The reform now blocking the file is not a new railway, a digital platform, or a climate target. It is a corporate governance change: two coal companies must be pulled out of the state energy holding. If that does not happen, around €400 million in EU money will not be paid.

The money sits inside the Recovery and Resilience Facility, the EU's post-pandemic fund that pays governments only after they prove that agreed reforms have been completed (European Commission, Regulation EU 2021/241). Malta knows this kind of mechanism well: Brussels does not simply reimburse a project because a minister says it matters. Each tranche is tied to milestones, and the Commission can cut or suspend payment when a reform is missing. Bulgaria's final payment request is worth almost €1.7 billion and must be submitted by 31 August (BTA). The Commission has already used the lever once, finding 23 of 26 milestones met in Bulgaria's fourth request for €1.1 billion and withholding money for the rest (Mirage News).

Why splitting a holding company matters

On paper, the reform is technical: separate Mini Maritsa East, a state coal mine, and TPP Maritsa East 2, a coal power plant, from Bulgarian Energy Holding, known as BEH. Energy Minister Iva Petrova has confirmed that this is a binding recovery-plan commitment and cannot be reversed (BTA).

The reason Brussels wants the split is simple enough. While the coal companies remain inside BEH, profitable parts of the group, including gas trading and electricity networks, can absorb coal losses without the full cost appearing clearly in the state accounts. That cross-subsidy keeps coal politically alive while hiding who is paying for it. Once the coal companies stand on their own books, the losses become visible and the government must decide openly how much public money it is prepared to spend (Mirage News). If coal needs a subsidy, Brussels wants it shown as a budget choice, not buried inside a state corporate structure.

From budget pressure to wages

If Bulgaria's final payment is delayed, the first blow lands on the state budget. Pekanov described the previous tranche as critical for public finances, while less than half of recovery money had actually reached project beneficiaries (Fakti). A stalled payment would leave Sofia with three choices: borrow more, cut spending elsewhere, or slow payments to contractors already waiting for state money.

The sharper pressure is in the coal region itself. Petrova said Mini Maritsa East needed about €50 million in a single month for wages and operating costs, with labour costs rising by around 8% and external services up roughly 12% (BTA). The company cannot cover its own payroll. The state is already filling the gap. If EU funds freeze, that gap becomes harder to cover.

Petrova has promised no closures and no mass layoffs (Nova). The alternative on offer is indirect: around €500 million from the EU's Just Transition Fund could be used for land reclamation, industrial zones and new employers in the region. Pekanov told parliament the money cannot go directly to the two coal companies, although they could work as subcontractors. For Maritsa East workers, that distinction matters. Transition funds may clean up land and build the roads for a new industrial estate, but they do not guarantee next month's wage.

Bulgaria is not alone in running out of time. Romania risks losing more than €4.5 billion if it cannot pass six reform laws before a similar deadline (Digi24). As the RRF closes at the end of 2026, every unfinished reform now has a direct budget cost (Regulation EU 2021/241). Bulgaria's case is more exposed because the disputed reform is not a delayed procurement exercise. It is a governance change facing political resistance in a region where the state is already covering payroll.

The RRF is doing what it was built to do. For governments that accepted reforms and then delayed them, that is exactly where the pressure begins.