Bulgaria’s 5.7% deficit draws EU discipline

Bulgaria joined the euro area in January. Six months later, Sofia has put forward 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 already moved to open an excessive deficit procedure, the formal disciplinary process used when a member state’s public finances drift too far from the rules (European Commission). For a country that used one-off accounting measures to pass the euro-entry test, the first budget under the new currency shows what those measures were hiding.

The money that was already spent

Bulgaria qualified for the euro partly through legal but temporary steps: collecting bank taxes early and bringing forward dividends from state enterprises into the entry year. Those moves shifted hundreds of millions of euros of future revenue into the present. The cash came in once. It is now gone, and the deficit shows a structural gap between what Bulgaria raises and what it spends.

The draft budget, published on 24 June, puts spending at 45.3% of GDP and revenue at 39.9%. Finance Minister Galab Donev is promising staged cuts, with the deficit falling to 3.8% in 2027 and 3.0% in 2028 (BTA). On the EU’s own general-government measure, however, the deficit remains above 3% through 2028 (European Commission).

Commissioner Valdis Dombrovskis confirmed that the excessive deficit procedure would go to EU finance ministers for a formal vote (Fakti). Once that happens, binding recommendations and regular monitoring begin. If Sofia fails to show progress, the EU’s fiscal rules allow escalation up to financial sanctions (Regulation (EU) 2024/1263).

Brussels now watches spending, not just the final number

Under the fiscal framework that has applied since 2024, governments cannot simply promise a lower deficit and hope growth does the rest. Brussels sets a ceiling on the growth of nationally financed spending, excluding interest costs and cyclical swings (Regulation (EU) 2024/1263). The mechanism is meant to track the spending governments actually control, rather than the final deficit after growth, inflation and accounting effects have moved the number.

Sofia’s budget combines revenue-raising with spending restraint: a 10% tax on gambling winnings, 30% more expensive road vignettes, higher social-security ceilings, and new personal contributions for civil servants (Forbes Bulgaria). Limits on automatic public-sector pay increases are expected to save more than €560 million (Sega). Trade unions are already resisting. But the measures are worth hundreds of millions, while the deficit gap exceeds €7.2 billion (Investor.bg). Extra revenue alone will not close this budget.

Who carries the cost

The costs fall on specific groups. Civil servants face new contributions. Higher earners will pay into the social-security system on a larger slice of income. Drivers face higher road charges. Gambling winners get a new tax. Bulgaria’s largest trade union, CITUB, says wages and pensions did not create the deficit and should not carry the correction (BTA). The numbers support that argument: the gap between 45.3% spending and 39.9% revenue did not appear because of recent pay rises.

Sofia does have one real cushion. Public debt is around 30.1% of GDP, far below the EU’s 60% reference level (Fakti, Investor.bg). This is not a debt crisis. It is a spending-driven deficit. Romania shows where prolonged slippage leads: a 9.3% deficit in 2024, much higher debt, and a correction path now stretching to 2030 (Eurostat).

The Council’s formal decision is expected within weeks. Sofia has written down a correction path. It now has to collect the money, restrain spending, and convince Brussels that the promised return to 3% in 2028 rests on something sturdier than the one-off fixes that helped get Bulgaria into the euro.