EU moves on Bulgaria’s 3.5% deficit

Bulgaria joined the eurozone on 1 January 2025. Seventeen months later, the European Commission is set to open an Excessive Deficit Procedure against it: the EU’s disciplinary track for countries whose budget deficit goes above 3% of GDP.

No country has moved from eurozone entry to enforcement this quickly. Eurostat put Bulgaria’s 2025 deficit at 3.5% of GDP (Economic.bg, BTA). The Commission expects it to rise to 4.1% in 2026 and 4.3% in 2027 (BTA).

The oddity is not the number itself. Among the ten EU countries already under, or entering, excessive deficit proceedings, roughly 37% of the bloc, Bulgaria has the lowest deficit. Romania is at 7.9%, France at 5.1%, and Slovakia at 4.5%.

Same Deficit, Different Treatment

Germany ran a deficit of €119.1 billion in 2025, about 3.5% of GDP, according to Destatis. The IMF projects it will move towards 4% by 2027. Yet Germany faces no Excessive Deficit Procedure.

Berlin used the National Escape Clause, which allows up to 1.5 percentage points of extra deficit for defence spending. 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. Once the defence derogation is applied, its 2025 deficit would fall within the 3% limit. For Germany, the clause prevents the procedure. For Bulgaria, it only reduces the pressure.

This is a familiar hierarchy in EU fiscal politics. No founding EU state has ever been sanctioned under the Stability and Growth Pact, the rulebook that sets the 3% ceiling. When France and Germany breached the rules in the early 2000s, they successfully pushed for looser enforcement.

Greece, whose deficit reached 15.1% in 2009 after years of statistical fraud, now chairs the Eurogroup. It posted 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 come from one bad budget. The country went through eight elections in five years. It entered the eurozone with a caretaker government, no adopted budget, and spending commitments already fixed by law.

Automatic pension increases and public-sector wage rises pushed staff costs to €12.4 billion in 2025, absorbing 30% of revenue. For Maltese readers, the mechanism is recognisable: once spending is embedded in law, a weak government has very little room to manoeuvre without taking political damage.

Prime Minister Radev, who took office in May 2026, accused his predecessors of using "financial tricks", including pulling forward tax payments and extracting extraordinary dividends from state firms. Former Finance Minister Klisurski said Eurostat had verified all the data.

Economist Shteryo Nozharov estimates the disputed manoeuvres at around €900 million. Both claims can be true. The accounting may have been legal, while still making the public finances look stronger than they were.

What Comes Next

The 3 June report starts the process. Bulgaria will have six months to present corrective measures. Under the reformed EDP framework, the correction period can be extended from four to seven years for countries that commit to structural reforms. Sofia could use that route if it manages to form a stable government.

Fines have never actually been imposed. The stronger pressure point is the possible suspension of EU structural funds, the money poorer member states use for infrastructure and development. Bulgaria depends on that money, with GDP per capita at roughly 60% of the EU average.

The country has absorbed only 53% of its Recovery and Resilience Facility allocation, with all disbursements due by year-end. A separate risk sits outside the official budget 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 hit would be worth roughly 3% of GDP.

A credible correction plan needs a functioning government and an adopted budget. Bulgaria has neither. When ten countries breach the same ceiling, but the newest and smallest eurozone member receives the sharpest scrutiny, the fiscal rules become a test of power as much as discipline.