EU Finance Ministers Approve Excessive Deficit Procedure Against Bulgaria

Finance ministers from the European Union (EU) approved a decision to launch an excessive deficit procedure (EDP) against Bulgaria. This became clear following today’s meeting of the Economic and Financial Affairs Council (ECOFIN).

The EDP mechanism is designed to ensure that member states return to or maintain discipline in their government budgets.

The procedures are initiated when a country has a deficit exceeding the 3% of GDP reference value, in accordance with Article 126(3) of the Treaty on the Functioning of the EU,” the Council explained.

The Council adds that its decision is based on Bulgaria’s projected government deficit for 2026 of 4.1% of GDP, which is expected to continue to exceed 3% of GDP in 2027.

Bulgaria’s use of the national derogation clause for defense spending under the Stability and Growth Pact does not fully explain the excess over the 3% threshold,” the Council states.

We remind you that the European Commission’s latest forecasts indicate that by 2027, the country will continue to exceed the permissible deficit limits, but this forecast is based on outdated calculations and estimates from the Ministry of Finance, as it turned out that Andrei Gyurov’s caretaker government failed to submit updated forecasts in the spring. Separately, Finance Minister Galab Donev’s draft budget for 2026 actually projects an even larger deficit – 5.7 percent.

In its recommendation, the Council states that Bulgaria should take effective action and present, by October 15, 2026, the necessary measures to reduce its deficit. Bulgaria must also ensure that the nominal cumulative growth rate of net expenditure does not exceed 4.2% in 2026, 7.7% in 2027, 11.4% in 2028, and 15% in 2029,” the Council stated.

As a reminder, on June 3, the European Commission (EC) officially launched the excessive deficit procedure against Bulgaria. In the report published at that time, the EC noted that since 2020, Bulgaria has recorded consecutive budget deficits, and public debt has been growing at an ever-faster pace.

Large and sustained increases in spending, without offsetting structural financing measures, have contributed to the continuing deficits despite positive economic growth. “Bulgaria may face challenges in fulfilling its commitments under the medium-term fiscal and structural plan in the absence of serious efforts toward fiscal consolidation,” the Commission warned at the time.

As Economic.bg reported, citing its European sources, the problem for the EC is not that we ended 2025 with a 3.5% deficit – against a permissible limit of 3% of GDP – but rather the rapid pace of growth in public spending.

The EC estimates that public debt will rise from about 29.9% of GDP in 2025 to 32.3% in 2026 and to 35.5% in 2027, driven by the structural deficit. Brussels has criticized Bulgaria for not placing “sufficient emphasis on spending that stimulates economic growth.”

Translated with DeepL.