The Council of the European Union has officially opened an excessive deficit procedure against Bulgaria, citing a projected budget deficit of 4.1% of GDP for 2026. This move mandates that Bulgaria implement strict fiscal consolidation measures to bring its deficit back below the 3% threshold established by the EU’s Stability and Growth Pact by 2029.
Understanding the Excessive Deficit Procedure
The excessive deficit procedure is a mechanism designed to ensure that EU member states maintain budgetary discipline. According to the Council of the EU, the process is triggered when a country’s government deficit exceeds the reference value of 3% of GDP. Bulgaria’s current trajectory, which includes a 3.5% deficit in 2025 and projections exceeding 4% through 2027, has necessitated this formal oversight.
While Bulgaria has invoked a national derogation clause regarding defense spending, the Council of the EU determined that these costs do not fully explain the breach of the 3% threshold. Alongside Bulgaria, the Council has initiated similar procedures for several other member states, including Germany, France, Italy, Belgium, and Romania, highlighting a broader trend of fiscal strain across the bloc.
Bulgaria previously entered an excessive deficit procedure in July 2010. The process was successfully concluded in June 2012 after the Council of the EU determined that the underlying fiscal concerns had been addressed.
Fiscal Targets and Compliance Deadlines
Bulgaria is required to present a comprehensive plan of corrective measures by October 15, 2026. The Council has set specific caps on the cumulative growth of net expenditure to guide the country toward fiscal stability. These annual growth limits are:
- 2026: 4.2%
- 2027: 7.7%
- 2028: 11.4%
- 2029: 15.0%
Failure to adhere to these targets could lead to intensified financial monitoring and potential sanctions, including restrictions on access to certain European funding streams. The European Commission, which recommended the procedure on June 3, will oversee the implementation of these budgetary adjustments.
The “Hidden” Deficit Context
Financial Minister Galab Donev recently highlighted the scale of the challenge, noting that without corrective policies, the projected deficit could reach 7.4%, equivalent to over 8.5 billion euros. Donev also identified approximately 2.2 billion leva in outstanding payments—described as “costs hidden in drawers”—which represent previously invoiced but unpaid activities that have only recently come to light.
This situation marks a departure from the country’s long-standing tradition of fiscal discipline. Since 2020, Bulgaria has consistently reported budget deficits, with national debt levels rising at a faster pace, according to European Commission reporting.
Investors and businesses monitoring Bulgarian fiscal policy should watch for the government’s October 2026 submission, as the specific austerity measures chosen will dictate the impact on public sector spending and long-term infrastructure investment.
Frequently Asked Questions
What happens if Bulgaria does not meet the deficit targets?
Continued failure to comply with the Council’s recommendations can result in more stringent financial oversight, the imposition of financial penalties, and potential limitations on the country’s access to EU financial resources.
Why is Bulgaria being placed under this procedure now?
The decision follows projections that Bulgaria’s budget deficit will exceed the 3% of GDP limit through 2027, reaching 4.1% in 2026. The European Commission noted that defense spending and other expenditure trends have contributed to this deviation from EU fiscal rules.
How does this affect the average citizen?
The procedure mandates stricter control over public finances.
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