FT: EU to open deficit procedure against Bulgaria after budget breach

The European Commission will launch an excessive deficit procedure against Bulgaria next week after the country breached EU fiscal rules, the Financial Times reported, exposing Sofia to potential reputational damage and higher borrowing costs.

According to the report, the move is effectively a punitive step triggered by Bulgaria’s widening budget deficit, which reached 3.5% of GDP, exceeding the eurozone’s 3% threshold. European Commission forecasts indicate that the deficit will continue to rise, reaching 4.1% next year and 4.3% in 2027.

Prime Minister Rumen Radev acknowledged the country’s economic difficulties and warned that the fiscal situation is deteriorating further. “This year the deficit will be even larger. The soap bubble has burst. This is the result of a heavy legacy that we inherited (from our predecessors, — ed.),” he said on Friday.

The development is particularly significant as Bulgaria joined the eurozone only six months ago. According to Euractiv, it would become the first country to fall under EU fiscal supervision just months after adopting the euro.

The excessive deficit procedure is a formal EU mechanism designed to enforce fiscal discipline among member states, ensuring they do not exceed limits on public debt and budget deficits. Under the procedure, the European Commission issues recommendations and requires the country to implement a corrective action plan to reduce the deficit.

If Brussels determines that Bulgaria has not taken sufficient measures to address the imbalance, it can impose fines of up to 0.2% of GDP. Such penalties can be applied repeatedly until the country demonstrates compliance and takes effective steps to correct its fiscal trajectory.

By Tamilla Hasanova