Exactly a year after the final decision for Bulgaria to become part of the eurozone and a little more than seven months after the introduction of the euro, the country is already in an excessive deficit procedure. According to economists Nikola Filipov and Mihail Krastev, the reasons for this are not related to the adoption of the single European currency, but to the structural problems in public finances that have accumulated in recent years, bTV reports.
According to Mihail Krastev, financial discipline in Bulgaria began to waver in 2020. Since then, deficits have been deepening without sufficient structural reforms being undertaken. According to him, the budgets prepared before the introduction of the euro led the country to the excessive deficit procedure, and not the membership in the eurozone itself.
Economists are categorical that the current government cannot be blamed for the accumulated deficit, since it has been in power for only two months. They define the situation as a heavy legacy accumulated over several years. According to them, the state systematically finances large deficits through new government debt, which further worsens the financial situation.
According to Nikola Filipov, the eurozone is not the main factor in the increase in inflation. He emphasized that the euro has a limited impact on price processes, while the main reasons lie in spending policy and the lack of fiscal discipline.
The two economists recalled that the rule for a maximum budget deficit of 3% of gross domestic product was valid for Bulgaria even before joining the eurozone. In addition to the European criteria, the same restriction is also written into the Public Finance Act. The problem, according to them, is that there are no real sanctions for non-compliance, which allows politicians to exceed the set limits.
Regarding the 2026 budget, experts define it as transitional and aimed at establishing the real state of state finances. According to them, the 2027 budget will be much more important, when the government will have the opportunity to implement its own vision for financial policy and the necessary structural reforms.
The economists also drew attention to the fact that Bulgaria has allowed deficit financing to become a normal practice. According to them, the country is in a period of economic growth, when it should accumulate budget surpluses, not deficits. It is the accumulated reserves that could be used in future economic crises.
Data from the Ministry of Finance as of the end of June show a deficit of about 2.4 billion euros, or approximately 2% of GDP. According to Mihail Krastev, this is particularly worrying, as the first half of the year is traditionally the period with the highest budget revenues, while a significant part of the expenditures are made in the second half of the year.
For this reason, the two economists do not expect Bulgaria to end the year with a deficit below 5% of GDP, despite the forecasts set in the budget. According to them, this means that the country will not fulfill the recommendations of the European Commission.
Brussels requires the Bulgarian government to present specific measures to limit the deficit by October 15. In addition, the new European fiscal rules set a limit for net public spending to increase by no more than 4.2% per year. According to economists, however, the implementation of these requirements will be difficult without serious structural changes.
Experts note that the immediate financial sanctions under the excessive deficit procedure are not the biggest risk. The possible fine, which could reach 0.05% of GDP, is imposed only after a prolonged failure to comply with the recommendations.
The more serious problem, they say, is the impact on confidence in financial markets. Although membership in the eurozone improves Bulgaria's credit image and creates the conditions for lower interest rates on government debt, the excessive deficit procedure weakens this positive effect. Thus, the country risks paying a higher price in financing its future spending, which would affect both the state budget and the economy as a whole.