"Get your spending under control!" the European Commission (EC) has recommended to Bulgaria, after proposing the opening of an excessive deficit procedure. This is not a sanction for state finances. The message is addressed to politicians who in the last five years have chosen to spend today and leave paying the bill for tomorrow.
Budgets tell the story of political decisions
The deficit has no party card. It does not run for elections and does not promise higher salaries, pensions or compensation. But it inevitably appears when politicians overdo their promises. This has happened seven times since 2021.
The reason for the EC's concern is that the deficit will remain above the 3% limit in the next two years - 4.1% in 2026 and 4.3% in 2027, as predicted in the Spring 2026 Economic Forecast for Bulgaria. This means that Brussels does not see a temporary problem, but a trend due to the permanent pressure from social spending and public sector wages.
The growth of these costs is not accidental. After the Covid pandemic, the inflationary shock on a global scale forced the state to compensate for the lag in income. And after the Russian invasion of Ukraine, defense and security spending also increased. Added to this was the political crisis, which turned the increase in pensions, salaries and social benefits into one of the few tools for gaining public support.
Increase in salaries and warnings from economists
Economists and financial analysts have repeatedly warned that automatic mechanisms for determining the size of salaries in a number of sectors, primarily in defense and security, threaten to explode costs. But for politicians, automatism is also a defense, because the increases do not look like a political decision, but as the result of a set formula.
Last fall, the Institute for Market Economics (IME) estimated that personnel costs paid by the budget will reach 22.8 billion leva for 2025, with more than half of the increase accumulated over the last 3 years. They reach 10.6% of GDP, which the organization defines as a historical maximum. And the growth of salaries in the budget sector also put pressure on the private sector, although not at the same pace.
For a country with an aging population and an acute shortage of personnel, the data is indicative. Between 2019 and 2025, salaries in the state administration and the “Security“ sector increased by 116%, and teachers' salaries - by 122%. In 2025 alone, personnel costs in the Ministry of Internal Affairs jumped by about 40%, in defense - by 35%, and in security services - by nearly 40%.
A similar process took place with pensions, which have more than doubled since 2021. After the inflationary shock, the increases were socially justified and could hardly be avoided. The problem is that none of the governments seriously addressed the question of how these costs will be financed in the long term. The political incentive was to give more today. The fiscal issue was left for tomorrow.
Technology provides control
Bulgaria continues to be among the least indebted countries in the EU, but the EC notes the growth of debt, which from 23.8% of GDP at the end of 2024 will reach 32.3% this year and 35.5% in 2027. If the EU Council approves the Commission's proposal, the country will be placed under enhanced surveillance of its public finances for four years and will be forced to implement a plan with corrective measures. The reduction in costs will be coordinated with the European Commission.
If it does not take action, a fine of up to 0.05% of GDP is foreseen, which accumulates every 6 months. In practice, however, there is no case where a country has paid such sanctions because of the excessive deficit itself. The mechanism is designed as a deterrent, but countries almost always receive new deadlines, recommendations and corrective paths before a financial penalty is imposed.
Bulgaria could also face a temporary suspension of European funds, but Brussels almost never goes that far. The real weight of the procedure lies elsewhere - in the political signal to investors and in the pressure on governments to limit spending. For Bulgaria, it casts a shadow on the optimism of creditors and rating agencies, which raised their assessments of the country precisely because of its membership in the eurozone.
The irony is that barely six months after joining the monetary union, Bulgaria finds itself under special surveillance. Yet the most bitter message is addressed to Bulgarian politicians: that the period in which each administration could pass the bill on to the next is over.
The political cost
The EU Council will decide whether to approve the procedure. But Finance Minister Galab Donev has already announced that the government will present specific measures with deadlines and will not wait for the EC to impose such measures in the event of an excessive deficit. This readiness is understandable. If Bulgaria does not reduce the deficit to the permitted limit, the first government with an absolute majority in decades will be deprived of a significant part of its freedom to determine public spending. And this is happening before the presidential elections this fall and local elections next year, when any spending restrictions will have not only a financial but also a political price. “Progressive Bulgaria” is about to break the GERB monopoly in local government.
According to the Finance Minister, if no action is taken, the budget deficit would reach 7.4% of GDP, and over 2 billion euros in unpaid debts to the road agency and municipal projects must be added to it. The discussion is about eliminating the automatic mechanisms for linking budget salaries to the average and minimum wage, restructuring the administration, measures against the shadow economy...
The temptation to look for the culprit
But nothing is final. The new government fears that tensions will erupt, and the hopes that the voters entrusted to it will be replaced by anger and discontent. The people are quickly falling out of love. And it is here that the temptation to look for the culprit elsewhere appears. Prime Minister Rumen Radev hastened to link the problem with joining the euro and with allegations that the real state of public finances has been concealed, which is what “Vazrazhdane” stubbornly claims. “The deficit for last year was well over 3%, as they lied in order to achieve the set goal of entering the eurozone. And this year the deficit will be even greater. "That means the bubble has burst," he said.
According to official data, the deficit for 2025 is 3.5%, but the EC accepts that it is permissible given the derogation for increased defense spending. According to Radev, the deficit is the result of years of manipulation, draining state-owned companies and "plunder". Such a thesis has a political advantage. It shifts the conversation from the question of how to control spending to the question of who is to blame for them. And above all, it allows dissatisfaction with the inevitable restrictions to be directed at the euro, instead of at the policies that led to the deficit.
The honeymoon of power ended quickly. If Bulgaria wants to control spending, it must tie the hands of politicians.