Financial Times: Increased wages, pensions and military spending have pushed Bulgaria into an excessive deficit, the EC

Bulgaria will be punished next week for breaking budget rules just months after joining the eurozone, setting Prime Minister Rumen Radev's government on a collision course with Brussels, the Financial Times reports.

According to officials, the European Commission will put Sofia under the so-called excessive deficit procedure, as its annual deficit rose to 3.5% last year, exceeding the 3% threshold for the eurozone.

The step, which is accompanied by market stagnation and potentially higher borrowing costs, is expected to increase tensions under Radev, who was previously president and has become increasingly critical of the EU and the US since he came to power. came to power in April on a pro-Russian platform.

Bulgaria’s deficit will widen further in the coming years, to 4.1% next year and 4.3% in 2027, according to the Commission’s latest forecast.

“This year the deficit will be even bigger. The bubble has burst“, Radev told a cabinet meeting on Friday. “This is the result of the heavy legacy we have received“

Ten other countries are under a similar procedure, including Italy and France.

Rome tried to reduce its budget deficit “below 3%“ last year – a requirement to exit the procedure – but failed to do so, a setback for Prime Minister Giorgi Meloni ahead of next year’s elections. Malta, which reduced its excessive deficit to 2.2% last year, will exit the procedure.

Other countries with deficits expected to exceed 3% – including Germany – will not be subject to an excessive deficit procedure this year, thanks to a clause that exempts certain defense-related spending.

Bulgaria joined the eurozone in January, ending years of struggle, repeated political crises and a disinformation campaign by pro-Kremlin politicians opposed to Sofia’s adoption of the single currency.

One of the criteria for joining the eurozone is compliance with EU fiscal rules, including a 3% deficit threshold and debt levels below 60% of GDP.

Bulgaria met the conditions until last year, when wage increases, pension spending and military spending squeezed the budget while ambitious tax revenue targets were not met.

Mismanagement of the economy and endemic corruption led to major protests that cut short the term of the previous government, led by the center-right, pro-European party of former Prime Minister Boyko Borissov. Radev has won broad political support, promising to end corruption.

The former air force general has an absolute majority in parliament, but his political line is seen as risky. He needs the support of pro-Western parties to implement his promised anti-corruption program.

Assen Vassilev, a former finance minister and now an MP for the liberal PPDB party, Radev's most likely partner in the reforms, called the previous fiscal practice “absolutely beyond any logic“. He said the government should return to the EU-mandated fiscal deficit of 3% as early as 2026.

“The procedure will be terminated and there will be no consequences for Bulgaria if we do well this year,“ Vassilev said.