The Council of the European Union adopted a Recommendation on 3 July 2026 addressing Bulgaria's economic, social, employment, structural, and budgetary policies, based on the Commission's 2026 country report and the European Semester framework. The recommendation calls on Bulgaria to urgently correct its deteriorating fiscal position and implement structural reforms, as the EU has already opened an excessive deficit procedure for the country.
Bulgaria's general government deficit rose from 3% of GDP in 2024 to 3.5% in 2025, and is projected at 4.1% in 2026 and 4.3% in 2027, driven mainly by public sector wage and social benefit increases. General government debt increased from 23.8% of GDP in 2024 to 29.9% in 2025, projected at 32.3% in 2026 and 35.5% in 2027. Net expenditure grew by 12.3% in 2025, well above the recommended 6.2% maximum, with a cumulative deviation of 1.4% of GDP after accounting for the national escape clause for defence spending. Real GDP growth was 3.1% in 2025, projected at 2.5% in 2026 and 2.2% in 2027, while HICP inflation stood at 3.5% in 2025, projected at 4.2% in 2026 and 2.6% in 2027.
a regressive flat income tax (10%), high tax arrears, a large shadow economy, and spending pressures from population ageing and defence needs. It urges Bulgaria to improve public administration capacity, digitalise public services, strengthen anti-corruption frameworks, and accelerate implementation of EU cohesion funds, especially the Just Transition Fund (due by end-2026).
Stakeholder impact The recommendation has direct implications for several stakeholders. For the Bulgarian government, it imposes fiscal consolidation pressure, requiring either spending cuts or revenue increases to bring the deficit below 3% of GDP, potentially limiting room for social spending and public sector wages. Bulgarian taxpayers may face higher taxes or reduced public services as the government seeks to close the fiscal gap. EU institutions, particularly the Commission and Council, gain leverage through the excessive deficit procedure to enforce fiscal discipline, reinforcing the EU's fiscal rules. Bulgarian businesses could benefit from improved public administration and digitalisation, but may also face higher tax compliance costs if the flat tax is reformed or tax collection is tightened.
Institutional follow-up The recommendation is part of the European Semester cycle. Bulgaria is expected to report on its implementation in its next National Reform Programme and Stability Programme. The Commission will monitor progress and may propose further steps under the excessive deficit procedure, including potential sanctions if corrective action is insufficient. The Council will review Bulgaria's compliance in subsequent semesters.