Bulgaria aims to use its membership in the euro area and the European Stability Mechanism (ESM) to strengthen economic growth, attract high-value-added investment and improve fiscal stability, Prime Minister Rumen Radev and Finance Minister Galab Donev said Friday at a high-level conference in Sofia marking the country’s accession to the ESM.
Radev said the government’s goal was to turn Bulgaria into an important pillar of the EU’s stability and future. He said the country should make the best use of the benefits of euro area and ESM membership while transforming its economic model from one based on consumption and redistribution to one driven by high economic growth and investment.
Donev said the Finance Ministry expected to accelerate the reduction of the government deficit towards the Maastricht limit of 3% of GDP as part of the 2027 budget procedure. He said tax rates would remain at their current levels, social spending would continue to grow and pensions would increase in line with the Social Security Code. The government also plans stronger fiscal controls and stepped-up efforts against the grey economy and VAT fraud. Donev said the Government’s broader objective was to restore confidence in financial stability and fiscal discipline and reduce the deficit below 3% in the coming years. He also highlighted Bulgaria’s debt-to-GDP ratio as a competitive advantage.
According to Donev, foreign investment in Bulgaria almost doubled in the first half of the year compared with the same period in 2025. He attributed the increase to euro area membership, greater investor confidence and sustained economic growth, adding that half of the increase came from reinvested profits and half from new foreign investment. Donev said Bulgaria’s economy was growing by around 2.8-2.9%, compared with 0.9% forecast growth for the euro area, but warned that faster growth also created policy challenges. He cited inflation of 5.1% year-on-year, the third-highest rate in the euro area after Lithuania and Cyprus.
Addressing inflation, Donev said its rise could not be attributed to the introduction of the euro. He pointed to higher fuel and electricity prices, the war in the Persian Gulf, the war in Ukraine and disruptions to supply chains in the Black Sea region as factors affecting prices. He also said low water levels in the Danube were preventing Bulgaria’s record wheat harvest from being exported to other European countries.
ESM Managing Director Pierre Gramegna said euro area membership would help Bulgaria attract investment, support growth and increase budget revenues. He said Bulgaria was expected to reduce its deficit from around 5% in 2026 to around 3% in 2027, adding that the country would be complying with European rules. Gramegna also said euro area membership had improved Bulgaria’s access to financing. According to him, the spread between Bulgarian borrowing costs and German Bund rates had fallen from more than two percentage points two or three years ago to below one percentage point. He said priority investment areas included logistics, transport, energy grids and energy, while the ESM could support Bulgaria by sharing its financial-market experience and helping diversify the pool of international investors. He stressed that financing investment projects was the role of the European Investment Bank, not the ESM.
BNB Deputy Governor Petar Chobanov said fiscal loosening had been a temporary phenomenon during political instability and that Bulgaria could now return to prudent fiscal policy. He said inflation had initially been driven by external shocks but that domestic factors, including rising wages and fiscal spending, had subsequently become more important. Chobanov stressed the need to increase supply, improve economic efficiency and contain inflation expectations while maintaining financing for economic growth.
Bulgaria joined the ESM on June 29 as its 21st member.
Bulgaria Seeks Faster Deficit Reduction, More Investment after Euro Area, ESM Accession THE NEWS FROM BULGARIA – NEWS AGENCY 2009-2025 2026-09-25 13:04:55
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