EN    EN EN 
EN    EN  EUROPEAN COMMISSION 
Brussels, 6.7.2010 
SEC(2010) 881 final 
  
COMMISSION OPINION 
on the existence of an excessive deficit in Bulgaria 
EN 2   EN COMMISSION OPINION 
on the existence of an excessive deficit in Bulgaria 
THE APPLICATION OF THE STABILITY AND GROWTH PACT IN THE CURRENT 
CRISIS SITUATION 
1. Many EU countries are presently facing gene ral government deficits above the 3% of 
GDP reference value set in the Treaty. The of ten strong deterioration in the deficit as 
well as the debt positions must be seen in the context of the unprecedented global 
financial crisis and economic downturn in 2008/09. Several f actors are at play. First, 
the economic downturn brings about declinin g tax revenue and ri sing social benefit 
expenditure (e.g. unemployment benefits ). Second, recognising that budgetary 
policies have an important role to play  in the current extraordinary economic 
situation, the Commission called for a fiscal stimul us in its November 2008 
European Economic Recovery Plan (EERP), endorsed by the European Council in December. The Plan explicated that the stimulus should be timely, targeted and 
temporary and differentiated acr oss Member States to reflect  their different positions 
in terms of public finance sustainability and competitiveness and should be reversed when economic conditions improve. Finally, several countries have taken measures 
to stabilise the financial sector, some of which have impacted on the debt position or 
constitute a risk of higher deficits and debt in the future, although some of the costs 
of the government support could be recouped in the future. 
2. The Stability and Growth Pact requires the Commission to initiate the excessive 
deficit procedure (EDP) whenever the defici t of a Member State exceeds the 3% of 
GDP reference value. The amendments to the Stability and Growth Pact in 2005 
aimed at ensuring that in particular  the economic and budgetary background was 
taken into account fully in al l steps in the EDP. In this way, the Stability and Growth 
Pact provides the framework supporting gover nment policies for a prompt return to 
sound budgetary positions taking account of the economic situa tion, and thereby 
ensuring long-term sustainability of public finances. 
LEGAL BACKGROUND 3. Article 126 of the Treaty on the Functioni ng of the European Union lays down an 
excessive deficit procedure (EDP). This procedure is further specified in Council 
Regulation (EC) No 1467/97 “on speeding up and clarifying the implementation of 
the excessive deficit procedure”
1, which is part of the Stability and Growth Pact. 
4. According to Article 126(2) of the Treaty, the Commission has to monitor 
compliance with budgetary discipline on th e basis of two criteria, namely: (a) 
whether the ratio of the planned or act ual government deficit to gross domestic 
product (GDP) exceeds the reference value of 3% (unless either the ratio has 
                                                 
1 OJ L 209, 2.8.1997, p. 6. The report also takes into account the “Specifications on the implementation 
of the Stability and Growth Pact and guidelines on the format and content of stability and convergence 
programmes”, endorsed by the ECOFIN Counc il of 10 November 2009, available at  
http://ec.europa.eu/economy_finance/sgp/legal_texts/index_en.htm. 
EN 3   EN declined substantially and continuously a nd reached a level that comes close to the 
reference value; or, alternatively, the excess over the reference value is only exceptional and temporary and the ratio remain s close to the reference value); and (b) 
whether the ratio of government debt to GDP exceeds the reference value of 60% (unless the ratio is sufficiently diminishi ng and approaching the reference value at a 
satisfactory pace). 
5. Article 126(3) of the Treaty stipulates that, if a Member State does not fulfil the 
requirements under one or both of these cr iteria, the Commission has to prepare a 
report. This report also has to “take into account whether the government deficit 
exceeds government investment expenditure and take into account all other relevant factors, including the medium-term econom ic and budgetary position of the Member 
State”. 
6. On the basis of the data notified by  the Bulgarian authorities in April 2010
2 and 
subsequently validated by Eurostat3 and taking into account the Commission 
services’ spring 2010 forecast, the Commissi on adopted a report under Article 126(3) 
for Bulgaria on 12 May 20104. 
7. Subsequently, and in accordance with Artic le 126(4) of the Treaty, the Economic and 
Financial Committee formulated an opi nion on the Commission report on 27 May 
2010. 
8. Article 126(5) of the Treaty requires th e Commission to address an opinion to the 
Council if the Commission considers that an  excessive deficit in a Member State 
exists or may occur. In order to reach a conclusion on whether an excessive deficit 
exists or may occur, the Commission cons iders that account shoul d be taken of: (i) 
the conclusions of its report under Artic le 126(3) and (ii) the opinion of the 
Economic and Financial Committee on this re port. On the basis of these elements, 
the Commission has established a number  of considerations for Bulgaria. 
CONSIDERATIONS CONCERNING BULGARIA 
9. According to the data notified by the Bulg arian authorities in April 2010, the general 
government deficit in Bulgaria reached 3.9%  of GDP in 2009, thus exceeding the 3% 
of GDP reference value. The Commissi on report under Article 126(3) considered 
that the deficit was not close to the 3% of GDP reference value but that the excess 
over the reference value can be qualified as exceptional within the meaning of the Treaty and the Stability and Growth Pact. In particular, it results from a severe 
economic downturn in the sense of the Trea ty and the Stability and Growth Pact, as 
the global economic and financial crisis hi t hard the economy of  Bulgaria and the 
negative annual GDP volume growth reached  5% in 2009. Furthermore, the excess 
over the reference value could be cons idered temporary. According to the 
                                                
 
2 According to Council Regulation (EC) No 479/2009, Member States have to report to the Commission, 
twice a year, their planned and actual government deficit and debt levels. The most recent notification 
of Bulgaria can be found at: 
 http://epp.eurostat.ec.europa.eu/portal/page/porta l/government_finance_statistics/excessive_deficit/edp_
notification_tables. 
3 Eurostat news release No 55/2010 of 22 April 2010.  
4 All EDP-related documents for Bulgaria can be found at the following website: 
 http://ec.europa.eu/ec onomy_finance/sgp/defic it/countries/index_en.htm. 
EN 4   EN Commission services’ spring 2010 forecast, based on a no-policy change assumption, 
the general government deficit will fall below the reference value already in 2010 
with the stabilization of the economy and as a result of the fiscal consolidation 
measures announced by the government at the end of March 2010. In a notification 
submitted on 22 June 2010, the Bulgarian aut horities further revised the planned 
deficit for 2010 to 3.8% of GDP, above and not close to the reference value. The 
deficit criterion in the Treaty is not fulfilled. 
10. The data in the April 2010 EDP notificati on shows that the general government gross 
debt remains well below the 60% of GDP reference value and stood at 14.8% of 
GDP in 2009. The Commission services’ spring 2010 forecast projects the debt ratio 
to increase over the 2010-2011 period, but to remain below 19% of GDP. In a 
notification submitted on 22 June 2010, the Bulg arian authorities further revised the 
planned debt for 2010 to 15.3% of GDP. The debt criterion in the Treaty is fulfilled. 
11. In line with the provisions  in the Treaty and the Stab ility and Growth Pact, the 
Commission also analysed in its report “rel evant factors”. According to the Stability 
and Growth Pact, these can only be taken into account in the st eps leading to the 
decision on the existence of an excessive deficit if the deficit satisfies the double 
condition of closeness and temporarine ss. In the case of Bulgaria, the double 
condition is not met. Considered on their own merit, the relevant factors in the 
current case on balance seem to be favourable.   
12. The opinion of the Economic and Financ ial Committee in accordance with Article 
126(4) of the Treaty is c onsistent with the assessmen t in the Commission report 
under Article 126(3) on the existe nce of excessive deficit.  
CONCLUSION 13. The monitoring of the budgetary situati on in Bulgaria and, in particular, the 
examination of the compliance with the crite ria laid down in Artic le 126(2) has led 
the Commission to prepare a report in accordance with Article 126(3) of the Treaty. 
The Commission, having taken into account its report and the opinion of the Economic and Financial Committee, as well as the information contained in the revised EDP notification submitted on 22 June 2010, is of the opinion that an excessive deficit exists in Bulgaria.