COMMISSION STAFF WORKING DOCUMENT Assessment of the 2013 national reform programme and convergence programme for BULGARIA Accompanying the document Recommendation for a Council Recommendation on Bulgaria’s 2012 national reform programme and delivering a Council Opinion on Bulgaria’s convergence programme for 2012-2016
Date: 2013-05-29
Institutions: European Commission
Subjects: Bulgaria, budgetary equilibrium, competitiveness, economic growth, economic recession, educational reform, health care system, job creation, labour market, liberalisation of the market, poverty, self-sufficiency in energy

EUROPEAN 
COMMISSION 

Brussels, 29.5.2013  
SWD(2013) 352 final 

COMMISSION STAFF WORKING DOCUMENT 

Assessment of the 2013 national reform programme and convergence programme for 
BULGARIA 

Accompanying the document 

Recommendation for a Council Recommendation  

on Bulgaria’s 2012 national reform programme and delivering a Council Opinion on 
Bulgaria’s convergence programme for 2012-2016 

{COM(2013) 352 final} 

EN 

   EN 

 
 
 
 
  
 
CONTENTS 

Executive summary .................................................................................................................... 3 

1. 

2. 

2.1. 

2.2. 

3. 

3.1. 

3.2. 

3.3. 

3.4. 

3.5. 

4. 

5. 

Introduction .................................................................................................................. 5 

Economic developments and challenges...................................................................... 6 

Recent economic developments and outlook............................................................... 6 

Challenges .................................................................................................................... 7 

Assessment of policy agenda ..................................................................................... 10 

Fiscal policy and taxation........................................................................................... 10 

Financial sector .......................................................................................................... 15 

Labour market, education and social policies ............................................................ 16 

Structural measures promoting growth and competitiveness..................................... 20 

Modernisation of public administration ..................................................................... 24 

Overview table ........................................................................................................... 27 

Annex ......................................................................................................................... 30 

2 

 
 
 
EXECUTIVE SUMMARY 

Economic Outlook 

According  to  the  Commission  2013  spring  forecast,  real  GDP  growth  is  projected  to 
recover  gradually  from  0.8%  in  2012  to  0.9  %  in  2013  and  to  1.7  %  in  2014. 
Unemployment, which edged up to 12.3% in 2012, is expected to level off in 2013 and stay 
high, at 12.4 % of the labour force, in 2014. HICP inflation slowed considerably to 2.4 % on 
average  through  2012  and  is  expected  to  moderate  to  2  %  in  2013  following  a  reduction  in 
some administered domestic energy prices and pick up to 2.6 % in 2014. 

In  2012,  the  fiscal  position  continued  to  strengthen  and  the  budgetary  outcome  was 
significantly better than expected. The headline budget deficit narrowed from 2% of GDP 
in 2011 to 0.8% in 2012 (well below target), though it is expected to rise to 1.3% of GDP in 
2013 on the back of a slight fiscal stimulus. Bulgaria reached its medium-term objective – a 
structural  budget  deficit  (the cyclically  adjusted  deficit  minus  one-off  measures)  of  0.5%  of 
GDP  in  2012.  However,  the  Commission  expects  this  to  rise  to  0.8%-0.9%  in  2013-14. 
Bulgaria recorded the second-lowest debt ratio among EU Member States in 2012, at 18.5% 
of GDP, which is expected to fall to 17.9% in 2013 and rise again to 20.3% in 2014. 

Key Issues 

Bulgaria  faces  a  set  of  interrelated  policy  challenges  to  achieve  sustainable,  robust 
growth  and  has  been  identified  by  the  European  Commission  as  experiencing 
macroeconomic  imbalances.  These  relate  in  particular  to  external  indebtedness,  corporate 
sector deleveraging and the labour market.  

The  government  has  ensured  financial  stability  and  fiscal  consolidation  by  out-
performing  its  fiscal  targets.  The  government  has  managed  to  achieve  its  medium-term 
objective for public finances, despite the slow economic recovery. In addition, the authorities 
took  some  steps  towards  improving  tax  collection  and  are  currently  implementing  a  major 
reform of the pension system. 

Despite  the  progress  the  government  has  made  in  implementing  its  fiscal  agenda,  the 
most pressing challenges for the country have remained broadly unchanged since 2012: 
labour  market,  education,  health  care,  the  business  environment,  public 
the 
procurement, energy and resource efficiency. A persistent lack of institutional capacity is 
causing critical delays in implementing the necessary reforms and in absorbing EU funding, 
which could help support the reforms (as of January 2013, overall absorption of structural and 
cohesion funding was just 26.7%). 

•  Labour  market:  Bulgaria  experienced  one  of  the  strongest  drops  in  employment  in 
the EU in 2008-12 (more than 8%) and has the EU’s highest rate of young people not 
in  employment,  education  or  training  (22.4  %  in  2011).  Declining  labour  force 
participation,  high  youth  unemployment,  skills  and  regional  mismatches  exacerbated 
by high emigration and inadequate pensions are also major concerns, given population 
ageing. A challenge will be to ensure that workers stay longer on the labour market, 
which  will  ease  the  pressure  on  pensions.  Social  policy  is  also  a  challenge,  as 

3 

 
Bulgarian citizens are at the highest risk of poverty or social exclusion in the EU (49.1 
% in 2011).  

•  Education:  The  education  and  training  systems  are  not  adapted  to  labour  market 
needs. Bulgaria has the EU’s highest share of low achievers in reading, mathematics 
and  science,  and  the  overall  investment  in  education  and  training  –  particularly  in 
primary, secondary and early childhood education  – are well  below the EU average, 
while the use of childcare is particularly low for those under three years old (covering 
only 7% of children in 2011), and is decreasing. 

•  Healthcare:  An  increase  in  the  quality  of  public  spending  in  the  health  sector  is 
crucial  to  improving  the  population’s  health  and  reducing  the  pressure  of  recurrent 
expenditure overruns. The population’s health needs are a major challenge, as are the 
lack  of  transparency  in  hospitals’  financing,  poor  access  for  some  social  groups  and 
regions and the disproportionately high out-of-pocket payments. 

•  Poverty: Bulgarian citizens are at the highest risk of poverty or social exclusion in the 
EU (49.1 % in 2011, almost twice the EU average). The rates of material deprivation 
for people up to 18 years of age and those above 65 are particularly worrying, while 
43.6%  of  the  overall  population  is  experiencing  severe  material  deprivation  (2011 
figures). Social assistance schemes are ineffective in supporting the inclusion of those 
further from the labour market. 

•  Business  environment:  A  major  challenge  is  to  foster  investment  in  innovation, 
which remains low (0.6 % of GDP in 2011) and to create a more favourable business 
climate, including for foreign investors. Businesses would also benefit from better tax 
administration,  insolvency  procedures  and  contract  enforcement.  There  are  also 
remaining deficiencies regarding public procurement and the independency, efficiency 
and  quality  of  the  justice  system.  Finally,  access  to  finance  for  SMEs  remains 
inadequate. 

•  Energy  and  resource  efficiency:  Bulgaria  is  highly  dependent  on  imported  energy. 
There  is  limited  competition  among  energy  suppliers,  insufficient  interconnections 
with  neighbouring  countries  and  an  inadequately  functioning  energy  market.  High 
energy intensity, low energy efficiency and deficient environmental infrastructure also 
hamper business activity and competitiveness. 

4 

 
 
1.  INTRODUCTION 

In  May  2012,  the  Commission  proposed  a  set  of  country-specific  recommendations  (CSRs) 
for  economic  and  structural  reform  policies  for  Bulgaria.  On  the  basis  of  these 
recommendations, the Council of the European Union adopted seven CSRs in the form of a 
Council Recommendation in July 2012. These CSRs concerned public finances, the pension 
system, education, healthcare, the labour market, administrative capacity, public procurement, 
energy  and  deregulation.  This  Staff  Working  Document  (SWD)  assesses  the  state  of 
implementation of these recommendations in Bulgaria. 

The  SWD  assesses  policy  measures  in  light  of  the  findings  of  the  Commission’s  Annual 
Growth Survey 2013 (AGS)1 and the second annual Alert Mechanism Report (AMR),2 which 
were  published  in  November  2012.  The  AGS  sets  out  the  Commission’s  proposals  for 
building  the  necessary  common  understanding  the  priorities  for  action  at  national  and  EU 
level in 2013. It identifies five priorities to guide Member States to renewed growth: pursuing 
differentiated, growth-friendly fiscal consolidation; restoring normal lending to the economy; 
promoting growth and competitiveness for today and tomorrow; tackling unemployment and 
the social consequences of the crisis; and modernising public administration. The AMR serves 
as  an  initial  screening  device  to  determine  whether  macroeconomic  imbalances  exist  or    in 
Member States. The AMR found positive signs that macroeconomic imbalances in Europe are 
being corrected. To ensure that a complete and durable rebalancing is achieved, Bulgaria and 
13 other Member States were selected for a review of developments in the accumulation and 
unwinding of imbalances.3 

Against  the  background  of  the  2012  Council  Recommendation,  the  AGS  and  the  AMR, 
Bulgaria  presented  updates  of  its  national  reform  programme  (NRP)  and  of  its  convergence 
programme  on  18  April  2013.  These  programmes  provide  detailed  information  on  progress 
made since July 2012 and on the future plans of the government. The information contained 
in these programmes provides the basis for the assessment made in this document. 

The  programmes  submitted  went  through  a  consultation  process  involving  the  national 
parliament and the social partners. Stakeholders as well as the general public were invited to 
submit proposals for consideration by the government. 

Overall assessment 

The analysis in  this  SWD leads  to  the  conclusion  that  Bulgaria has made some  progress on 
measures  taken  to  address  the  CSRs  of  the  Council  Recommendation.  On  the  positive  side, 
the  government  has  managed  to  achieve  its  medium-term  objective  for  public  finances, 
despite  the  slow  economic  recovery.  In  addition,  the  authorities  took  some  steps  towards 
improving  tax  collection  and  are  currently  implementing  a  major  reform  in  the  pension 
system. Only limited progress has been made in implementing the 2012 recommendations on 

1 COM(2012) 750 final. 
2 COM(2012) 751 final. 
3 13 in-depth reviews were published on 10 April 2013. While selected for an in-depth review in the AMR,  
Cyprus was ultimately not reviewed under the Macroeconomic Imbalance Procedure in view of the advanced  
reparations for a financial assistance programme. 

5 

 
                                                 
the  labour  market,  education,  public  procurement  and  the  energy  sector,  as  no  substantial 
measures have been adopted in these areas. 

Challenges  identified  in  July  2012  and  reflected  in  the  AGS  remain  valid.  Bulgaria’s  most 
pressing challenges are in the labour market, education, healthcare, the business environment, 
public procurement, energy and resource efficiency. Lower potential growth poses a number 
of challenges for the labour market and highlights the importance of boosting productivity and 
efficiency  through  structural  reforms.  A  major  challenge  with  respect  to  growth-enhancing 
macroeconomic  policies  is  fostering  the  economy’s  innovation  capacity  by  supporting 
investment in higher value-added production and services. This would be helped by creating a 
more favourable business climate (including for foreign investors and service providers) and 
by improving the absorption of EU funds. 

The  policy  plans  submitted  by  the  national  authorities  are  relevant.  Bulgaria  confirms  its 
existing  strategies,  which  focus  on  sound  public  finances,  increasing  investment  in 
infrastructure  and  the  absorption  of  EU  funds  across  sectors,  and  improving  the  business 
environment and public administration. However, reforms, particularly in the labour market, 
education  and  the  energy  sector,  lack  the  ambition  needed  to  address  the  challenges  in  a 
comprehensive way. 

2.  ECONOMIC DEVELOPMENTS AND CHALLENGES 

2.1. 

Recent economic developments and outlook 

Recent economic developments 

The recovery has been slow over 2010-12, reflecting not only global economic headwinds 
but  also  the  deleveraging  process  following  a  markedly  strong  economic  boom  and  a 
sudden stop of capital inflows. Preliminary GDP data for 2012 indicates growth slowing to 
0.8 %  in  annual  terms,  down  from  1.8 %  in  2011.  While  the  initial  phase  of  the  economic 
recovery  over  2010-11  was  driven  by  exports,  net  exports  turned  negative  in  2012  and 
domestic  demand  took  over  as  the  main  growth  driver.  The  labour  market  has  remained 
remarkably  weak,  with  employment  declining  by  3.4 %  in  2011  and  over  4 %  in  2012. 
Unemployment edged up to 12.3 % of the labour force in 2012 and long-term unemployment 
continued  to  increase  (6.8 %).  In  particular,  young  people  and  the  low-skilled  face 
considerable challenges on the labour market. 

Economic outlook 

According to the Commission 2013 spring forecast, GDP growth is projected to recover 
gradually  to  0.9 %  in  2013  and  to  1.7 %  in  2014.  Domestic  demand  is  expected  to  be 
supported  by  a  stable  domestic  economic  environment,  easing  financing  conditions  and 
relatively  strong  public  finances  upholding  consumer  confidence.  Investment  would  benefit 
from public sector projects funded by the EU and improved private sector confidence. While 
exports are forecast to recover in line with EU markets, imports are set to grow slightly faster 
due  to  the  revival  of  consumption  and  investments.  Hence,  net  exports  are  envisaged  to 
continue  contributing  negatively  to  growth  over  2013-14,  while  the  external  balance  is 
projected to slide into a deficit of 3.6 % of GDP by 2014. 

6 

 
The recovery in employment is held back by weak economic activity, skill and geographical 
mismatches,  and  high  long-term  unemployment.  The  labour  market  is  therefore  forecast  to 
embark  on  a  sluggish  recovery  only  after  2014,  therefore  dampening  the  upturn  in  GDP 
growth.  HICP  inflation  slowed  considerably  to  2.4 %  on  average  through  2012  and  is 
expected  to  moderate  to  2 %  in  2013  following  a  reduction  in  some  administered  domestic 
energy prices and pick up to 2.6 % in 2014. 

The economic scenario underlying both the national reform programme (NRP) and the 
convergence programme is plausible for the 2013-14 period. It projects real GDP growth 
of 1.0% in 2013 and 1.8% in 2014, which is broadly in line with the Commission 2013 spring 
forecast.  The  programmes  do  not  include  the  estimate  of  the  macro  impact  of  the  structural 
reforms. 

2.2. 

Challenges 

Bulgaria  faces  a  set  of  interrelated  policy  challenges  to  achieve  sustainable  robust 
growth. Structural rigidities and financing constraints continue to hinder full recovery in the 
post-crisis  environment.  Despite  an  improving  external  balance,  mainly  as  a  result  of 
protracted  weakness  in  domestic  demand,  a  strongly  negative  net  international  investment 
position  points  to  further  deleveraging  ahead.  Companies  remain  exposed  to  very  high  debt 
levels  and  non-performing  loans  have  increased.  Falling  employment,  especially  in  labour-
intensive sectors, has supported apparent improvements in labour productivity, yet continuing 
rapid growth in unit labour cost weighs on competitiveness. A persisting lack of institutional 
capacity  causes  critical  delays  in  reforming  the  labour  market,  education,  the  business 
environment,  energy  and  transport,  leading  to  a  loss  of  investment  and  convergence 
opportunities.  Bulgaria  was  invited  to  tackle  these  challenges  in  last  year’s  CSRs  and  the 
significance of such challenges was again underlined in the AMRAGS.AGS, the 2012 AMR 
and the 2013 in-depth review (see Box 1). 

Investment is essential to generate productivity gains over the long term, but structural 
aspects  of  the  business  and  competition  environment  keep  holding  back  investors. 
Businesses  would  benefit  from  improvements  in  tax  administration,  the  streamlining  of 
insolvency procedures and contract enforcement, as well as from full implementation of the 
Point  of  Single  Contact  and  e-government  solutions.  According  to  the  EU  Justice 
Scoreboard,4 the  perceived  independence of justice  in  Bulgaria ranks third  worst  in  the EU. 
This  can  deter  investments  as  the  independence  of  the  judiciary  ensures  the  predictability, 
certainty,  fairness  and  stability  of  the  legal  system  in  which  businesses  operate.  Significant 
economic  benefits  of  effective  procurement  practices  (including  greater  transparency,  faster 
procedures and more competition) are currently not being fully exploited. 

Better functioning markets, along with effective oversight by regulatory and supervisory 
authorities,  could  enhance  competitiveness.  In  particular,  high  dependency  on  imported 
energy,  limited  competition  among  energy  suppliers,  insufficient  interconnections  with 
neighbouring  countries  and  an  inadequately  functioning  energy  market  have  to  be  urgently 
addressed.  The  business  environment  and  competitiveness  also  suffer  from  high  energy 

4          COM (2013) 160. 

7 

 
                                                 
intensity, low energy efficiency and deficient environmental infrastructure. Water and waste 
management remain inefficient, with leaking water distribution systems, overuse of landfills 
and  insufficient  waste  recycling.  Underdeveloped  transport  infrastructure  restrains  the 
mobility  of  goods  and  factors  of  production.  Broadband  take-up  and  coverage  is  low, 
particularly  in  rural  areas.  Inefficient  absorption  of  EU  funds  and  limited  administrative 
capacity in these sectors continue to be key growth bottlenecks. Bulgaria also fails to tap the 
growth  potential  stemming  from  innovation  activities,  as  private  sector  participation  is 
limited,  while  public  research  expenditure  is  very  low  and  only  a  small  part  is  allocated 
competitively.  Finally,  access  to  finance  for  small  and  medium-sized  enterprises  (SMEs) 
remains inadequate. 

Bulgaria  suffers  from  a  below-average  and  declining  employment  rate  and  high 
unemployment  disparities  across  regions  and  population  subgroups.  The  country 
experienced  one  of  the  sharpest  drops  in  employment  in  the  EU  over  2008-12,  with  the 
employment  rate  in  the  20-64  age  group  declining  by  more  than  8  percentage  points.  Low-
skilled workers were most severely hit by the crisis and the subsequent restructuring, with the 
employment rate for this segment falling considerably. Many of the low-skilled unemployed 
belong  to  ethnic  minorities,  in particular Roma with no education or work experience.5 The 
EU’s highest rate of young people not in employment, education or training (NEETs) (22.4 % 
in 2011) and the highest level of discouraged workers among inactive NEETs point to serious 
structural problems; these are reinforced by the still insufficient quality and coverage of the 
Employment  Agency.  Skill  mismatches,  in  particular  in  technical  competences  (given  the 
disproportionately high number of graduates in social sciences, business and law), indicate a 
need for a better link between education output and labour demand. 

Bulgaria has a high proportion of workers retiring before the statutory retirement age 
through invalidity pensions. A challenge will be to ensure that workers stay longer on the 
labour market, thereby contributing to more adequate pension entitlements. 

Bulgaria  is  facing  the  challenge  of  improving  the  overall  quality  and  efficiency  of  the 
education and training system to ensure the availability of a qualified labour supply and 
mitigate  the  expected  decline  in  potential  growth.  The  low  educational  achievements  in 
basic  skills  are  linked  to  poor  education  provision  combined  with  a  lack  of  performance 
incentives for teachers, curricula in need of modernisation, a poor national assessment system 
and  insufficient  accountability.  Bulgaria  has  the  EU’s  highest  share  of  low  achievers  in 
reading,  mathematics  and  science  (according  to  PISA  2009),  suggesting  that  there  are 
significant structural obstacles to ensuring quality education. The country’s overall investment 
in  education  and  training,  and  specifically  in  primary  and  secondary  education  and  in  early 
childhood education, are well below the EU average. Use of childcare is particularly low (for 
those under three years old) and has been decreasing since 2008.6 

The health sector faces major difficulties in meeting the population’s health needs. The 
main challenges are the lack of transparency in hospitals’ financing, the poor access for some 
social  groups  and  regions  to  health  services  and  the  disproportionately  high  level  of  out-of-

5  

6  

According to the UNDP/World Bank/EC Regional Roma survey 2011, over 50 % of active age Roma are 
unemployed and over 65 % of 15-24 year old unemployed Roma have no work experience at all. 
Bulgaria Country Fiche on Gender Equality and Policy Developments (ENEGE, 4th Quarter 2012). 

8 

 
                                                 
pocket payments in health. An increase in the quality of public spending in the health sector is 
crucial  to  improving  the  population’s  health  and  reducing  the  pressure  of  recurrent 
expenditure overruns. 

Poverty and social exclusion indicators highlight a number of worrying trends. Bulgarian 
citizens  are  exposed  to  the  highest  risk  of  poverty  or  social  exclusion  in  the  EU  (49.1 %  in 
2011, almost twice the EU average). The risk of poverty recorded the highest increase in 2011 
as compared with 2010 and this was accompanied by a rise in the poverty threshold and larger 
inequality  in  income  distribution.  Particularly worrying  are  the  rates  of  material  deprivation 
for  people  up  to  18  years  of  age  and  those  over  65  years  old,  the  latter  highlighting  the 
challenge of improving the adequacy of pensions. Social assistance schemes are ineffective in 
supporting the inclusion of those further from the labour market. 

Box  1  Summary  of  the  2013  in-depth  review  (IDR)  under  the  Macroeconomic  Imbalances 
Procedure (MIP) 

The  first  in-depth  review  of  the  Bulgarian  economy  concluded  that  Bulgaria  was  experiencing 
macroeconomic  imbalances,  in  particular  as  regards  developments  relating  to  external  indebtedness, 
corporate  sector  deleveraging  and  the  labour  market  adjustment  process.  On  this  basis,  the  Alert 
Mechanism Report (AMR), published in November 2012, suggested that it was appropriate to conduct 
a  second  in-depth  review  to  examine  further  the  persistence  of  imbalances  or  their  unwinding.  The 
review has focused on analysing in detail the recent developments and expected future prospects of the 
identified imbalances. The main observations are: 

Bulgaria’s  external  position  remains  highly  negative,  although  recent 
• 
developments go in the right direction. The current account has remained largely balanced over 
the last three years, allowing for a reduction of external debt as share of GDP. The negative income 
balance of the current account has been offset by positive current and capital transfers, related to rising 
remittances  and  the  absorption  of  EU  structural  funds.  Future  risks  to  the  external  position  lie  in  a 
return  to  excessive  current  account  deficits  when  economic  conditions  normalise,  especially  if  those 
deficits  are  driven  by  consumption  and  non-productive  investments  (e.g.  real  estate).  The  external 
position  seems  only  moderately  vulnerable  to  sudden  shocks  to  the  economy,  as  a  large  part  of  the 
indebtedness comes from foreign direct investment and long-term debt. 

• 
On  the  private  sector  side,  non-financial  corporations  remain  vulnerable  despite  the 
ongoing  deleveraging  process.  The  high  level  of  debt,  combined  with  rising  non-performing  loans 
and an increasing ‘other payables’ account balance, indicates that deleveraging pressures are expected 
to persist for a while and are probably impeding economic activity at present. Late payment and debt 
restructuring  procedures  in  the  sector  deserve  attention  and  could  facilitate  the  gradual  reduction  of 
indebtedness. 

The  labour  market  has  been  hit  disproportionately  hard  by  the  crisis.  Companies  have 
• 
opted to shed labour rather than reduce wages, causing one of the largest drops in employment in the 
EU. Job losses were especially large in the low-skilled segment of the market. Both overall and long-
term  unemployment  have  increased  markedly,  suggesting  that  a  large  part  of  the  current 
unemployment could become structural in nature. 

Notwithstanding  gains 

in  export  market  share,  concerns  over 

• 
in  cost-
competitiveness remain. Non-cost factors, including quality improvements made by export-oriented 
industries,  have  been  identified  as  the  main  contributor  to  market  share  gains.  Nevertheless,  unit 
labour  cost  (ULC)  growth,  while  having  come  down,  remains  above  that  of  Bulgaria’s  industrial 
competitors. This is likely to weigh on competitiveness, thus compromising export performance. 

losses 

9 

 
The in-depth review also discusses possible policy avenues to address the challenges identified in the 
analysis.  The  business  climate  could  benefit  from  further  reduction  of  administrative  costs  and  red 
tape and improved efficiency of the judiciary to ensure a level playing field. Improving the business 
environment would allow Bulgaria to attract more investments in productive sectors and grow out of 
its  external  indebtedness  in  the  medium  and  long  term  through  increases  in  economic  output. 
Streamlining the in- and out-of-court debt restructuring and debt settlement procedures could increase 
business  confidence  and  reduce  uncertainty  in  the  corporate  sector.  Effective  implementation  of  the 
late payments regulation would relieve cash flow concerns and help quantify arrears on payments for 
goods  and  services  between  non-financial  corporations.  Measures  targeting  higher  education,  youth 
employment and reintegration of the low-skilled in the labour market may be considered to address the 
high level of long-term unemployment. In addition, a careful examination and possible recalibration of 
the  system  of  minimum  social  security  thresholds  may  benefit  the  threshold-setting  mechanism  and 
prevent adverse effects on the more vulnerable parts of the labour market. 

3.  ASSESSMENT OF POLICY AGENDA 

3.1. 

Fiscal policy and taxation 

Budgetary developments and debt dynamics 

The main goal of the 2013 convergence programme’s medium-term budgetary strategy 
is to keep the structural balance close to the MTO. The programme defines the medium-
term objective (MTO) as a structural deficit of 0.5% of GDP. This nationally set MTO more 
than  adequately  reflects  the  requirements  of  the  Stability  and  Growth  Pact.  However,  while 
the  MTO  was  already  achieved 
the  Council 
Recommendations  of  10  July  2012,  the  programme  foresees  a  weakening  of  the  structural 
balance,7  settling  to  0.7-0.8%  of  GDP  in  2013  and  over  the  rest  of  the  programme  horizon 
until  2016.  The  structural  fiscal  position  thus  weakens,  but  stays  close  to  the  MTO.  The 
programme  states  that  it  expects  the  MTO  to  be  met  in  2017,  but  the  actual  numeric 
projections  in  the  programme  extend  only  until  2016.  In  nominal  terms,  after  a  temporary 
budgetary  loosening  in  2013,  the  deficit  is  set  to  improve  gradually  from  1.3%  of  GDP  in 
2013-14 to 0.8% of GDP by 2016. 

in  2012,  as  also  recommended  by 

In  2012,  the  fiscal  position  continued  to  strengthen  and  the  budgetary  outcome  was 
significantly better than expected in the previous convergence programme. The general 
government headline deficit narrowed from 2 % of GDP in 2011 to 0.8 % in 2012, well below 
the  target  of  1.6 %  of  GDP  set  in  the  previous  programme.  This  improvement  was  largely 
driven  by  lower-than-planned  investment  expenditure.  However,  the  unrealised  investment 
expenditure might be carried over to the following years. 

In  2013,  the  convergence  programme  projects  the  fiscal  position  to  revert  back  to  a 
deficit  of  1.3%  of  GDP.  This  2013  deficit  projection  has  remained  unchanged  from  the 
previous year’s programme. Given the better-than-expected outcome in 2012 and thus a lower 
expenditure  base,  the  current  fiscal  plans  imply  a  slight  fiscal  stimulus  in  2013,  albeit 

7            Cyclically  adjusted  balance  net  of  one-off  and  temporary  measures,  recalculated  by  the  Commission 
services  on  the  basis  of  the  information  provided  in  the  programme,  using  the  commonly  agreed 
methodology. 

10 

 
                                                 
following  a  stronger-than-planned  fiscal  consolidation  in  2012.  The  Commission  spring 
forecast also projects the same fiscal outcome for 2013. The deficit is set to weaken from the 
previous year on account of expenditure increases. Notably, pensions have been increased by 
9.3 % on 1 April 2013 and the 2013 state budget provides for increased investments. 

The  latest  convergence  programme  has  somewhat  loosened  the  forward-looking  fiscal 
targets as compared with the previous programme. Instead of aiming to achieve headline 
and  structural  fiscal  balance  by  2015,  the  new  programme  projects  the  headline  deficit  to 
improve more gradually from 1.3% of GDP in 2013-2014 to 1% of GDP in 2015 and 0.8% in 
2016. This weaker outlook is explained by a significant downward revision of the underlying 
macroeconomic scenario for both the EU and Bulgaria. The recalculated structural deficit is 
projected  to  remain  relatively  stable  at  0.7-0.8 %  of  GDP  over  the  programme  period.8  The 
primary balance (net of interest payments) reaches zero by 2016. 

While  the  headline  deficit  is  set  to  improve  gradually,  both  the  revenue-  and 
expenditure-to-GDP ratios are expected to increase by 0.6 pps between 2012 and 2016.9 
The programme projects an increase in revenues driven by higher VAT and excise revenues, 
even  though  the  tax  rates  are  planned  to  remain  largely  stable.10  The  increase  in  VAT 
revenues as a share of GDP is due to an assumed continuation of a consumption-led economic 
recovery, with private consumption and investments outpacing overall GDP growth. Also, the 
programme  assumes  a  continuation  of  the  trend  of  gains  in  the  efficiency  of  revenue 
collection in 2013, boosted by measures to fight tax evasion. The rise in the expenditure ratio 
is explained by significantly increasing capital expenditure as compared with 2012, which is 
partly offset by curbing other expenditure items (see annex: Table 3). Overall, the programme 
plans to reallocate expenditure towards growth-enhancing items, notably investments. These 
fiscal projections are supported by detailed measures only for 2013, and occasionally by their 
carry-over  impact  to  2014  (see  Box  2).  For  the  period  2014-16,  the  budgetary  adjustment 
represents projections under a no-policy-change assumption. There are no significant one-off 
or other temporary measures planned in the programme. 

Assessed  against  the  deficit  projections  in  the  Commission  2013  spring  forecast,  the 
deficit  projections  of  the  programme  for  2013-14  appear  realistic.  The  macroeconomic 
scenario of the programme (including the inflation and employment projections) is broadly in 
line  with  that  of  the  Commission  services.  Given  the  similar  baseline  macroeconomic 
scenarios,  the  programme  and  the  Commission  forecast  are  subject  to  similar  risks.  As 
mentioned in the Bulgaria section of the Commission 2013 spring forecast, there is a risk to 
the  baseline  macroeconomic  scenario  from  a  potentially  weaker-than-expected  recovery  in 
household consumption, given the still fragile consumer sentiment and a weak labour market. 

8            While  the  weaker  cyclical  position  of  the  economy  should  in  theory  not  impact  on  cyclically-adjusted 
structural balances, their estimates were also lowered compared to the previous programme. This is due to 
a  downward  revision  of  potential  growth  estimates  given  the  slower  recovery  in  employment  and 
investments.  This  in  turn  impacted  the  output  gap  estimates  and  the  cyclical  component  used  for  the 
calculation of the structural budget balance.  

9        For 2013, the Commission forecast expects both lower revenues and lower expenditures. This is due to a 
more conservative assumption of EU structural funds absorption in that year, which implies both lower 
revenues and expenditures and is thus broadly deficit-neutral. 

10        Some excise taxes were raised in 2013, but with a relatively small budgetary impact of 0.04 % of GDP. 

11 

 
                                                 
Since  the  programme  projections  rely  on  an  assumption  of  a  consumption-led  tax-rich 
economic recovery driving strong VAT revenues, the materialisation of this macroeconomic 
risk would jeopardise the revenue targets. In addition, the assumption of the programme that 
the  trend  of  improving  tax  compliance  would  continue  in  2013  entails  some  risks.  On  the 
expenditure  side,  the  unreformed  healthcare  sector,  which  has  led  to  recurrent  expenditure 
overruns  in  the  past,  could  continue  to  put  pressure  on  the  fiscal  balance.  In  terms  of 
implementation risks, the budgetary targets could be altered by a new government following 
the  early  parliamentary  elections  in  May  2013.  However,  at  the  time  of  writing  the  current 
assessment, there are no indications of a change in fiscal policy. Overall, the authorities have 
a  proven  track  record  of  meeting  and  even  over-performing  their  targets  in  the  past,  which 
would partially offset the above-mentioned risks. 

Measured against the recalculated structural balance, Bulgaria reached its MTO (-0.5 % 
of GDP) in 2012, but the structural position is set to weaken slightly in 2013-14, albeit 
remaining close to the MTO. The programme foresees a weakening of the structural deficit 
from 0.4 % of GDP in 2012 to 0.7 % of GDP in 2013, then slightly further to 0.8 % in 2014 
and  to  fluctuate  between  0.7-0.8 %  of  GDP  over  the  programme  horizon.  The  Commission 
services' forecast projects a slightly weaker structural deficit (by 0.1 % pps of GDP) in 2013-
14. According to the information provided in the programme and in the Commission services' 
forecast, the growth rate of government expenditure, net of discretionary revenue measures, in 
2013-15  would  not  exceed  the  relevant  reference  medium-term  expenditure  benchmarks, 
which are estimated at between 2.1-2.6 % for those years. Although in 2016 the expenditure 
benchmark is projected to be breached, this does not lead to any significant weakening of the 
structural balance. 

In 2012, Bulgaria recorded the second-lowest debt ratio among EU Member States, with 
general government gross debt at 18.5 % of GDP, well below the 60 % Treaty reference 
value. The programme projects the government debt to peak at 20.4 % of GDP in 2014 and 
then  to  abate  to  below  20 %  of  GDP  in  2015-16.  The  underlying  debt  dynamics  reflect  the 
positive impact of a gradual improvement in the primary balance and increasing nominal GDP 
growth.  The  projected  debt  ratio  fluctuates  slightly  from  year  to  year  over  the  programme 
period, reflecting the planned repayment and refinancing operations of some larger bonds in 
certain  years  (notably  a  single  large  bond  maturing  in  early  2015).  The  projections  of  the 
debt-to-GDP  ratio  in  the  programme  appear  plausible  taking  into  account  the  Commission 
2013  spring  forecast  and  the  latest  available  information.  Since  the  debt-to-GDP  ratio  is 
below the reference rate, the debt reduction benchmark is not applicable. Medium-term debt 
projections  (Graph  below  Table  V  in  annex)  indicate  that  the  full  implementation  of  the 
programme would lead to a smaller debt-to-GDP ratio by 2020. 

Box 2. Main measures 

The  box  provides  an  overview  of  all  discretionary  measures  with  a  significant  budgetary  impact  as 
well  as  macro-structural  measures  mentioned  in  the  Convergence  Programme/National  Reform 
Programme. The main budgetary measures for 2013 include: on the revenue side, (i) increasing the tax 
rates  on  some  energy  products,  (ii)  raising  the  minimum  and  maximum  mandatory  social  security 
income  thresholds  and  (iii)  applying  income  tax  to  interest  income  on  deposit accounts.  In addition, 
the  programme  expects  a  comprehensive  set  of  measures  to  fight  tax  evasion,  instituted  over  the 

12 

 
previous  years,  to  boost  VAT  and  excise  tax  revenue  collection  by  0.2 %  of  GDP  in  2013.  On  the 
expenditure  side,  the  main  measures  are  (iv)  increasing  pensions  on  average  by  9.3 %,  which  also 
compensates  for  the  temporary  halt  in  pension  indexation  over  2010-12,  and  (v)  boosting  public 
investments, related to the EU funds absorption cycle. For 2014, some of the revenue measures have a 
carry-over effect, but their overall size is relatively small. The only notable revenue measure specified 
for 2014 is increasing excise on natural gas (0.06 % of GDP). For 2015-16, the programme does not 
provide  details  of  specific  measures  and  is  largely  based  on  an  assumption  of  stable  tax  rates. 
However, the pension reform of 2011 is projected to have an effect over the medium and longer term, 
with  the  gradual  increases  in  the  pension  age  keeping  the  growth  of  pension  scheme  expenditures 
below  GDP  growth.  Therefore,  the  programme  expects  the  ratio  of  pension  expenditure  to  GDP  to 
drop by 0.5 pps over 2013-16.  

  Revenue 

Main budgetary measures 

Expenditure 

2013 

  • 

• 

Increase  of  the  mandatory  minimum  and 
income 
maximum 
thresholds (0.1 % of GDP) 

security 

social 

Increase  of  excise  tax  rates  on  some 
line  with  EU 
in 
energy 
harmonisation  requirements  (0.04 %  of 
GDP) 

goods 

• 

• 

•  A wide set of measures to improve VAT 
and excise tax compliance is expected to 
yield 0.2 % of GDP 

• 

Increasing  pensions  by  9.3 %,  and  raising 
minimum  and  social  pensions  (total  increase 
0.6% of GDP) 

impact 

Increase  of  EU  funding  related  investments, 
the  budget  balance 
which  will 
through  national  co-financing  expenditure 
(the  exact  budgetary  impact  is  not  specified 
in the programme)   

Increase  of  the  retirement  age  by  4  months 
(the  exact  budgetary  impact  is  not  specified 
in the programme) 

  Note:  The  budgetary  impact  in  the  table  is  the  impact  reported  in  the  programme,  i.e.  by  the  national 
authorities. A positive sign indicates that revenue/expenditure increases as a consequence of this measure. 
The degree of detail  reflects the  information  made  available  in  the  convergence  programme  and, where 
available, in a multiannual budget. 

The 2013 National Reform Programme describes a number of macro-structural reform measures in 
the  areas  of  public  administration,  health,  employment,  social  inclusion,  education,  energy,  and 
research  and  development  with  the  overall  objective  of  raising  employment  and  boosting  potential 
growth. However, the programmes do not provide a quantitative estimate of their budgetary impact 
on an annual basis. The larger part of the reform funding is accounted for by the EU funds. 

Long-term sustainability 

Bulgaria does not appear to be facing a risk of fiscal stress in the short term, and does 
not  appear  to  face  medium-term  or  long-term  sustainability  challenges  either. 
Government debt (18.5 % of GDP in 2012, expected to rise to 20.3 % in 2014) is well below 
the Treaty threshold (60 % of GDP). Hence, the low debt ratio provides time to adjust policies 
that affect age-related spending. 

13 

 
 
 
 
 
 
 
 
 
Recent reforms to the pension system have further reduced the sustainability risks, and need 
to be accompanied by improvements in labour market conditions that allow older workers to 
stay  longer  in  employment.  Further  containing  the  growth  of  age-related  expenditure  would 
contribute  to  the  sustainability  of  public  finances  in  the  long  term.  According  to  the  2012 
Ageing  Report,11  projections  for  healthcare  and  long-term  care  are  rather  favourable. 
Conversely,  health  status  indicators  are  weak  in  comparison  with  the  other  Member  States, 
pointing  to  higher  needs  for  healthcare  and  long-term  care  needs,  and  therefore  potentially 
higher costs, in the future. 

Fiscal framework 

Bulgaria has substantially strengthened its fiscal framework in recent years. Reforms in 
the  field  of  numerical  fiscal  rules  and  medium-term  fiscal  planning  have  contributed  to 
maintaining fiscal discipline and increasing fiscal policy predictability. The fiscal targets were 
met  and  even  outperformed,  while  sizeable  fiscal  buffers  were  maintained.  With  a  view  to 
complying  with  EU  Directive  2011/85/EU  on  national  budgetary  frameworks  and  preparing 
the implementation of the Fiscal Compact,12 a new public finance law was adopted in January 
2013 (to enter into force in January 2014). The new law retains the existing numerical fiscal 
rules (including a nominal ceiling of 3 % of GDP for general government deficit in ESA 95 
terms and 2 % for the Consolidated Fiscal Programme (CFP),13 and an expenditure ceiling of 
40 %  of  GDP  for  the  CFP).  It  further  strengthens  requirements  at  the  municipal  level  by 
aligning public finance accounting and statistics with the Eurostat methodology and reforms 
the  three-year  medium-term  budgetary  framework.  The  existing  rules  are  supplemented  by 
additional  ones  related  to  the  Stability  and  Growth  Pact:  a  medium-term  budget  ceiling  of 
0.5 % of GDP for the structural deficit and of 1 % in case debt is under 40 % of GDP, as well 
as  a  limit  to  expenditure  growth  below  the  forecast  GDP  growth,  and  an  annual  adjustment 
path of 5 % in case public debt exceeds 60 % of GDP. The Public Finance Act also requires 
the  government  to  submit  to  parliament  by  mid-2013  a  proposal  on  the  establishment  of  an 
independent body whose mandate would include the monitoring of national numerical fiscal 
rules. 

The  authorities  should  maintain  the  reform  momentum  and  prepare  the  ground  for 
implementation of the new Law, in particular by establishing the envisaged independent 
fiscal body and giving it a clear mandate, functional autonomy and adequate resources. 
To  further  improve  the  content  of  the  medium-term  budgetary  framework,  the  authorities 
should also provide more details on off-budget items which represent a potentially important 
contingent liability for the budget, such as losses and arrears of state-owned enterprises. 

Tax system 

11  

12  

http://ec.europa.eu/economy_finance/publications/european_economy/2012/2012-ageing-

See 
report_en.htm. 
Bulgaria has signed the Treaty on Stability, Coordination and Governance in the EMU, but not ratified it 
to date. 

13       The Consolidated Fiscal Programme is a system of summary indicators from the budget of all first-level 
spending  units,  the  central  budget,  the  resources  from  EU  funds  and  other  indicators  to  calculate  the 
budget balance. 

14 

 
                                                 
The  tax  system  is  characterised  by  a  low  overall  tax  burden  on  labour  and  capital 
matched by relatively high taxation of consumption. This is suggestive of a rather growth-
friendly tax structure. Bulgaria has the second lowest tax-to-GDP ratio in the EU (27.2 % of 
GDP in 2011), reflecting a very low share of direct taxes and a high share of indirect taxes. 
Although revenues from energy taxes are the second highest in the EU, the implicit tax rate on 
energy, which relates the tax burden to overall energy consumption, indicates that they stem 
from the high energy-intensity of the economy rather than from high excise rates on energy 
products,  which  are  in  fact  below  average.  Revenues  from  non-energy  environmental  taxes 
(transport excluding fuel, pollution and resource taxes) are below the EU average. The flat tax 
system, with its low rate and almost no tax deductions, makes Bulgaria’s labour taxation rate 
one of the lowest in the EU. This applies to both the implicit tax rate on labour employed and 
the tax wedge. 

In spite of a low tax burden on labour, the poor labour market performance points inter 
alia to taxation challenges for low-paid jobs. The minimum thresholds for the calculation of 
social  contributions  are  very  close  to  the  average  wage  in  some  low-paid  sectors  and 
occupations.  A  cap  at  about  three  times  the  average  wage  and  continued  increases  in  the 
social  payment  floors,  including  during  the  crisis,  imply  a  higher  tax  wedge  for  low-wage 
jobs.  Furthermore,  it  appears  that,  especially  for  low-skilled  jobs,  the  thresholds  have  not 
allowed  for  sufficient  downward  flexibility  of  wages  in  the  current  juncture,  pricing  some 
lower paid workers out of the labour market. The government decided to freeze the limits for 
some occupations for 2013, resulting in a lower average increase of the thresholds. 

Improving tax compliance remains a key challenge in Bulgaria. Available estimates point 
to a considerable size of the shadow economy. This is confirmed by data for undeclared work 
in  Bulgaria,  which  are  far  above  the  EU  average.  Bulgaria  also  seems  to  have  a  particular 
need  to  improve  the  quality  of  tax  administration,  as  the  administrative  costs  of  revenue 
collection  are  above  the  EU  average  and  the  compliance  costs  of  paying  taxes  are  high. 
Efforts to strengthen tax collection have been directed towards an increased use of third-party 
information, with a new requirement for all fiscal retail devices and integrated computerised 
sales  management  systems  to  be  remotely  connected  to  the  National  Revenue  Agency’s 
information  systems.  The  high  compliance  costs  have  been  addressed  somewhat  by  the 
streamlining  of  reporting  requirements  and  reducing  the  number  of  payments  for  tax 
obligations. Nonetheless, these efforts do not seem to be supported by a comprehensive tax-
compliance strategy, which would include a prior analysis of the most significant risks to tax 
collection and assessment of the measures already in place. 

3.2. 

Financial sector 

Macro-financial  stability  has  been  preserved  since  the  outburst  of  the  crisis.  Bulgaria’s 
financial sector is heavily bank-based and mostly foreign-owned. Banks managed to maintain 
their  capital  buffers  and  remain  profitable  despite  significant  loan-loss  impairments,  while 
their liquidity position has even improved. Banks’ overall capital adequacy ratio (16.7 %) and 
core tier-one ratio (15.2 % at the end of 2012) remain above international averages. In parallel 
with its comfortable capital position, the banking system is also increasingly benefiting from 
domestic funding instead of relying on liquidity from parent banks. In 2012, resident deposits 

15 

 
 
grew by 9.4 % in the context of almost stagnant credit growth of under 3 %. This has resulted 
in  the  accumulation  of  extra  liquidity  as  indicated  by  a  declining  loan-to-deposit  ratio. 
However, the growth of loans that are more than 90 days overdue accelerated again in the first 
half of 2012 and by end-2012 these represented 16.6 % of all loans. 

The  authorities  stepped  up  supervision,  while  maintaining  high  regulatory  standards  and 
ensuring  continued  funding  of  foreign-owned  banks  by  their  parent  institutions.  Close 
monitoring  of  balance  sheet  developments,  including  regular  stress-testing,  should  continue 
with  a  view  to  pre-emptively  assessing  solvency  and  liquidity  risks.  In  particular,  the 
evolution of non-performing loans, as well as banks’ strategies for dealing with them, need to 
be followed closely. 

Notwithstanding the stable financial sector, weak economic recovery continues to weigh 
on credit risk with negative effects on credit extension to the real economy. Credit growth 
is unlikely to resume soon, given the still highly-leveraged corporate sector (146 % of GDP). 
With  capital  markets  playing  a  weak  role  in  intermediating  savings  and  productive 
investment, equity financing remains very limited and the real economy effectively depends 
on financing from foreign-owned banks. While large and export-oriented companies seem to 
have little trouble in accessing credit, restoring normal lending to SMEs and thus avoiding an 
excessive pace of deleveraging that can be detrimental to growth are key policy challenges. 
EU-funded SME support programmes remain largely untapped and Bulgaria has made limited 
progress in increasing the availability of credit to SMEs. 

3.3. 

Labour market, education and social policies 

Still  rising  unemployment  (from  11.3 %  in  2011  to  12.3 %  in  2012)  is  to  a  large  extent 
driven  by  the  weak  post-crisis  recovery,  while  disadvantaged  people  bear  the  brunt  of 
the adjustment process. From a demand-side perspective, the feeble economic environment 
continues to weigh on the labour market, but long-standing structural challenges on the supply 
side further exacerbate the current situation. The predominance of job cuts over wage cuts is 
especially  problematic  for  disadvantaged  people  in  the  labour  market  and  sectors  with  the 
least  capacity  for  finding  alternative  employment.  High  structural  unemployment  (6.8 %  in 
2012) may already be pushing up wages and ULCs in some sectors that have recovered from 
the crisis. Furthermore, high unemployment among the low-skilled and young people (28.5 % 
and  28.2 %  respectively  in  2012)  partly  reflects  persistent  skill  and  regional  mismatches  as 
well as the low quality and low relevance to labour market needs of the education and training 
systems.  Amid  risks  of  locking  the  economy  on  a  low-growth  path,  low  employment  rates 
also  result  in  a  persistent  and  significant  share  of  the  population  becoming  vulnerable  to 
poverty and social exclusion. 

In  2012,  the  Council  Recommendation  for  Bulgaria  contained  CSRs  concerning 
unemployment,  social  exclusion,  education  and  pension  reform.  The  authorities  were 
urged to tackle high levels of youth unemployment by increasing the scope and efficiency of 
active  labour  market  policies  (ALMP),  improving  work  incentives  and  strengthening  the 
Employment Agency for providing better services. In addition, the authorities were invited to 
improve  the  effectiveness  of  social  transfers  and  access  to  quality  social  services,  ensure  a 

16 

 
stronger contribution of the education system to human capital formation at all levels as well 
as reduce risks to the sustainability, and improve the adequacy of the pension system. 

The existing schemes to promote youth employment have failed to reach those most in 
need. The need to tackle the weak labour market participation of young people was identified 
in  a  2012  CSR  for  Bulgaria  and  highlighted  as  a  general  priority  in  the  AGS.  Under  the 
national  ‘Employment  for  Youth’  initiative,14  Bulgaria  has  committed  itself  to  reduce  the 
youth (15-24 years) unemployment rate to 23 % and the share of young NEETs to 19 % by the 
end  of  2013.  Nevertheless,  an  integrated  approach  for  youth  policies  is  still  lacking, 
hampering  the  successful  delivery  of  the  Youth  Guarantee.15  Given  that  almost  one  young 
person in four is neither involved in the labour market nor in the education system, the pool of 
NEETs  is  proposed  as  the  main  target  group.  Two  European  Social  Fund  (ESF)  operations 
launched in the second half of 2012, ‘First Job’ and ‘New Workplace’, are supporting efforts 
to boost youth employment. Both operations address the needs of unemployed people below 
29  years  of  age  by  providing  incentives  to  employers.  The  tangible  outcomes  of  these 
schemes are to be monitored closely, if necessary to refocus resources on those actions which 
generate the highest returns in terms of job creation. Draft amendments to the Labour Code on 
internship  contracts  for  young  graduates  with  secondary  or  tertiary  education  are  at  an 
advanced stage of adoption. The measures planned in this area are relevant, but they do not 
sufficiently  differentiate  among  the  needs  of  young  people  with  diverse  levels  of  education 
and  socio-economic  backgrounds.  Nevertheless,  lasting  ambitious  solutions  to  the  lack  of 
apprenticeships and appropriate transition paths from education to employment are necessary 
in order to ensure a fully adequate response and overcome the systemic weaknesses. 

Only limited progress has been made on improving the performance of the Employment 
Agency  (EA),  as  recommended  in  2012.  In  the  context  of  increased  skill  and  regional 
mismatches  on  the  labour  market,  as  well  as  high  (long-term)  unemployment,  the  efforts  to 
reinforce  the  EA’s  administrative  capacity  had  a  limited  effect  on  the  quality  of  services 
provided  (i.e.  insufficient  provision  of  relevant  information,  lack  of  personalised  approach, 
insufficient number of Roma mediators, and inadequate level of competence at regional/local 
level).  In  addition,  reforms  aimed  at  addressing  unemployment  among  low-skilled  persons 
have not taken place so far. Also, the government has not managed to set up a task force on 
forecasting skills needs. The public work scheme remains ineffective in ensuring (re-)entry to 
the open labour market. Some of these commitments have already been postponed for several 
years and  were  not  sufficiently ambitious in view  of the worsening labour market  situation. 
Active labour market policies fall short of what is needed to prevent structural unemployment 
from  weighing  on  labour  supply  and  pushing  up  wages  in  growing  sectors.  This  makes  it 
more difficult for Bulgaria to reach the Europe 2020 employment target. 

The current  pension reform  aims to boost labour market supply but further measures 
are  needed  to  improve  the  adequacy  of  pensions.  The  government  has  already  advanced 

14  

15  

Drawn up and adopted in response to the Europe 2020 strategy and the Commission’s Youth Opportunity 
Initiative. 
Council Recommendation of 22 April 2013 on establishing a Youth Guarantee (2013/C 120/01) to ensure that all 
young people under the age of 25 receive a good-quality offer of employment, continued education, an 
apprenticeship or a traineeship within four months of becoming unemployed or leaving formal education. 

17 

 
                                                 
some  of  the  pension  reforms  by  increasing  the  statutory  retirement  age  and  the  minimum 
contribution  periods  and  retirement  age  for  specific  schemes  (i.e.  for  police  and  army 
personnel).  The  reforms  are  a  step  in  the  right  direction,  but  increasing  the  number  of 
contributors  is  key  to  improving  pensions.  Both  in  the  short  and  the  longer  term,  as  the 
statutory retirement age increases, efforts to prevent early exit from the labour force should be 
maintained  by  increasing  incentives  to  stay  in  work  and  adopting  measures  to  improve  the 
employability  of  older  workers  and  to  tackle  barriers  employers  may  face  regarding  older 
workers.  Although  changes  have  been  made  to  specific  schemes  as  regards  the  required 
contribution  period  and  retirement  age,  such  pensions  are  still  available  from  what  can  be 
considered a young age (from 42 to 52), particularly given increasing life expectancy. There 
are  still  no  plans  to  bring  the  pensionable  age  for  women  into  line  with  that  for  men. 
According to the available data, disability benefits are increasing and additional measures are 
needed to avoid abuses of the invalidity pension system. 

Education and healthcare 

The adoption of the new School Education Act, as recommended in 2012 is expected for 
the  second  half  of  2013  following  the  constitution  of  a  new  national  assembly.  Pending 
adoption  of  the  new  School  Education  Act,  critical  measures  aimed  at  further  adapting  the 
education  and  training  systems,  such  as  new  curricula  for  general  education,  cannot  be 
implemented. Curricula have been modernised under ESF co-funded projects, with a package 
of  60  curricula  covering  all  subjects  for  general  education  having  already  been  completed. 
The  upgrading  of  the  qualifications  of  pedagogical  specialists  and  teacher  training  are 
delivered  under  a  national  programme  and  a  complementary  training  programme  co-funded 
by  the  ESF.  Another  current  project,  also  co-funded  by  the  ESF,  addresses  disadvantaged 
people’s access to education by assessing their needs and providing support in pilot schools 
for  children  with  disabilities.  There  is  a  need  to  enhance  access  to  inclusive  mainstream 
education for disadvantaged people, including Roma. 

Higher  education  faces  persisting  challenges  in  responding  better  to  labour  market 
needs  (employment  levels  of  young  graduates  deteriorated  to  57.5 %  in  2011)  and  raising 
innovation  potential  in  the  economy.  The  existing  financing  and  structure  of  the  higher 
education  system,  including  the  degree  of  specialisation,  and  suboptimal  incentives  at  the 
institution  level,  as  well  as  for  individual  teachers  and  researchers,  contribute  to  the  gap 
between  educational  output  and  demand.  Bulgaria  has  addressed  the  2012  CSR  on  higher 
education (upper/post-secondary and tertiary) mostly by initiating the process of modernising 
the  curricula  for  higher  and  vocational  education.  Calls  for  proposals  have  been  issued  and 
80 % of all university students are expected to have modernised curricula by the end of 2014. 
Curricula  for  vocational  education  will  be  modernised  in  partnership  with  employers. 
However, there are no further plans to amend the Law on Higher Education. While the efforts 
made show that some of the challenges are being addressed, close attention needs to be paid 
to  adopting  and  enforcing  reform  laws  as  well  as  carefully  monitoring  their  impacts.  The 
reform of higher education needs to be accompanied by effective governance and investment, 
in particular in the professional development of higher education staff, and a comprehensive 
set of education and labour market measures may be necessary to address the skills mismatch 
and labour shortages in some sectors. 

18 

 
The healthcare system is not providing the right combination of services, as a result of 
inefficiencies in the allocation and use of resources. Although projections of public health 
spending due to population ageing do not point to a significant burden on public finances in 
the medium-to-long term, inequalities between social groups and regions as regards access to, 
and quality of, healthcare are long-standing challenges. With one of the highest  numbers of 
hospital  beds  per  capita  among  the  new  Member  States,  Bulgaria  also  faces  enormous 
challenges in the rationalisation and management of the hospital sector. Some steps have been 
taken on the e-Health programme and the National Hospital Map was approved in line with 
the objectives of the 2012 CSR, but implementation remains blocked. A lack of administrative 
capacity in the healthcare sector hampers efforts to establish appropriate strategies and deliver 
high-quality projects, thus limiting the absorption of EU funds. The public financing system 
provides no incentives for efficiency in service provision, with no real competition between 
hospitals.  A  more  transparent  system  of  pricing  in  healthcare  services  would  contribute  to 
growth and competitiveness in the sector. A thorough overhaul of the system is needed if it is 
to function efficiently and address citizens’ health needs. 

Poverty reduction 

The  deterioration  of  social  and  labour  market  conditions  has  taken  Bulgaria  further 
away  from  the  national  target  of  reducing  the  number  of  people  at  risk  of  poverty 
and/or  social  exclusion  by  260 000  persons  (by  2020).  In  February  2013,  the  government 
adopted the 2020 National Strategy for Combating Poverty and Social Exclusion to address 
all challenges (income support, access to services and active labour market measures, access 
to  healthcare  and  education,  etc.)  in  a  comprehensive  manner.  The  Strategy  frames  a  wide-
ranging  set  of  priorities  underpinned  by  relevant  measures  (i.e.  supporting  training  for 
unemployed  persons,  addressing  the  adequacy  of  pensions  and  social  transfers,  providing 
impact  assessments  for  employment,  income,  social,  health  and  education  policies). 
Implementation  of  the  Strategy  rests  on  the  timely  finalisation  of  the  action  plan  and  its 
subsequent funding. 

Social transfers have, so far, had little effect in fighting poverty (in 2011, the shares of the 
population  at  risk  of  poverty  before  and  after  social  transfers  were  27.1 %  and  22.3 % 
respectively). The proportion of the population covered as well as adequacy, replacement and 
take-up  rates  (in  particular  for  means-tested  benefits)  are  low  —  a  further  indication  of  the 
reduced efficiency of social transfers. The activation potential of social benefits in supporting 
those  further  from  the  labour  market  remains  limited.  Although  the  authorities  have,  for 
several years, pursued a welfare adjustment policy focused on increasing the lowest pensions, 
the elderly still face high income-poverty and social-exclusion risks. As to improving access 
to  quality  social  services  for  children  and  the  elderly,  progress  is  not  convincing.  The 
government has proactively continued the transition from residential to community-based care 
for children deprived of parental care and intends to develop similar services for the elderly. 
Restructuring the existing system without having in place a completely developed set of new 
community-based services, together with inadequate staffing, poses risks to the sustainability 
of  reforms  in  this  area.  Moreover,  few  steps  have  been  taken  to  support  access  to  quality, 
affordable  early  childhood  education  and  care  services,  which  have  an  essential  role  in 
supporting children’s development whilst breaking the cycle of disadvantage. 

19 

 
The National Roma Integration Strategy (NRIS) has moved ahead with pilot initiatives 
in several municipalities, but overall implementation is slow. The underlying approach is 
to  support  integrated  interventions  (combining  measures  on  employment,  education,  health 
and housing) at municipal level. On education, measures aim to reduce early-school leaving 
by improving social services in schools and cooperation between schools and parents, as well 
as creating early-childhood infrastructure. However, the action plan accompanying the NRIS 
and detailing concrete measures and budgetary commitments — a necessary precondition for 
putting the Strategy into practice — has yet to be enforced. In addition, despite the fact that 
municipalities have been asked to draw up local action plans to step up Roma integration, the 
link between these plans and the NRIS is missing and local authorities have not been provided 
with additional resources or support to draw up and implement the action plans. NGOs could 
also  be  given  a  greater  role  in  planning  mainstream  measures  with  an  important  impact  on 
Roma.  Finally,  there  is  no  progress  so  far  in  setting  up  a  robust  national  monitoring 
mechanism  for  measuring  the  impact  of  the  NRIS  on  the  situation  of  the  Roma  and 
compliance with the targets that have been set. 

3.4. 

Structural measures promoting growth and competitiveness 

Despite  the  positive  developments  in  terms  of  fiscal  and  financial  sector  stability,  the 
economy  has  not  been  able  to  benefit  fully  from  the  global  rebound  in  the  post-crisis 
environment. Past gains in export market shares have turned out to be short-lived, pointing to 
persisting  concerns  over  cost  and  non-cost  competitiveness.  The  significant  impact  of  large 
labour shedding on apparent labour productivity gains has masked one of the fastest growing 
unit  labour  costs  in  the  EU  (and  one  which  is  above  those  of  Bulgaria’s  industrial 
competitors). As a small open economy, the country depends on foreign financing to fuel its 
output growth. Hence, improving the business environment and infrastructure, particularly as 
regards energy and transport, strengthening innovation and absorbing available EU funds are 
essential to further enhancing Bulgaria’s growth potential. 

In  2012,  the  Council  Recommendation  for  Bulgaria  contained  CSRs  concerning  a 
business-friendly  environment,  enhanced  public  administrative  capacity  and  well-
functioning energy markets. 

Business environment 

Bulgaria  has  made  some  limited  progress  in  improving  the  business  environment. 
Starting a business became easier with a drop in the cost of registration (percentage of income 
per capital) from 1.5 % in 2011 to 1.1 % in 2012.16 The amount of time needed to pay taxes 
was also reduced (from 500 hours in 2011 to 454 in 2012), but it remains much higher than in 
peer  developing  countries  (in  Eastern  Europe).  The  amount  of  time  needed  to  complete 
import/export procedures has improved (from 21/23 days in 2011 to 17/21 days in 2012), but 
insolvency  procedures  remain  cumbersome  in  terms  of  costs,  recovery  rates  and  the  time 
needed to close a business (3.3 years on average). 

16   World Bank (2013): Doing Business: Bulgaria. 

20 

 
 
                                                 
Although  various  action  plans  to  improve  the  business  environment  are  in  progress, 
companies  and  citizens  do  not  yet  see  a  significant  improvement  in  public  services.  In 
June  2012,  Bulgaria  adopted  a  second  Action  Plan  to  reduce  the  administrative  burden  (for 
2012-14).  As  of  end  2012,  49  of  167  measures  were  already  in  force.  Amendments  to  the 
corporate and personal income tax laws (effective from January 2013) are expected to further 
ease the procedures for the declaration and payment of taxes for businesses. In particular, the 
threshold for quarterly advance payments of corporate income tax was increased and a single 
bank account for the payment of both taxes and social security contributions was introduced 
as of 1 January 2013. The scope of e-services provided by the National Revenue Agency has 
been broadened and the use of online forms has increased (the number of tax returns sent via 
the internet has more than doubled since 2009, albeit from low levels). 

Efforts  to  reduce  the  administrative  burden  for  service  providers  could  be  boosted  by 
improvements to the Point of Single Contact (PSC), which is a part of the e-government 
portal.  The potential of the PSC in terms of efficiency  gains, reduced transaction costs  and 
time,  and  savings  for  the  public  administration  is  far  from  being  fully  realised,  as 
implementation  is  highly  unsatisfactory.  In  particular,  the  assignment  of  responsibilities 
within  public  administration  departments  is  unclear  and  there  is  no  proper  system  of 
cooperation  between  competent  authorities.  This  affects  the  availability  and  quality  of 
information  provided  by  the  PSC  and  restricts the  online  completion  of  procedures,  making 
business  set-up  and  operation  cumbersome.  Estimates17  suggest  that  further  procedural 
streamlining  in  PSC  could  contribute  growth  of  up  to  0.2-0.3 %  of  GDP  in  the  medium  to 
long  term.  Additional  growth  could  come  through  a  more  ambitious  implementation  of  the 
Services  Directive,  which,  according  to  an  economic  study,18  has  the  untapped  potential  to 
add  up  to  1.0 %  of  GDP  to  the  impact  of  the  measures  already  implemented.  In  particular, 
Bulgaria  should  focus  on  removing  unjustified  or  disproportionate  requirements  in  some 
sectors  (such  as  construction  and  professional  services),  and  generally  seek  to  simplify 
administrative procedures. 

Research and innovation 

A significant burden on the Bulgarian economy in the global competitive context is the 
low  level  of  research  and  innovation  (R&I).  Both  remain  underfunded,  underperforming 
and  in  need  of  radical  reform.  Although  R&I  expenditure  has  increased  slowly  (to  0.6 %  of 
GDP  in  2011),  it  falls  significantly  short  of  Bulgaria’s  2020  target  of  1.5 %  of  GDP.  The 
funding  of  specific  fields  of  research  is  not  prioritised  in  the  national  strategy  and  more 
funding  needs  to  be  allocated  competitively  (currently  this  applies  to  around  just  10 %  of 
funding)  and  transparently.  The  ranking  of  universities  (launched  in  2010)  provides  the 
government with a tool for performance-based allocations but not enough use is made of it. 

There are only very limited frameworks for supporting collaboration between research 
establishments, universities and the private sector on innovation, and public policies are 
not fostering enough long-term sustainable partnerships between innovators. Following 

17  

18  

The  economic  impact  of  the  Services  Directive:  A  first  assessment  following  implementation,  see 
http://ec.europa.eu/economy_finance/publications/economic_paper/2012/ecp456_en.htm. 
The  economic  impact  of  the  Services  Directive:  a  first  assessment  following  implementation,  see 
http://ec.europa.eu/economy_finance/publications/economic_paper/2012/ecp456_en.htm. 

21 

 
                                                 
the  adoption  (in  2011)  of  the  National  Strategy  for  Scientific  Research  to  2020,  the 
government promised a new Law on Innovation in 2012 to create an effective and up-to-date 
innovation framework. The Law has yet to be adopted. In addition, public policy tends to be 
unpredictable  and  there  is  often  a  lack  of  consistency  between  multi-annual  strategy 
documents. R&I administration is fragmented and the cooperation between the two national 
instruments (the Innovation Fund and the Science Fund) remains inefficient. Further measures 
are  needed  to  facilitate  the  structural  change  towards  knowledge-intensive  industries  and  to 
promote  eco-innovation.  The  first  science  and  technology  park  in  Sofia,  co-financed  by  the 
European Regional Development Fund, deserves support to grow into a core R&I hub. 

Energy, environment and climate change 

High  gas  import  dependency  coupled  with  supply  dependency  on  one  source  and  an 
inefficient  energy  market  (market  concentration  reaches  97 %)  expose  Bulgaria  to 
significant  supply  shocks  and  relatively  high  gas  prices.19  The  gas  interconnections  with 
Romania,  Greece  and  Serbia  are  already  at  various  stages  of  implementation  and  their 
completion  without  further  unnecessary  delays  would  ensure  access  to  new  sources  of  gas 
(Southern  Gas  Corridor)  and  improve  security  of  supply.  Enabling  bi-directional  physical 
capacity  on  cross-border  interconnections  (with  Turkey)  would  not  only  enhance  the 
flexibility of Bulgaria’s gas infrastructure in coping with disruption of the single largest gas 
infrastructure (N-1) but also provide new pricing points and increased gas price competition. 
Expanding  underground  storage  and  interconnection  capacity  would  also  help  to  reduce 
exposure to supply disruptions. So far, the preparation and construction of infrastructure has 
been too slow, and investment continues to be hindered by inappropriate regulation. 

There is wide scope for competition in the electricity and gas sectors. The current public 
provider  system,  with  pre-defined  quota  obligations,  and  electricity  supply  agreements  with 
territorial restrictions on the ‘free’ segment of the market, entrenches market domination. A 
market-based  approach  would  enable  electricity  generators  and  suppliers  to  choose  their 
contracting  parties  freely  and  thus  boost  competition.  Areas  of  particular  concern  for 
improving  the  functioning  of  the  energy  markets  remain  the  lack  of  electricity  and  gas 
exchanges, and the absence of intraday and balancing markets, effective third-party access to 
gas pipelines and virtual reverse flows. Bulgaria needs to safeguard the full independence of 
the  National  Regulatory  Authority  on  the  basis  of  the  third  energy  package  and  ensure  that 
transmission  system  operators  are  certified  as  soon  as  possible.  The  regulator  is  still  not 
provided with the necessary means to fulfil its tasks and responsibilities as defined in the third 
energy  package.  The  gradual  phasing-out  of  regulated  prices  for  electricity  and  natural  gas 
should be accompanied by effective support for vulnerable energy consumers and measures to 
empower  consumers and  help them find  the best offers, while taking into account universal 
service obligations. There are still regulatory obstacles to changing one’s energy supplier and 
transparency  measures.  Limited 
switching  could  be  proactively  supported 
competition  and  obstacles  to  switching  are  reflected  in  poor  consumer  assessment  of  the 

through 

19  

In comparison with other EU Member States, expressed in purchasing power standards (PPS). 

22 

 
                                                 
electricity  and  gas  markets,  with  low  scores  on  the  choice  of  providers  available  in  both 
markets and on the ease of switching providers.20 

While  the  two  main  options  for  reducing  the  high  energy  and  carbon  intensity  of  the 
economy  are  a  reduction  in  the  energy  consumption  and  a  substitution  of  fossil  fuels 
with renewable sources of energy, progress is insufficient in both respects. Bulgaria is the 
most energy- and carbon-intensive economy in the EU and has one of the highest energy trade 
deficits.  As  regards  improving  energy  efficiency,  the  authorities  proposed  a  mix  of  policy 
measures in the second National Energy Efficiency Action Plan (NEEAP, 2011). For public 
buildings  and  industrial  sites,  the  NEEAP  provides  for  a  combination  of  financing  options, 
energy-saving  obligations,  mandatory  audits  and  management  measures.  Many  of  these 
measures have already been adopted but proper enforcement is required. Energy efficiency is 
also  seen  as  part  of  a  long-term  solution  to  high  energy  bills,  which  have  recently  sparked 
widespread public discontent. Public funding for energy efficiency projects in housing estates 
is  held  back  by  unclear  institutional  responsibilities  for  the  maintenance  of  multi-family 
residential buildings and the functioning of house-owners’ associations. An improved policy 
framework  and  greater  use  of  Cohesion  Funds could promote innovative financing schemes 
and thereby increase the efficiency of buildings, district heating and the cogeneration fleet. On 
renewables, the current policy measures are insufficient to reach Bulgaria’s renewable energy 
target  for  2020.  In  addition,  the  authorities  have  recently  set  temporary  grid  access  tariffs 
exclusively for renewable energy producers, with a negative impact on the renewables sector. 

Measures  to  ensure  an  efficient  environmental  infrastructure  have  been  insufficient  so 
far.  Substantial  leakages  from  water  distribution  networks  persist,  together  with  deficient 
urban  waste-water  infrastructure  and  significant  pollution  from  agriculture.  Insufficient 
investment, in particular very low absorption of EU funds, as well as inadequate cost recovery 
of  water  services  and  little  progress  in  reforming  the  water  supply  and  sewage  sectors  are 
barriers  to  improving  water  efficiency.  A  revised  National  Plan  for  Management  of  sludge 
from  urban  waste-water  treatment  plants  is  due  for  adoption  in  2013.  Bulgaria  has  taken 
action  to  improve  waste  management,  inter  alia  with  the  adoption  of  a  new  Law  on  Waste 
Management  in  2012.  Moving  away  from  landfilling  to  the  recycling  of  waste  could  give  a 
major boost to jobs and growth, while contributing to reductions in greenhouse gas emissions. 
However, the 2020 recycling targets are unlikely to be met without further significant efforts. 
A  landfill  tax  on  municipal  waste,  introduced  in  2011,  is  still  too  low  to  provide  a  strong 
incentive  to  move  towards  more  prevention  and  recycling.  The  absorption  of  EU  funds  in 
support  of  a  sustainable  waste  management  infrastructure  remains  sub-optimal,  as  do 
inspections and enforcement, while the potential of extended producer responsibility schemes 
and pay-as-you-throw schemes is largely untapped. 

Despite an acknowledgement of the high energy intensity, particularly in the transport sector, 
a  strategic  approach  to  promote  more  sustainable  means  of  transport,  sustainable  biofuels, 
modernisation  of  the  vehicle  fleet  and  widespread  application  of  the  recently  transposed 
Directive 2009/33/EC are lacking in Bulgaria. This might hinder the market uptake of clean 
and energy-efficient vehicles, mainly in urban areas where energy consumption, greenhouse 

20 

  8th  Consumer  Markets  Scoreboard,  December  2012,  European  Commission,  DG  SANCO, 

http://ec.europa.eu/consumers/consumer_research/editions/cms8_en.htm. 

23 

 
                                                 
gas  emissions  and  pollutant  emissions  are  a  major  concern.  No  specific  efforts  are  reported 
that  would  translate  climate  and  energy  policies  into  sustained  economic  development,  job 
creation and social inclusion. 

Transport and broadband infrastructure 

Available EU funds to co-finance the construction of transport and waterway projects, 
and provide technical assistance, have not been used to their full potential. Efficient and 
well-maintained  transport  networks  help  ensure  improved  access  to  the  EU  single  market, 
enhance growth and competitiveness and attract foreign investment. Currently, administrative 
capacity  remains  insufficient  to  properly  manage  and  maintain  the  road,  rail  and  waterway 
infrastructure. Bulgaria’s poor performance in the transport sector also stems from the modal 
shift  from  rail  to  road  transport,  poor  energy  efficiency  and  the  high  average  age  of  the 
transport  fleet.  Both  national  and  trans-European  network  (TEN)  transport  infrastructure  is 
still  characterised  by  bad  connections  and  insufficient  rehabilitation  and  maintenance.  Also, 
the  inland  navigation  infrastructure  requires  upgrading  to  make  navigability  on  the  Danube 
more reliable. In the case of the railways, the last two decades have seen a serious decline in 
performance  and  loss  of  market  share  for  both  freight  and  passenger  transport.  The  rail 
passenger services need to be better aligned with demand and infrastructure charges should be 
set  and  paid  on  a  non-discriminatory  basis.  Administrative  capacity  in  key  transport  sectors 
and regulatory authorities is too weak to make public services sufficiently effective. 

Bulgaria  is  still  facing  a  digital  divide  in  terms  of  broadband  infrastructure.  In  rural 
areas,  broadband  coverage  is  well  below  the  EU  average.  Overall,  the  level  of  fixed 
broadband take-up is still one of the lowest in the EU. The situation has not improved over the 
past  year  and  is  still  hampered  by  insufficient  technical  capacity  for  planning  and 
implementing  ICT  investments  as  well  as  administrative  obstacles  that  hinder  investment. 
Bulgaria has still not released the 800 MHz band for wireless broadband. A shortage of ICT 
skills and literacy holds back efficiency. The share of population with advanced ICT skills is 
below the EU average, while the percentages of citizens with no or low computer skills are 
among the highest in the EU. 

3.5.  Modernisation of public administration 

Efforts to modernise the public administration have continued, although their impact on 
overall  effectiveness  is  rather  limited.  No  steps  have  been  undertaken  to  advance 
decentralisation and strengthen the role of the administration and efficiency at local level. The 
legislative framework for performance-based remuneration for civil servants was put in place, 
but inconsistencies in human resources management at central level have not been resolved. 
Clear career development paths for public servants are lacking. However, a draft strategy on 
developing  the  administrative  system  over  2013-20  period  has  been  elaborated,  aimed  at 
addressing  policy-making,  performance-based  management,  accountability,  quality  of 
services and administrative burden. 

The  use  of  EU  funds  is  still  hampered  by  unnecessary  bureaucracy  and  a  poor 
understanding of sound financial management. As of January 2013, overall absorption of 
Bulgaria’s European Regional Development Fund, ESF and Cohesion Fund budgets for 2007-
13  stood  at  just  26.7 %,  with  only  three  more  years  available  to  spend  the  remaining  funds. 
Efforts should be stepped up to mobilise the available EU funds, including in support of the 
24 

 
modernisation  and  effective  delivery  of  employment,  social  and  environmental  policies. 
Municipalities have had no serious planning role in the structural and cohesion funds system 
and their capacity as beneficiaries remains insufficient. The large number of appeals against 
outcomes  of  public  tender  procedures  related  to  these  funds,  which  in  the  majority  of  cases 
turn out to be unjustified, has negatively affected their implementation. However, this  trend 
has  to  be  assessed  against  the  right  of  effective  judicial  protection,  which  needs  to  be 
preserved. The main problem to be tackled in this area is weak administrative capacity, which 
slows down the progress of the administrative and the judicial assessment of the appeals. 

The  development  of  e-government  services  is  characterised  by  multiple  projects  with 
little coordination between them and no overall strategic approach. A small number of e-
services have been upgraded to the interaction stage and only in sporadic cases is electronic 
case  management  complete.21  Encouraging  results  are  expected  from  the  ESF  co-funded 
projects of the Bulgarian Customs Agency and the National Revenue Agency. 

Progress  on  public  procurement  is  not  yet  sufficient  to  ensure  the  prevention  of 
irregularities  to  a  satisfactory  level.  New  rules  entered  into  effect  concerning  the  ex-ante 
control of: (i) EU co-financed projects, a very relevant part of public investment in Bulgaria; 
and (ii) contracts awarded on the basis of the negotiated procedure without prior publication. 
However,  the  scope  of  this  ex-ante  control  by  the  Public  Procurement  Agency  is  limited  to 
certain aspects of the procedure only, including which contract notices and the methodology 
for  evaluating  bids  when  the  award  criteria  refer  to  the  most  economically  advantageous 
tender. The ex-ante control should be made more effective by including the prior check of the 
technical specifications as well as the decisions to apply any of the exclusions provided by the 
national  legislation.  In  parallel,  in  the  context  of  the  control,  the  attribution  of  ex-officio 
powers  to  an  appropriate  body  should  be  considered.  The  scope  of  the  ex-post  control  was 
reinforced in 2011 with the introduction of planned ex-officio powers for the State Financial 
Inspection  Agency,  which  is  in  charge  of  ex-post  control,  including  the  application  of 
sanctions, together with the National Audit Office. This was supplemented by ad-hoc ex-post 
investigations by the State Financial Inspection Agency. The results include a more effective 
identification  of  irregularities  and  errors,  and  a  more  targeted  imposition  of  sanctions.  This 
trend towards a reinforcement of the ex-post controls is reflected in the adequate staffing of 
both the State Financial Inspection Agency and the National Audit Office, in contrast to the 
limited administrative capacity in the field of public procurement in general. However the real 
effects of the measures taken need to be confirmed in the coming years. Finally, tools are not 
yet available to submit tenders electronically. As a result, the significant economic benefits of 
e-procurement  (including  greater  transparency,  faster  procedures  and  more  competition)  are 
not being fully exploited. 

Bulgaria  has  taken  a  number  of  steps  to  improve  the  quality  of  justice  and  the 
independence of the judicial system. However, there are still deficiencies regarding the 
independency,  efficiency  and  quality  of  justice  which  have  a  direct  bearing  on  the 
business climate. The Commission reports more broadly on Bulgaria’s progress on judicial 
reform,  the  fight  against  corruption  and  the  fight  against  organised  crime  under  the 

21  

See also information on Points of Single Contact within the meaning of the Services Directive – section 
2.6 ‘Structural measures promoting growth and competitiveness’. 

25 

 
                                                 
Cooperation  and  Verification  Mechanism.  The  latest  report22  in  this  context  shows,  for 
example,  that  there  were  deficiencies  regarding  an  independent  judiciary  which  mirror  the 
results  on  perceived  independence  in  Bulgaria  published  in  the  EU’s  Justice  Scoreboard.  23 
Bulgaria  does  not  perform  regular  evaluations  of  court  activities  nor  has  it  defined  quality 
standards. The insufficient monitoring and evaluation of court activities could make it more 
difficult  to  improve  the  functioning  of  the  justice  system.  On  e-justice  tools  and  electronic 
communications  between  courts  and  parties,  which  can  contribute  to  reducing  delays  and 
costs for citizens  and businesses by  facilitating access to justice, the EU Justice Scoreboard 
rates Bulgaria below the EU average. 

Steps  were  taken  in  July  2012  to  bring  more  transparency  to  elections  and  appointments  to 
top-level positions in the judiciary. In addition, there are concrete plans to promote the use of 
information  and  communication  technologies  in  order  to  improve  the  accessibility  and 
efficiency of justice. Such measures have the potential to improve the confidence of business 
operators in the efficiency and objectivity of civil justice. It is too early, however, to assess in 
full the effectiveness of these reforms, above all as parts have not been implemented yet. 

Stronger efforts are indispensable to tackle corruption, as surveys continue to indicate 
perceived corruption levels significantly above the EU average.24 Greater transparency and 
consistency in the awarding of public tenders and in commercially relevant judicial decisions 
would  build  confidence,  encourage  inward  investment  and  improve  the  efficiency  of 
economic activity. 

22        COM (2012) 411. 
23        COM (2013) 160. 
24     In the 2012-13 Global Competitiveness Report, Bulgaria ranks 87th on diversion of public funds (22nd 
among EU Member States) and 76th on irregular payments and bribes (24th among EU countries). See 
http://reports.weforum.org/global-competitiveness-report-2012-2013/. 

In the 2011 Eurobarometer, 25 % of Bulgarian respondents said they had been asked or expected to pay a 
bribe  over  the  previous  12  months  (compared  with  an  EU  average  of  8 %),  and  57 %  considered  that 
corruption is widespread among officials awarding public tenders (EU average: 47 %). Bulgaria had the 
highest percentage of respondents in the EU who believe there is corruption in the customs service (77 %) 
and judiciary (76 %). See http://ec.europa.eu/public_opinion/archives/ebs/ebs_374_en.pdf. 

26 

 
                                                 
 
4.  OVERVIEW TABLE 

2012 commitments 

Summary assessment 

Country-specific recommendations (CSRs) 

to 

CSR  1:  Continue  with  sound  fiscal  policies  to  achieve 
the MTO by 2012. To this end, implement the budgetary 
strategy  as  envisaged,  ensuring  compliance  with  the 
expenditure  benchmark,  and  stand  ready 
take 
additional  measures  in  case  risks  to  the  budgetary 
scenario  materialise.  Strengthen  efforts  to  enhance  the 
quality of public spending, particularly in the education 
and health sectors and implement a comprehensive tax-
compliance strategy to further improve tax revenue and 
address  the  shadow  economy.  Further  improve  the 
contents  of  the  medium-term  budgetary  framework  and 
the quality of the reporting system. 

CSR  2:  Take  further  steps  to  reduce  risks  to  the 
sustainability  and  to  improve  adequacy  of  the  pension 
system by making the statutory retirement age the same 
for  men  and  women  with  full  career  contributions. 
Introduce stricter criteria and controls for the allocation 
of invalidity pensions. 

CSR  3:  Accelerate  the  implementation  of  the  national 
Youth Employment Initiative. Ensure that the minimum 
thresholds  for  social  security  contributions  do  not 
discourage declared work. Step up efforts to improve the 
Public Employment Service’s performance. To alleviate 
poverty, improve the effectiveness of social transfers and 
the access to quality social services for children and the 
elderly  and  implement  the  National  Roma  Integration 
Strategy. 

the 

budgetary 

requirements. 

legislation  with 

Bulgaria  has  made  substantial  progress  to 
address the CSR. 
Public finances have remained strong in spite of the 
relatively  slow  economic  recovery  and  preliminary 
estimates  indicate  that  the  MTO  was  achieved  in 
2012.  The  recently  adopted new public  finance  law 
further  aligns 
the  Fiscal 
Compact  and  Directive  2011/85/EU  on  minimum 
Bulgaria 
national 
implemented  measures  to  increase  tax-compliance 
and  address  the  shadow  economy,  but  still  lacks  a 
comprehensive  strategy.  Further  efforts  to  put  in 
place  a  coherent  strategy  for  the  health  system, 
including  a  hospital  master  plan  and  more 
transparent  hospital  financing,  will  be  needed  to 
enhance the quality of public spending in the health 
sector. 
Bulgaria has made some progress to address the 
CSR. 
Steps  have  been  taken  in  the  right  direction  but 
further  measures  are  needed 
the 
adequacy  of  the  pension  system,  especially  by 
increasing  the number of  contributors,  discouraging 
early  exit  and  avoiding  abuses  of  the  invalidity 
pension system. 
Bulgaria  has  made  limited  progress  to  address 
the CSR. 
improve  youth 
Comprehensive  measures 
employment  and  fight  poverty  and  social  exclusion 
are  lacking.  The  strategy  on  reducing  poverty  is  in 
the early stages of implementation; an assessment is 
not  feasible  at  this  stage.  The  National  Roma 
Integration Strategy lacks an appropriate budget and 
an  action  plan.  The  government  kept  the  minimum 
thresholds  unchanged  in  2013  for  those  professions 
where employers and employees could not reach an 
agreement,  but  a  review  of  the  system  has  not  yet 
been launched.  

to  guarantee 

to 

CSR  4:  Speed  up  the  reform  of  relevant  legal  acts  on 
schools  and  higher  education  and  of  accompanying 
measures  by 
focusing  on  modernising  curricula, 
improving teacher training, and ensuring effective access 
to  education  for  disadvantaged  groups.  Improve  the 
access  to  finance  for  start-ups  and  SMEs,  in  particular 
those involved in innovative activities. 

Bulgaria  has  made  limited  progress  to  address 
the CSR. 
The  new  Law  on  Pre-School  and  School  Education 
has  still  not  been  adopted  with  an  indicative 
timeframe  for  adoption  being  the  second  half  of 
2013  following  the  constitution  of  a  new  National 
Assembly.  The  complete  package  of  modernised 
curricula  for  general  education  has  been  finalised. 
There are no longer plans to further amend the Law 
on  Higher  Education.  ESF-funded  projects  on 
teacher  training  and  ensuring  effective  access  for 

27 

 
CSR  5:  Step  up  efforts  to  enhance  administrative 
capacity  and  reforms  by  reducing  red  tape  and  the  cost 
of tax compliance and collection, and further improving 
the absorption of EU funds, in particular in road and rail 
transport  and  water  management.  Improve  the  quality 
and  independence  of  the  judicial  system  and  speed  up 
the  introduction  of  e-  government.  Strengthen  public 
administrative  capacity  in  key  transport  sectors  and 
regulatory authorities. 

CSR  6:  Ensure  sound 
implementation  of  public 
procurement  legislation.  Strengthen  the  prevention  of 
irregularities  and  effectively  apply  the  sanctions  under 
the  Public  Procurement  Law  and  those  of  the  Law  on 
Conflict of Interest. 

the 

independence  of 

CSR  7:  Take  measures  to  remove  market  barriers, 
guaranteed  profit  arrangements  and  price  controls. 
Ensure 
and 
distribution  system  operators;  complete  the  market 
design  in  particular  for  the  energy  exchanges  and 
balancing  markets. 
Improve  electricity  and  gas 
connections,  boost  energy  efficiency  and  enhance  the 
capacity to cope with disruptions. 

transmission 

disadvantaged people are ongoing. 
Investments  in  seed  capital  and  support  for  early 
start-up  and  innovative  companies  remain  very  low 
and  there  is  a  risk  of  losing  EU  funds  already  in 
2013.  Joint  European  resources  for  Micro 
to 
Medium  Enterprises  (JEREMIE)  is  operational  but 
actual disbursements are lagging behind. 
Bulgaria has made some progress to address the 
CSR. 
Measures  to  reduce  red  tape  and  the  cost  of  tax 
compliance are steps in the right direction; however, 
their impact on businesses remains to be seen. Lack 
of  expertise  and  coordination  between  relevant 
entities,  and  a 
lack  of  appropriate  broadband 
infrastructure  threaten  the  implementation  of  e-
government.  More  efforts  are  needed  to  strengthen 
capacity  in  the  rail  and  road  sector.  The  use  of  EU 
structural funds remains low (30 %) despite progress 
over recent years. The key to achieving progress on 
judicial reform is to deliver on the recommendations 
under the Cooperation and Verification Mechanism. 
Bulgaria has made some progress to address the 
CSR. 
The  new  rules  for  ex-post  control  contributed  to 
increasing  the  effectiveness  of  controls  and  the 
number of the sanctions applied. This trend needs to 
be confirmed. 
Although  new  rules  on  ex  ante  control  of  EU-
financed  projects  have  been  put  forward  by  the 
authorities, further strengthening of these preventive 
measures  is  needed.  Delays  in  the  treatment  of 
appeals  related  to  public  procurement  for  reasons 
linked  to  the  limited  administrative  and  judicial 
capacity  considerably  affect  the  implementation  of 
Structural and Investment Funds. 
Bulgaria  has  made  limited  progress  to  address 
the CSR. 
The independence of the energy regulator was put in 
doubt by recent developments. The new Energy Law 
sets  out  rules  for  unbundling  in  the  energy  sector, 
but transmission system operators have not yet been 
certified. Progress on market design, retail markets, 
energy  exchange  and  balancing  markets  remains 
very  limited  and  there  is  partial  progress  on  energy 
efficiency, and electricity and gas connections. 

Europe 2020 (national targets and progress) 

Employment rate target (in %) as set in the 2011 NRP: 
76 % 

R&D target (in %) as set in the 2011 NRP: 
1.5 % of GDP  

28 

Employment rate (%) 2011: 63.9 %. No progress has 
been  made  towards  achieving  the  target.  To  reach 
the target, the yearly employment growth rate would 
have  to  be  at  least  0.1 %,  which  is  a  less  positive 
scenario than the government’s expectations. 
Gross domestic expenditure on R&D (in % of GDP) 
2011: 0.6 % 

 
Greenhouse  gas 
target:  +20 % 
(compared  to  2005  emissions,  ETS  emissions  are  not 
covered by this national target) 

(GHG)  emissions 

Renewable energy target: 
16 % 
Share of renewable energy in the transport sector: 10 % 

Indicative  national  energy  efficiency  target  for  2020: 
increase  of  energy  efficiency  with  25%  until  2020 
(leading to 5 Mtoe primary energy savings in 2020) and 
decreasing  the  energy  intensity  by  50%  until  2020 
compared to 2005 levels. 

Progress is not on track and the target is out of reach 
as  R&D  intensity  would  have  to  be  stepped  up 
significantly.  
Change  in  greenhouse  gas  emissions  between  2005 
and  2011:  +6 %.  According  to  the  latest  national 
projections submitted to the Commission and taking 
into  account  existing  measures,  it  is  expected  that 
the  target  will  be  reached:  +12 %  in  2020  as 
compared with 2005 (with a margin of 8 pps). 
Share  of  total  renewable  energy  in  gross  final 
energy consumption was 4.1 % in 2011 and 0.3 % in 
the  transport  sector.  (Source:  Eurostat's  estimate. 
April  2013.  For  2011,  only  formally  reported 
biofuels compliant with Art. 17 and 18 of Directive 
2009/28/EC are included). 
Bulgaria  has  set  an  indicative  national  energy 
efficiency  target  in  accordance  with  Articles  3  and 
24 of the Energy Efficiency Directive (2012/27/EU). 
However, it has neither expressed it, as required, in 
terms  of  an  absolute  level  of  primary  and  final 
energy  consumption  in  2020,  nor  has  provided 
information on the basis on which data this has been 
calculated. 

and 

from 

leavers 

education 

training 
Early 
(percentage  of  the  population  aged  18-24  with  at 
most  lower  secondary  education  and  not  in  further 
education or training) 
2012: 12.5 %. Bulgaria is slightly outperforming the 
EU  average  (12.8 %).  It  has  shown  a  steady 
improvement since 2006 (17.3 %), however Bulgaria 
has taken a step back from 2011 (11.8%). 
Tertiary educational attainment 
2012:  26.9 %.  Bulgaria  is  lagging  behind  the  EU 
average  (34.6 %)  with  minimal  progress  being 
registered  since  2006  (25.3 %)  towards  the  national 
2020  target.  When  compared  to  2011  (27.3%), 
Bulgaria has taken a step back. 
People at risk of poverty or social exclusion in 1 000 
persons (2011): 3 693. 
The target does not appear to be very ambitious but 
limited progress has been made towards achieving it. 

Early school leaving target (in %): 
11 % 

Tertiary education target (in %): 
36 % 

Target on the reduction of population at risk of poverty 
in number of persons: 
Decrease by 260 000 (baseline 1 630 000) 

29 

 
 
5.  ANNEX 

Table I Macroeconomic indicators 

1995-
1999

2000-
2004

2005-
2009

2010

2011

2012

2013

2014

Core indicators
GDP growth rate
Output gap 1
HICP (annual % change)
Domestic demand (annual % change) 2
Unemployment rate (% of labour force) 3
Gross fixed capital formation (% of GDP)
Gross national saving (% of GDP)

General Government (%  of GDP)

Net lending (+) or net borrowing (-)

Gross debt

Net financial assets 

Total revenue 

Total expenditure
  of which: Interest

Corporations (%  of GDP)

Net lending (+) or net borrowing (-)

Net financial assets; non-financial corporations

Net financial assets; financial corporations

Gross capital formation
Gross operating surplus

Households and NPISH (%  of GDP)

Net lending (+) or net borrowing (-)

Net financial assets

Gross wages and salaries

Net property income

Current transfers received
Gross saving

Rest of the world (%  of GDP)

Net lending (+) or net borrowing (-)

Net financial assets

Net exports of goods and services

Net primary income from the rest of the world

Net capital transactions 

Tradable sector

Non tradable sector
  of which: Building and construction sector

Real effective exchange rate (index, 2000=100)

-0.2

-4.0

10.6

1.8

13.3

14.0

14.5

-3.4

87.9

n.a

38.0

41.4

10.2

2.9

n.a

n.a

9.8

24.1

-4.4

n.a

27.8

6.9

12.1

-2.4

-0.7

n.a

1.3

-2.9

0.0

54.7

34.1

4.0

3.0

Terms of trade goods and services (index, 2000=100)
Market performance of exports (index, 2000=100)

91.1

139.2

5.4

0.9

6.4

7.6

16.0

18.3

15.3

0.2

54.4

7.1

40.0

39.8

3.0

4.0

3.0

7.1

4.6

7.7

28.9

14.8

0.3

18.9

7.3

38.4

38.1

1.2

0.4

-2.9

3.0

-4.8

10.3

22.8

22.5

-3.1

16.2

2.7

34.3

37.4

0.7

1.8

-1.3

3.4

0.0

11.3

21.5

22.0

-2.0

16.3

1.3

33.6

35.6

0.7

3.7

-5.7

7.8

n.a

-69.0

-161.3

-192.3

-185.0

0.1

9.7

18.0

-7.3

49.6

16.1

0.2

9.5

-6.8

-4.8

14.7

-8.9

0.6

0.2

51.6

35.6

4.4

93.1

98.7

118.1

-16.5

25.7

30.4

-11.4

62.1

31.5

0.3

13.5

-9.4

-16.9

111.3

-16.3

-3.4

0.4

47.1

37.3

6.7

112.8

103.6

130.7

14.8

17.1

32.2

-5.4

65.8

31.6

0.1

15.3

-2.2

0.3

114.8

-1.9

-2.0

0.7

46.4

39.7

6.2

137.1

108.1

149.9

16.4

n.a

n.a

n.a

74.7

n.a

n.a

n.a

n.a

1.3

98.6

0.0

-3.4

1.2

48.2

38.4

5.6

142.3

108.2

161.5

0.8

-1.3

2.4

3.5

12.3

21.4

22.8

-0.8

18.5

n.a

34.9

35.7

0.9

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

0.2

n.a

-3.7

-2.3

1.3

48.4

37.5

5.1

138.1

106.7

165.2

0.9

-1.6

2.0

2.0

12.5

21.8

21.7

-1.3

17.9

n.a

36.2

37.5

0.9

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

-1.1

n.a

-5.1

-2.2

1.5

n.a

n.a

n.a

139.3

106.3

168.8

1.7

-1.4

2.6

2.7

12.4

22.1

20.8

-1.3

20.3

n.a

36.9

38.2

0.9

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

n.a

-1.9

n.a

-6.3

-2.1

1.7

n.a

n.a

n.a

141.8

106.2

169.2

Notes:
1 The output gap constitutes the gap between the actual and potential gross domestic product at 2005 market prices.
2 The indicator on domestic demand includes stocks.

3  Unemployed persons are all persons who were not employed, had actively sought work and were ready to begin working immediately or within two 
weeks. The labour force is the total number of people employed and unemployed. The unemployment rate covers the age group 15-74.

Source :

Commission services’ 2013 spring forecasts (COM); Convergence programme (CP).

30 

 
 
 
 
 
Table II. Comparison of macroeconomic developments and forecasts 

Real GDP (% change)

Private consumption (% change)

Gross fixed capital formation (% change)

Exports of goods and services (% change)

Imports of goods and services (% change)

Contributions to real GDP growth:

- Final domestic demand

- Change in inventories

- Net exports
Output gap1
Employment (% change)

Unemployment rate (%)

Labour productivity (% change)

HICP inflation (%)

GDP deflator (% change)

Comp. of employees (per head, % change)

Net lending/borrowing vis-à-vis the rest of the 
world (% of GDP)

Note:

2012

2013

2014

2015

2016

COM

0.8

2.6

0.8

-0.4

3.7

1.6

1.9

-2.7

-1.3
-4.3

12.3

5.4

2.4

2.2

5.6

0.2

CP

0.8

2.6

0.8

-0.4

3.7

1.6

1.9

-2.7

-1.8
-4.3

n.a.

5.4

2.4

2.2

5.6

0.0

COM

0.9

1.4

3.0

2.8

4.3

2.1

0.0

-1.2

-1.6
-2.1

12.5

3.1

2.0

2.2

4.4

-1.1

CP

1.0

1.7

0.9

2.0

2.6

1.4

0.1

-0.5

-1.8
-2.4

13.0

3.5

1.8

2.0

4.7

0.3

COM

1.7

2.5

3.1

4.5

5.8

2.8

0.0

-1.2

-1.4
0.2

12.4

1.5

2.6

2.6

4.8

CP

1.8

2.7

2.4

3.9

4.4

2.3

0.0

-0.6

-1.6
0.4

12.8

1.4

2.7

2.4

5.0

CP

2.9

3.9

5.4

4.0

5.1

3.8

0.1

-0.9

-0.9
0.7

12.4

2.2

2.6

2.2

5.3

CP

3.4

4.4

6.1

4.1

5.3

4.4

0.1

-1.1

-0.1
1.1

11.8

2.3

2.6

2.2

5.6

-1.9

-1.5

-1.6

-2.1

1In percent of potential GDP, with potential GDP growth recalculated by Commission services on the basis of the programme scenario 
using the commonly agreed methodology.

Source :

Commission services’ 2013 spring forecasts (COM); Convergence programme (CP).

31 

 
 
Table III. Composition of the budgetary adjustment 

(% of GDP)

2012

2013

2014

2015

2016

Revenue

of which:

- Taxes on production and imports

- Current taxes on income, wealth, etc.

- Social contributions

- Other (residual)

Expenditure

of which:

- Primary expenditure

of which:

Compensation of employees

Intermediate consumption

Social payments

Subsidies

Gross fixed capital formation

Other (residual)

- Interest expenditure

General government balance (GGB)

Primary balance

One-off and other temporary measures

GGB excl. one-offs

Output gap2

Cyclically-adjusted balance2

Structural balance (SB)3

Change in SB

Two year average change in SB 

Structural primary balance3

Change in structural primary balance

Expenditure benchmark

Applicable reference rate4

Deviation5 (% GDP)

Two-year average deviation (% GDP)

Notes:

COM COM

34.9

36.2

CP

37.2

COM1

36.9

CP

36.5

CP

36.5

15.1

15.5

15.6

15.9

15.9

15.9

5.0

7.2

7.6

5.1

7.6

8.0

5.3

7.6

8.7

5.1

7.6

8.2

5.3

7.4

7.9

5.3

7.3

8.0

CP

35.5

16.1

5.3

7.1

7.0

35.7

37.5

38.5

38.2

37.8

37.5

36.3

34.9

36.6

37.4

37.3

37.0

36.7

35.5

8.9

5.8

13.5

0.9

3.3

2.6

0.9

-0.8

0.1

0.0

-0.8

-1.3

-0.4

-0.4

1.2

0.9

0.5

1.14

-1.5

-1.8

8.9

6.1

13.9

0.8

4.1

2.8

0.9

-1.3

-0.4

0.0

-1.3

-1.6

-0.8

-0.8

-0.5

0.4

0.1

-0.4

2.56

-0.1

-0.8

9.0

6.2

14.2

0.9

5.5

1.7

1.1

-1.3

-0.3

0.0

-1.3

-1.8

-0.7

-0.7

-0.3

0.4

0.4

-0.1

2.56

-0.2

-0.9

8.9

6.4

13.8

0.8

4.5

2.9

0.9

-1.3

-0.4

0.0

-1.3

-1.4

-0.9

-0.9

-0.1

-0.3

0.1

0.0

0.73

0.7

0.3

8.7

6.0

14.1

0.9

5.5

1.9

0.8

-1.3

-0.5

0.0

-1.3

-1.6

-0.8

-0.8

-0.1

-0.2

0.0

-0.4

2.11

0.2

0.0

8.7

5.8

13.7

0.8

5.8

1.8

0.8

-1.0

-0.3

0.0

-1.0

-0.9

-0.7

-0.7

0.1

0.0

0.1

0.1

0.73

0.0

0.1

8.3

5.5

13.2

0.8

5.9

1.8

0.8

-0.8

0.0

0.0

-0.8

-0.1

-0.8

-0.8

-0.1

0.0

0.0

-0.1

2.11

0.7

0.4

Change: 
2012-
2016
CP

0.6

1.0

0.3

-0.1

-0.6

0.6

0.6

-0.6

-0.3

-0.3

-0.1

2.6

-0.8

-0.1

0.0

-0.1

0.0

0.0

1.3

-0.4

-0.4

-

-

-0.5

-

-

-

-

1On a no-policy-change basis.
2Output gap (in % of potential GDP) and cyclically-adjusted balance according to the programme as recalculated by Commission services on 
the basis of the programme scenario using the commonly agreed methodology.
3Structural (primary) balance = cyclically-adjusted (primary) balance excluding one-off and other temporary measures.
4 Reference medium-term rate of potential GDP growth. The (standard) reference rate applies from year t+1, if the country has reached its 
M TO in year t. A lower  rate applies as long as the country is adjusting towards its M TO, including in year t.The reference rates applicable 
5 Deviation of the growth rate of public expenditure net of discretionary revenue measures and revenue increases mandated by law from the 

Source :

Convergence programme (CP); Commission services’ 2013 spring forecasts (COM); Commission services’ calculations.

32 

 
 
 
Table IV. Debt dynamics 

(% of GDP)

1
Gross debt ratio
Change in the ratio
Contributions 2 :

1. Primary balance

2. “Snow-ball” effect

Of which:

Interest expenditure

Growth effect

Inflation effect

3. Stock-flow adjustment

Of which:

Cash/accruals diff.

Acc. financial assets

Privatisation

Val. effect & residual

Gap to the debt benchmark

5,6

7
Structural adjustment
To be compared to:
Required adjustment8

Notes:

Average

2007-2011

15.6

-1.1

0.5

-0.4

0.9

-0.3

-0.9

-1.1

2012

18.5

2.2

-0.1

0.4

0.9

-0.1

-0.4

1.9

2012

n.r.

n.r.

n.r.

2013

2014

COM

17.9

-0.7

0.4

0.4

0.9

-0.2

-0.4

-1.5

2013

COM / 
CP3
n.r.

n.r.

n.r.

CP

17.9

-0.6

0.3

0.5

1.0

-0.2

-0.4

-1.4

-1.6

0.2
0.1

CP4

n.r.

n.r.

n.r.

COM

20.3

2.4

0.4

0.2

0.9

-0.3

-0.4

1.8

2015

CP

18.6

-1.8

0.3

-0.3

0.7

-0.6

-0.4

-1.8

-2.4

0.0
0.1

2016

CP

19.9

1.3

0.0

-0.2

0.8

-0.6

-0.4

1.5

0.4

0.0
0.1

CP

20.4

2.5

0.5

0.1

0.8

-0.3

-0.4

1.9

1.9

0.2
0.1

2014

2015

2016

COM / 
CP3
n.r.

n.r.

n.r.

CP4

n.r.

n.r.

n.r.

CP

n.r.

n.r.

n.r.

CP

n.r.

n.r.

n.r.

1End of period.
2The snow-ball effect captures the impact of interest expenditure on accumulated debt, as well as the impact of real GDP growth and inflation on 
the debt ratio (through the denominator). The stock-flow adjustment includes differences in cash and accrual accounting, accumulation of financial 
assets and valuation and other residual effects. 

3 Assessment of the consolidation path set in CP assuming growth follows the COM  forecasts.
4Assessment of the consolidation path set in the CP assuming growth follows the CP projections.
5Not relevant for M ember Sates that were subject to an EDP procedure in November 2011 and for a period of three years following the correction 
of the excessive deficit.

6Shows the difference between the debt-to-GDP ratio and the debt benchmark. If positive, projected gross debt-to-GDP ratio does not comply 
with the debt reduction benchmark.
7Applicable only during the transition period of three years from the correction of the excessive deficit for EDP that were ongoing in November 
2011.
8Defines the remaining annual structural adjustment over the transition period which ensures that - if followed – M ember State will comply with 
the debt reduction benchmark at the end of the transition period, assuming that COM  (SP) budgetary projections for the previous years are 
achieved.

Source :

Convergence programme (CP); Commission services’ spring 2013 forecasts (COM); Commission services’ calculations.

33 

 
 
 
 
 
 
 
 
 
 
Table V Sustainability indicators 

S2

of which:

Initial budgetary position (IBP)

Long-term cost of ageing (CoA)

of which:

Pensions

Health care

Long-term care

Others

S1 (required adjustment)*

of which:

Initial budgetary position (IBP)

Debt requirement (DR)

Long-term cost of ageing (CoA)

S0 (risk for fiscal stress)**

Debt,  % of GDP (2012)

Age-related expenditure, % of GDP (2012)

BG

EU27

No-policy 
change 
scenario 

Programme 
(SCP) 
scenario

No-policy 
change 
scenario 

Programme 
(SCP) 
scenario

1.1

0.7

0.3

-0.4

0.4

0.2

0.2

-2.9

-0.1

-2.2

-0.7

1.1

0.3

0.9

0.2

0.3

0.2

0.2

-3.3

0.0

-2.6

-0.7

3.0

0.8

2.2

1.0

0.9

0.6

-0.4

2.2

0.0

1.9

0.3

1.3

-0.9

2.2

1.1

0.8

0.6

-0.3

0.5

-1.8

1.9

0.4

0.30

18.5

17.6

:

87.0

25.8

Note: 
The 'No-policy change' scenario depicts the sustainability gap under the assumption that the budgetary position evolves 
according to the Commissions' spring 2013 forecast until 2014. The 'Programme (SCP)' scenario depicts the sustainability gap 
under the assumption that the budgetary plans in the programme are fully implemented.
* The required adjustment of the primary balance until 2020 to reach a public debt of 60% of GDP by 2030.              
** The critical threshold for the S0 indicator is 0.44. 

Source : 
Commission services; 2013 stability programme.                                                                                                                               

(% of GDP)

Gross debt as % of GDP - BG - Medium term debt projections

120

100

80

60

40

20

0

0
9
9
1

2
9
9
1

4
9
9
1

6
9
9
1

8
9
9
1

0
0
0
2

2
0
0
2

4
0
0
2

6
0
0
2

8
0
0
2

0
1
0
2

2
1
0
2

4
1
0
2

6
1
0
2

8
1
0
2

0
2
0
2

2
2
0
2

4
2
0
2

6
2
0
2

8
2
0
2

0
3
0
2

COM no-policy change scenario

COM + Shock ( -1p.p. in the short-term/long-term interest rate on maturing and new debt from 2015)

COM + Shock (+1p.p. in the short-term/long-term interest rate on maturing and new debt from 2015)

COM consolidation scenario (0.5% per year on SB) in order to achieve MTO

COM consolidation scenario (1% per year on SB) in order to achieve MTO

SCP scenario

34 

 
 
 
 
Table VI. Taxation indicators 

Total tax revenues (incl. actual compulsory social contributions, % of GDP)

28.5

30.7

32.3

29.0

27.5

27.2

2002

2006

2008

2009

2010

2011

Breakdown by economic function (% of GDP)1
     Consumption

              of which:

              - VAT

              - excise duties on tobacco and alcohol

             - energy

             - other (residual)

     Labour employed

     Labour non-employed

     Capital and business income

     Stocks of capital/wealth
     p.m.  Environmental taxes 2
3
VAT efficiency
     Actual VAT revenues as % of theoretical revenues at standard rate

Note: 

11.9

16.6

17.2

14.7

14.4

14.1

7.3

1.6

2.1

0.9

11.9

0.0

4.2

0.5

2.3

10.7

2.2

2.5

1.1

10.0

0.1

3.2

0.8

2.9

10.9

2.8

3.0

0.4

9.7

0.1

4.3

1.0

3.4

9.0

2.8

2.7

0.3

9.7

0.1

3.7

0.8

3.0

9.2

2.5

2.6

0.2

9.0

0.1

3.2

0.8

2.9

8.7

2.6

2.6

0.3

9.1

0.1

3.1

0.8

2.9

45.1

71.6

75.6

64.1

67.5

64.5

1 Tax revenues are broken down by economic function, i.e. according to whether taxes are raised on consumption, labour or capital. See European Commission 
(2013) Taxation trends in the European Union, for a more detailed explanation.

2 This category comprises taxes on energy, transport and pollution and resources included in taxes on consumption and capital.

3 The VAT efficiency is measured via the VAT revenue ratio. The VAT revenue ratio is defined as the ratio between the actual VAT revenue collected and the 
revenue that would theoretically be raised if VAT was applied at the standard rate to all final consumption. A low ratio can indicate a reduction of the tax base due 
to large exemptions or the application of reduced rates to a wide range of goods and services ('policy gap') or a failure to collect all tax due to e.g. fraud ('collection 
gap'). See European Commission (2012), Tax reforms in EU M ember States, European Economy 6/2012 and Taxation Papers 34/2012 for a more detailed 
explanation.

Source: Commission

35 

 
 
 
Table VII. Financial market indicators 

2008

2009

2010

2011

2012

Total assets of the banking sector (% of GDP)

103.9

108.8

111.2

109.7

114.6

Share of assets of the five largest banks (% of total assets)

Foreign ownership of banking system (% of total assets)
Financial soundness indicators:
              - non-performing loans (% of total loans)1),2)
              - capital adequacy ratio (%) 1)
              - return on equity (%) 1), 3)
Bank loans to the private sector (year-on-year % change)

Lending for house purchase (year-on-year % change)

Loan to deposit ratio

CB liquidity as % of liabilities

Banks' exposure to countries receiving official financial assistance  (% of GDP)

Private debt (% of GDP)
Gross external debt (% of GDP)4)
            - Public
            - Private

Long term interest rates spread versus Bund (basis points)*

Credit default swap spreads for sovereign securities (5-year)*
Notes: 

57.3

83.4

2.5
14.9

23.1

32.4

38.1

58.3

83.7

6.4
17.0

10.2

4.1

8.6

55.2

…

11.9
17.5

7.9

1.6

3.7

52.6

…

14.9
17.5

7.1

3.8

1.3

…

…

16.9
16.7

7.9

3.5

1.0

128.1

126.7

119.5

107.5

102.6

0.0

…

72.6

7.1
72.1

1.4

0.0

…

76.2

8.1
76.6

4.0

0.0

…

74.6

7.9
75.4

3.3

0.0

…

71.9

7.2
71.0

2.7

0.0

…

…

8.7
70.9

3.0

498.6

353.1

259.0

276.0

253.8

1) Latest data (June 2012).
2) Figures from 2008 onwards include foreign bank branches; Excludes loans to credit institutions.
3) After extraordinary items and taxes. Tier 1 capital.
4) Latest data 2012Q3.

* M easured in basis points.

Source :

Bank for International Settlements and Eurostat (exposure to macro-financially vulnerable countries), IMF (financial soundness indicators), 
Commission (long-term interest rates), World Bank (gross external debt) and ECB (all other indicators).

36 

 
 
 
Table VIII. Labour market and social indicators 

Labour market indicators
Employment rate
(% of population aged 20-64)
Employment growth 
(% change from previous year)
Employment rate of women
(% of female population aged 20-64)
Employment rate of men 
(% of male population aged 20-64)
Employment rate of older workers 
(% of population aged 55-64)
Part-time employment (% of total employment, 
15 years and more)
Part-time employment of women  (% of women employment, 15 
years and more)
Part-time employment of men  (% of men employment, 15 years 
and more)
Fixed term employment (% of employees with a fixed term 
contract, 15 years and more)
Transitions from temporary 
to permanent employment
Unemployment rate1 (% of labour force, 
age group 15-74)

Long-term unemployment rate2 (% of labour force)

Youth unemployment rate 
(% of youth labour force aged 15-24)
Youth NEET rate (% of population aged 15-24)

Early leavers from education and training (% of pop. 18-24 with at 
most lower sec. educ. and not in further education or training)
Tertiary educational attainment (% of population 30-34 having 
successfully completed tertiary education)
Formal childcare (from 1 to 29 hours; % over the population less 
than 3 years)
Formal childcare (30 hours or over; % over the population less 
than 3 year)
Labour productivity per person employed (annual % change)

Hours worked per person employed  (annual % change)
Labour productivity per hour worked (annual % change; constant 
prices)

Compensation per employee (annual % change; constant prices)

Nominal unit labour cost growth (annual % change)

Real unit labour cost growth (annual % change)

2007

2008

2009

2010

2011

2012

68.4

70.7

68.8

65.4

62.9

63.0

3.2

63.5

73.4

42.6

1.7

2.1

1.3

5.2

:

6.9

4.1

14.1

19.1

14.9

26.0

2.0

6.0

3.2

0.0

3.1

3.2

9.3

0.1

2.6

65.4

76.1

46.0

2.3

2.7

2.0

5.0

3.1

5.6

2.9

11.9

17.4

14.8

27.1

2.0

9.0

3.5

0.1

3.4

7.3

12.5

3.7

-2.6

64.0

73.8

46.1

2.3

2.7

2.0

4.7

0.8

6.8

3.0

15.1

19.5

14.7

27.9

1.0

7.0

-2.9

-0.1

-2.9

4.9

12.7

8.1

-4.7

61.7

69.1

43.5

2.4

2.6

2.2

4.5

0.6

-3.4

59.8

66.0

44.6

2.4

2.6

2.1

4.1

1.4

-4.4

60.2

65.8

45.8

2.4

2.7

2.2

4.5

:

10.3

11.3

12.3

4.8

21.8

21.8

13.9

27.7

1.0

6.0

5.3

-0.1

5.4

8.2

5.6

2.7

6.3

25.0

21.8

11.8

27.3

0.0

7.0

5.4

-0.1

5.5

3.5

3.0

-1.8

6.8

28.2

21.5

12.5

26.9

:

:

5.4

0.0

5.3

3.3

0.2

-2.0

Notes:
1 Unemployed persons are all persons who were not employed, had actively sought work and were ready to begin working immediately or within 
two weeks. The labour force is the total number of people employed and unemployed.
2 Long-term unemployed are unemployed persons for at least 12 months.

Sources: 
Commission (EU Labour Force Survey and European National Accounts) 

37 

 
 
Expenditure on social protection benefits (% of 
GDP)
Sickness/Health care

Invalidity

Old age and survivors

Family/Children

Unemployment

Housing and Social exclusion n.e.c.

Total

of which:  means tested benefits
Social inclusion indicators
At-risk-of-poverty or social exclusion1 
(% of total population)
At-risk-of-poverty or social exclusion of children 
(% of people aged 0-17)
At-risk-of-poverty or social exclusion of elderly 
(% of people aged 65+)
At-Risk-of-Poverty rate2 (% of total population)
Severe Material Deprivation3  (% of total population)
Share of people living in low work intensity households 4 (% of 
people aged 0-59)

In-work at-risk-of poverty rate (% of persons employed)

Impact of social transfers (excluding pensions) on reducing 
poverty
Poverty thresholds, expressed in national currency at constant 
prices5
Gross disposable income (households)
Relative median poverty risk gap (60% of median equivalised 
income, age: total)

2006

2007

2008

2009

2010

3.59

1.26

7.25

1.02

0.30

0.00

13.77

0.84

3.70

1.13

7.04

1.18

0.28

0.00

13.68

0.67

4.41

1.15

7.40

1.30

0.35

0.00

14.96

0.71

3.92

1.38

8.63

1.99

0.53

0.01

16.67

0.74

4.25

1.40

9.04

2.00

0.60

0.01

17.56

0.79

2007

2008

2009

2010

2011

60.7

60.8

71.1

22.0

57.6

15.9

5.8

13.7

44.8

44.2

65.5

21.4

41.2

8.1

7.5

46.2

47.3

66.0

21.8

41.9

6.9

7.5

49.2

49.8

63.9

20.7

45.7

7.9

7.7

21.0

17.4

23.6

49.1

51.8

61.1

22.3

43.6

11.0

8.2

17.7

1737

2369

2755

2869

2678

30549

37277

41041

41575

:

33.5

27.0

27.4

29.6

30.0

Notes:
1 People at-risk-of poverty or social exclusion (AROPE): individuals who are at-risk-of poverty (AROP) and/or suffering from severe 
material deprivation (SM D) and/or living in household with zero or very low work intensity (LWI).
2 At-risk-of poverty rate (AROP): share of people with an equivalised disposable income below 60% of the national equivalised median 
income. 
3 Share of people who experience at least 4 out of 9 deprivations: people cannot afford to i) pay their rent or utility bills, ii) keep their 
home adequately warm, iii) face unexpected expenses, iv) eat meat, fish, or a protein equivalent every second day, v) enjoy a week of 
holiday away from home once a year, vi) have a car, vii) have a washing machine, viii) have a colour tv, or ix) have a telephone.
4 People living in households with very low work intensity: share of people aged 0-59 living in households where the adults (excluding 
dependent children) work less than 20% of their total work-time potential during the previous 12 months.

5 For EE, CY, M T, SI, SK, thresholds in nominal values in Euros; HICP -  index 100 in 2006 (2007 survey refers to 2006 incomes)

Sources: 
For expenditure for social protection benefits ESSPROS; for social inclusion EU-SILC.

38 

 
 
Table IX. Product market performance and policy indicators 

Performance indicators

2003-
2007

2008

2009

2010

2011

2012

Labour productivity1 total economy (annual 
growth in %)
Labour productivity1 in manufacturing (annual 
growth in %)
Labour productivity1 in electricity, gas, steam and 
air conditioning supply (annual growth in %)
Labour productivity1 in the construction sector 
(annual growth in %)
Total number of patent2 applications per million of 
labour force

Policy indicators

Enforcing contracts 3 (days)
Time to start a business 3 (days)
R&D expenditure (% of GDP)
Tertiary educational attainment 
(% of 30-34 years old population)
Total public expenditure on education 
(% of GDP)

Product market regulation4, Overall
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Retail
(Index; 0=not regulated; 6=most regulated)
Product market regulation4, Network Industries 5
(Index; 0=not regulated; 6=most regulated)

3.5

3.5

-2.9

5.3

5.4

5.4

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

-4.9

-0.8

6.2

5.0

9.3

4.6

-0.3

12.9

7.6

3.6

n.a.

n.a.

2003-
2007
564

32

0.5

2008

2009

2010

2011

2012

564

49

0.5

564

18

0.5

564

18

0.6

564

18

0.6

564

18

n.a.

25.0

27.1

27.9

27.7

27.3

26.6

4.13

4.44

4.58

4.10

n.a.

n.a.

2007

2008

2009

2010

2011

2012

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

Notes:
1 Labour productivity is defined as gross value added (in constant prices) divided by the number of persons employed.
2 Total number of patent applications to the European Patent Office (EPO) per million of labour force
3 The methodologies, including the assumptions, for this indicator are presented in detail on the website 
http://www.doingbusiness.org/methodology. 
4 The methodologies of the product market regulation indicators are presented in detail on the website 
http://www.oecd.org/document/1/0,3746,en_2649_34323_2367297_1_1_1_1,00.html. The latest available product market 
regulation indicators refer to 2003 and 2008, except for Network Industries.
5 Aggregate Energy, Transport and Communications Regulation (ETCR).
*figure for 2007.

Source :
Commission, World Bank - Doing Business  (for enforcing contracts and time to start a business) and OECD (for the 
product market regulation indicators). 

39 

 
 
Table X. Green Growth 

Green Growth performance

Macroeconomic
Energy intensity 
Carbon intensity 
Resource intensity (reciprocal of resource productivity)
Waste intensity 
Energy balance of trade 
Energy weight in HICP
Difference between change energy price and inflation 
Environmental taxes over labour taxes
Environmental taxes over total taxes

Sectoral 

Industry energy intensity 
Share of energy-intensive industries in the economy
Electricity prices for medium-sized industrial users**
Gas prices for medium-sized industrial users***
Public R&D for energy 
Public R&D for the environment
Recycling rate of municipal waste
Share of GHG emissions covered by ETS*
Transport energy intensity
Transport carbon intensity
Security of energy supply
Energy import dependency
Diversification of oil import sources 
Diversification of energy mix
Share renewable energy in energy mix

kgoe / €
kg / €
kg / €
kg / €
% GDP
%
%
ratio
ratio

kgoe / € 
% GDP
€ / kWh
€ / kWh
% GDP
% GDP
ratio
%
kgoe / €
kg / €

%
HHI
HHI
%

2002-
2006

1.14
3.84
7.08
n.a.
0.9%
n.a.
n.a.
24.5%
9.3%

0.84
13.6
n.a.
n.a.
n.a.
n.a.
0.0%
n.a.
n.a.
n.a.

n.a.
n.a.
n.a.
n.a.

2007

2008

2009

2010

2011

0.98
3.41
6.86
n.a.
-7.5%
13
-3.5
32.7%
10.2%

0.71
n.a.
0.06
0.02
0.01%
0.01%
0.0%
57.2%
1.19
3.26

51.3%
0.37
0.27
4.7%

0.91
3.11
6.96
7.60
-8.4%
14
-1.3
35.1%
10.5%

0.62
n.a.
0.06
0.02
0.03%
0.00%
0.0%
57.2%
1.25
3.42

52.1%
0.41
0.27
4.8%

0.84
2.82
5.89
n.a.
-5.3%
13
3.2
30.6%
10.3%

0.46
n.a.
0.06
0.03
0.01%
0.00%
0.0%
55.4%
1.18
3.28

45.3%
0.39
0.26
6.2%

0.86
2.93
n.a.
7.99
-6.1%
14
-3.7
32.2%
10.6%

0.48
n.a.
0.07
0.03
0.00%
0.01%
0.0%
55.5%
n.a.
n.a.

40.1%
0.58
0.27
8.1%

0.91
n.a.
n.a.
n.a.
-6.8%
12
-0.4
n.a.
n.a.

n.a.

n.a.
0.07
0.03
0.00%
0.01%
n.a.
60.5%
n.a.
n.a.

36.6%
n.a.
0.29
7.0%

Country-specific notes: 
The year 2012 is not included in the table due to lack of data.
General explanation of the table items:
Source: Eurostat unless indicated otherwise; ECFIN elaborations indicated below
All macro intensity indicators are expressed as a ratio of a physical quantity to GDP (in 2000 prices)
          Energy intensity: gross inland energy consumption (in kgoe) divided by GDP (in EUR)
          Carbon intensity: Greenhouse gas emissions (in kg CO2 equivalents) divided by GDP (in EUR)
          Resource intensity: Domestic M aterial Consumption (in kg) divided by GDP (in EUR)
          Waste intensity: waste (in kg) divided by GDP (in EUR)
Energy balance of trade: the balance of energy exports and imports, expressed as % of GDP  
Energy weight in HICP: the share of the "energy" items in the consumption basket used in the construction of the HICP
Difference between energy price change and inflation: energy component of HICP, and total HICP inflation (annual %-change)
Environmental taxes over labour or total taxes: from DG TAXUD's database "Taxation trends in the European Union"
Industry energy intensity: final energy consumption of industry (in kgoe) divided by gross value added of industry (in 2005 EUR) 
Share of energy-intensive industries in the economy: share of gross value added of the energy-intensive industries in GDP
Electricity and gas prices medium industrial users: consumption band 500  - 2000M Wh and 10000 - 100000 GJ;  figures excl. VAT.
Recycling rate of municipal waste: ratio of municipal waste recycled over total municipal waste
Public R&D for energy or for the environment: government spending on R&D (GBAORD) for these categories as % of GDP
Share of GHG emissions covered by ETS: based on greenhouse gas emissions as reported by M ember States to EEA (excl LULUCF)
Transport energy intensity: final energy consumption of transport activity (kgoe) divided by transp industry gross value added (2005 EUR)
Transport carbon intensity:  greenhouse gas emissions in transport activity divided by gross value added of the transport sector
Energy import dependency: net energy imports divided by gross inland energy consumption incl. energy consumption international bunkers

Diversification of oil import sources: Herfindahl index (HHI), calculated as the sum of the squared market shares of countries of origin 

Diversification of the energy mix: Herfindahl Index over natural gas, total petrol products, nuclear heat, renewable energies and solid fuels

Share renewable energy in energy mix: %-share in  gross inland energy consumption, expressed in tonne oil equivalents

*Provisional data (15 April 213). Commission Services and EEA.

** For 2007 average of S1 & S2 for DE, LU, NL, FI, SE & UK. Other countries only have S2.

*** For 2007 average of S1 & S2 for IT, NL, FI, SE & UK. Other countries only have S2.

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