Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform Programme of Bulgaria and delivering a Council opinion on the 2020 Convergence Programme of Bulgaria
Date: 2020-05-20
Institutions: European Commission, Secretariat-General
Subjects: Bulgaria, administrative formalities, economic policy, economic recovery, economic reform, epidemic, infectious disease, investment, labour market, stability pact, stability programme

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   EUROPEAN COMMISSION  Brussels, 20.5.2020  COM(2020) 502 final  Recommendation for a COUNCIL RECOMMENDATION on the 2020 National Reform Programme of Bulgaria and delivering a Council opinion on the 2020 Convergence Programme of Bulgaria  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the 2020 National Reform Programme of Bulgaria and delivering a Council opinion 
on the 2020 Convergence Programme of Bulgaria 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 121(2) and 148(4) thereof, 

Having regard to Council Regulation (EC) No 1466/97 of 7 July 1997 on the strengthening of 
the  surveillance  of  budgetary  positions  and  the  surveillance  and  coordination  of  economic 
policies1, and in particular Article 9(2) thereof, 

Having  regard  to  Regulation  (EU)  No  1176/2011  of  the  European  Parliament  and  of  the 
Council  of  16  November  2011  on  the  prevention  and  correction  of  macroeconomic 
imbalances2, and in particular Article 6(1) thereof,  

Having regard to the recommendation of the European Commission, 

Having regard to the resolutions of the European Parliament, 

Having regard to the conclusions of the European Council, 

Having regard to the opinion of the Employment Committee, 

Having regard to the opinion of the Economic and Financial Committee, 

Having regard to the opinion of the Social Protection Committee, 

Having regard to the opinion of the Economic Policy Committee, 

Whereas: 

(1) 

(2) 

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On  17  December  2019,  the  Commission  adopted  the  Annual  Sustainable  Growth 
Strategy,  marking  the  start  of  the  2020  European  Semester  for  economic  policy 
coordination. It took due account of the European Pillar of Social Rights, proclaimed 
by the European Parliament, the Council and the Commission on 17 November 2017. 
On  17  December  2019,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the 
Commission also adopted the Alert Mechanism Report, in which it identified Bulgaria 
as one of the Member States for which an in-depth review would be carried out.  
The 2020 country report for Bulgaria3 was published on 26 February 2020. It assessed 
Bulgaria’s  progress  in  addressing  the  country-specific  recommendations  adopted  by 
the Council on 9 July 20194, the follow-up given to the recommendations adopted in 
previous years and Bulgaria's progress towards its national Europe 2020 targets. It also 

OJ L 209, 2.8.1997, p. 1. 
OJ L 306, 23.11.2011, p. 25. 
SWD(2020) 501 final. 
OJ C 301, 5.9.2019, p. 117–122. 

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(4) 

(5) 

(6) 

included  an  in-depth  review  under  Article  5  of  Regulation  (EU)  No  1176/2011,  the 
results of which were also published on 26 February 2020. The Commission’s analysis 
led  it  to  conclude  that  Bulgaria  is  not  experiencing  macroeconomic  imbalances 
anymore.  In  the  past  years,  vulnerabilities  in  the  financial  sector  were  coupled  with 
high indebtedness and non-performing loans in the corporate sector. Imbalances are no 
longer  identified  because  consistent  policy  action  and  a  favourable  macroeconomic 
environment have reduced risk and vulnerabilities further. 

On 11 March 2020, the World Health Organization officially declared the COVID-19 
outbreak  a  global  pandemic.  It  is  a  severe  public  health  emergency  for  citizens, 
societies  and  economies.  It  is  putting  national  health  systems  under  severe  strain, 
disrupting  global  supply  chains,  causing  volatility  in  financial  markets,  triggering 
consumer  demand  shocks  and  having  negative  effects  across  various  sectors.  It  is 
threatening  people’s  jobs,  their  incomes  and  companies’  business.  It  has  delivered  a 
major  economic  shock  that  is  already  having  serious  repercussions  in  the  European 
Union. On 13 March 2020, the Commission adopted a Communication5 calling for a 
coordinated economic response to the crisis, involving all actors at national and Union 
level. 

Several Member States have declared a state of emergency or introduced emergency 
measures.  Any  emergency  measures  should  be  strictly  proportionate,  necessary, 
limited in time, and in line with European and international standards. They should be 
subject to democratic oversight and independent judicial review. 

On  20  March  2020,  the  Commission  adopted  a  Communication  on  the  activation  of 
the general escape clause of the Stability and Growth Pact6. The clause, as set out in 
Articles 5(1), 6(3), 9(1) and 10(3) of Regulation (EC) 1466/97 and Articles 3(5) and 
5(2) of Regulation (EC) 1467/97, facilitates the coordination of budgetary policies in 
times  of  severe  economic  downturn.  In  its  Communication,  the  Commission  shared 
with the Council its view that, given the expected severe economic downturn resulting 
from the COVID-19 outbreak, the current  conditions  permit activation of the clause. 
On  23  March  2020,  the  Ministers  of  Finance  of  the  Member  States  agreed  with  the 
assessment of the Commission. The activation of the general escape clause allows for 
a temporary departure from the adjustment path towards the medium-term budgetary 
objective,  provided  that  this  does  not  endanger  fiscal  sustainability  in  the  medium 
term. For the corrective arm, the Council may also decide, on a recommendation from 
the  Commission,  to  adopt  a  revised  fiscal trajectory.  The  general escape  clause  does 
not suspend the procedures of the Stability and Growth Pact. It allows Member States 
to depart from the budgetary requirements that would normally apply while enabling 
the  Commission  and  the  Council  to  undertake  the  necessary  policy  coordination 
measures within the framework of the Pact.  

Continued  action  is  required  to  limit  and  control  the  spread  of  the  pandemic, 
strengthen  the  resilience  of  the  national  health  systems,  mitigate  the  socio-economic 
consequences through supportive measures for business and households and to ensure 
adequate  health  and  safety  conditions  at  the  workplace  with  a  view  to  resuming 
economic  activity.  The  Union  should  fully  use  the  various  tools  at  its  disposal  to 
support  Member  States’  efforts  in  those  areas.  In  parallel,  Member  States  and  the 
Union should work together to prepare the measures necessary to get back to a normal 
functioning of our societies and economies and to sustainable growth, integrating inter 

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COM(2020) 112 final. 
COM(2020) 123 final. 

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(8) 

(9) 

alia the  green  transition and  the  digital  transformation,  and  drawing  all  lessons  from 
the crisis. 

The  COVID-19  crisis  has  highlighted  the  flexibility  that  the  single  market  offers  to 
adapt  to  extraordinary  situations.  However,  in  order  to  ensure  a  swift  and  smooth 
transition to the recovery phase and the free movement of goods, services and workers, 
exceptional measures  that  prevent  the  single  market  from  functioning  normally  must 
be removed as soon as they are no longer indispensable. The current crisis has shown 
the  need  for  crisis  preparedness  in  the  health  system,  which  include  in  particular 
improved  purchasing  strategies,  diversified  supply  chains  and  strategic  reserves  of 
essential  supplies.  They  are  key  elements  for  developing  broader  crisis  preparedness 
plans. 
The  Union  legislator  has  already  amended  the  relevant  legislative  frameworks7  to 
allow  Member  States  to  mobilise  all  unused  resources  from  the  European  Structural 
and  Investment  Funds  so  they  can  address  the  exceptional  effects  of  the  COVID-19 
pandemic. Those amendments will provide additional flexibility, as well as simplified 
and streamlined procedures. To alleviate cash flow pressures, Member States can also 
benefit  from  a  100%  co-financing  rate  from  the  Union  budget  in  the  2020-2021 
accounting year. Bulgaria is encouraged to make full use of those possibilities to help 
the individuals and sectors most affected by the challenges. 

The  socio-economic  impacts  of  the  pandemic  are  likely  to  be  unevenly  distributed 
across  Bulgarian  regions  due  to  different  specialisation  patterns,  in  particular  in 
regions  markedly  relying  on  face-to-face  business  to  consumers.  This  entails  a 
substantial  risk  of  widening  regional  disparities  within  Bulgaria,  aggravating  the 
already observed trend of widening disparities between the capital and the rest of the 
country  and  between  urban  and  rural  areas.  Combined  with  the  risk  of  a  temporary 
unravelling of the convergence process between Member States, the current situation 
calls for targeted policy responses. 

(10)  On  30  April  2020,  Bulgaria  submitted  its  2020  National  Reform  Programme  and  its 
2020 Convergence Programme. In order to take account of their interlinkages, the two 
programmes have been assessed at the same time. 

(11)  Bulgaria is currently in the preventive arm of the Stability and Growth Pact.  

(12) 

In  its  2020  Convergence  Programme,  the  government  plans  the  headline  balance  to 
deteriorate from a surplus of 2,1% GDP in 2019 to a deficit of 3,1% of GDP in 2020. 
After decreasing to 20,4 % of GDP in 2019, the general government debt-to-GDP ratio 
is  expected  to  increase  to  25,8%  in  2020  according  to  the  2020  Convergence 
Programme.  The  macroeconomic  and  fiscal  outlook  is  affected  by  high  uncertainty 
due to the COVID-19 pandemic. 

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Regulation (EU) 2020/460 of the European Parliament and of the Council of 30 March 2020 amending 
Regulations  (EU)  No  1301/2013,  (EU)  No  1303/2013  and  (EU)  No  508/2014  as  regards  specific  measures  to 
mobilise  investments  in  the  healthcare  systems  of  Member  States  and  in  other  sectors  of  their  economies  in 
response to the COVID-19 outbreak (Coronavirus Response Investment Initiative) (OJ L 99, 31.3.2020, p. 5) and 
Regulation  (EU)  2020/558  of  the  European  Parliament  and  of  the  Council  of  23  April  2020  amending 
Regulations  (EU)  No  1301/2013  and  (EU)  No  1303/2013  as  regards  specific  measures  to  provide  exceptional 
flexibility for the use of the European Structural and Investments Funds in response to the COVID-19 outbreak 
(OJ L 130, 24.4.2020, p. 1). 

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(13) 

In response to the COVID-19 pandemic, and as part of a coordinated Union approach, 
Bulgaria has adopted budgetary measures to increase the capacity of its health system, 
contain  the  pandemic,  and  provide  relief  to  those  individuals  and  sectors  that  have 
been  particularly  affected.  According  to  the  2020  Convergence  Programme,  those 
budgetary measures amounted to 1,3% of GDP. The measures include higher spending 
on  health  care  and  security  services  and  employment  support  scheme  for  distressed 
sectors. In addition, Bulgaria has announced measures that, while not having a direct 
budgetary  impact,  will  contribute  to  support  liquidity  to  businesses,  which  the  2020 
Convergence  Programmes  estimates  at  0,6%  of  GDP.  Those  measures  include 
guarantees  by  the  State-owned  Bulgarian  Development  Bank  and  tax  deferrals  for 
corporate income  taxes.  Overall, the measures taken by Bulgaria are in line with the 
guidelines  set  out  in  the  Commission  Communication  on  a  coordinated  economic 
response  to  the  COVID-19  outbreak.  The  full  implementation  of  those  measures, 
followed  by  a  refocusing  of  fiscal  policies  towards  achieving  prudent  medium-term 
fiscal  positions  when  economic  conditions  allow,  will  contribute  to  preserving  fiscal 
sustainability in the medium term. 

(14)  Based on the Commission 2020 spring forecast under unchanged policies, Bulgaria’s 
general government deficit is forecast at 2,8% of GDP in 2020 and 1,8% in 2021. The 
general government debt ratio is projected to remain below 60% of GDP in 2020 and 
2021.  

(15)  On 20 May 2020, the Commission issued a report prepared in accordance with Article 
126(3)  of  the  Treaty  due  to  Bulgaria’s  planned  breach  of  the  3%  of  GDP  deficit 
threshold  in  2020.  The report  concluded,  following  an  assessment  of  all  the relevant 
factors,  that  the  deficit  criterion  as  defined  in  the  Treaty  and  in  Regulation  (EC) No 
1467/1997 is fulfilled. 

(16)  On 13 March 2020, Bulgaria declared a state of emergency from 13 March 2020 to 13 
April 2020; this was subsequently extended to 13 May 2020 and then to 14 June 2020. 
On 6 April 2020, the Parliament adopted a proposal for amendment of the 2020 state 
budget, presented by the government. The new budget foresees a deficit of BGN 3,5 
billion (2,9% of GDP), due to the increased spending for crisis-related measures and 
the expected reduction in revenues of 2.4 billion. A fivefold increase of the ceiling of 
new  debt  the  government  can  issue  is  foreseen,  from  BGN  2.2  billion  to  BGN  10 
billion.    Overall,  Bulgaria  mobilised  a  financial  package  of  over  BGN  870  million 
under  several  operational  programmes  financed  by  the  European  Structural  and 
Investment Funds for the period 2014-2020 to support the health system and address 
the socio-economic consequences of the pandemic.  

(17) 

In  response  to  the  crisis,  Bulgaria  introduced  an  employment  support  measure  by 
which  the  state  commits  to  pay  60%  of  the  workers’  income  and  of  the  associated 
social security contribution for a period up to three months, provided that the employer 
pays  the  difference  and  commits  to  keep  the  workers  in  employment.  Eligible 
companies  include  those  directly  affected  by  restrictions  imposed  due  to  the  state  of 
emergency. Companies from other sectors, which manage to prove a 20% decline in 
revenue in March 2020 compared to March 2019, are also eligible. 

(18)  The capital of the Bulgarian Development Bank was increased to support the liquidity 
in the economy. BGN 500 million were allocated for portfolio guarantees to banks to 
provide more flexible business loan conditions to businesses, while BGN 200 million 
were  for  guarantees  for  interest-free  loans  up  to  BGN  4,500  for  people  placed  on 
unpaid leave by their companies or self-employed. The Bulgarian Development Bank 

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will also implement a EUR 100 million guarantee scheme for loans to SMEs financed 
by  Operation  Programme  “Innovation  and  Competitiveness”  under  the  European 
Regional Development Fund. The Fund Manager of Financial Instruments in Bulgaria 
re-examined  its  portfolio  and  is  tailoring  its  enterprise  support  instruments  to  the 
current  economic  reality.  The  Bulgarian  National  Bank  introduced  a  package  of 
measures of BGN 9,3 billion, which aim at maintaining the resilience of the banking 
system and enhancing its flexibility, to reduce the negative effects of the constraints on 
citizens and businesses. 

(19)  Bulgaria’s  economy  was  hit  hard  by  the  crisis,  which  affected  both  services  and 
manufacturing sectors. The negative impact was aggravated by declining demand and 
supply,  and  disruptions  in  the  global  value  chains.  The  measures  taken  by  the 
government  to  face  the  emergency  can  help  mitigate  the  consequences  of  the  crisis, 
but their prompt and effective implementation will be key for preserving employment 
and  improving  the  liquidity  of  companies,  especially  SMEs,  and  of  independent 
workers. In the process of designing and implementing these measures the resilience 
of  the  banking  sector  needs  to  be  taken  into  account.  In  line  with  the  Commission 
Guidelines,  Bulgaria  lifted  export  bans  on  personal  protective  equipment  and  set-up 
“green lanes” for fast checks at border crossings.  

(20)  COVID-19  put  an  additional  burden  on  the  Bulgarian  health  system,  already 
characterised  by  limited  accessibility  stemming  from  low  public  financing,  limited 
health  insurance  coverage,  a  low  number  of  nurses,  and  an  uneven  geographical 
distribution  of  health  workers.  There  is  therefore  scope  for  strengthening  the  overall 
resilience, accessibility and capacity of the Bulgarian health system . Providing more 
care (general and specialist) in ambulatory settings, also with use of teleconsultations, 
would  release  hospitals,  while  testing  and  treatment  should  be  available  for  all, 
independently  of  health  insurance  status.  Proper  access  to  health  workers  and  their 
services should be ensured over the whole territory. Integration of primary, long-term 
and community care is crucial for the elderly and the most vulnerable groups. 

(21)  According to the Commission forecast,  unemployment is expected to rise to 7,0% in 
2020  and  decrease  to  5,8%  in  2021.  Since  the  beginning  of  the  state  of  emergency, 
unemployment  has  rapidly  increased  in  the  hospitality  industry,  in  large  cities  and 
among people with up to secondary education. The government has taken measures to 
protect  employment,  notably  short-time  work  schemes,  which  should  be  swiftly 
implemented  and  further  enhanced.  In  cooperation  with  social  partners,  the  current 
context  warrants  extensive  support  to  employers  and  workers,  including  the  self-
employed, to prevent further job losses. The capacity and the measures implemented 
by  the  National  Employment  Agency  will  need  to  be  reinforced,  to  respond  to  the 
adverse labour market effects. Further efforts in activation, up-skilling and re-skilling 
will be instrumental to bring people back to work, while preparing the labour force for 
the challenges and opportunities resulting from digitisation. The crisis might also have 
a significant impact on workers in informal employment, with limited access to health 
services  and  social  protection.  Targeted  policy  measures  could  prevent  unprotected 
workers and the most vulnerable groups falling deeper into poverty and improve their 
livelihoods during the recovery. 

(22)  The  COVID-19  crisis  disproportionally  affects  vulnerable  groups  and  exacerbates 
existing  social  challenges.  The  share  of  people at  risk  of  poverty  or  social exclusion 
was already high before the crisis, especially among children, the elderly, people with 
disabilities  and  Roma,  while  social  transfers  managed  to  reduce  poverty  only  to  a 
limited  extent.  Income  inequality  was  one  of  the  highest  in  the  EU  and  the  tax  and 

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benefit systems showed one of the weakest impacts on reducing it. The crisis requires 
measures to fix the gaps already identified in previous years, and in particular in the 
minimum  income  scheme,  which  is  one  of  the  least  adequate  in  the  EU  for  lifting 
recipients  out  of  poverty.  Issues  such  as  ensuring  social  protection  for  all,  including 
non-standard  workers,  self-employed  and  low-income  households,  ensuring  income 
support,  food  and  adequate  social  services,  as  well  as  providing  emergency  housing 
and  support  for  homeless  persons,  remain  relevant.  The  reform  of  social  services 
would  help  stabilising  the  system,  while  a  stronger  cooperation  between  health  and 
social  services  would  allow  reaching  out  further  to  those  unable  to  take  care  of 
themselves  and  people  with  disabilities.  Many  Roma  households,  already  in  deep 
poverty prior to the crisis, are in need of mediation services and essential services and 
support. 

(23)  Enhanced provision of education and training services and a better skilled workforce 
would  also  strongly  underpin  the  recovery  and  promote  inclusive  and  sustainable 
growth  in  the  medium  term.  There  is  still  scope  for  improving  the  quality,  labour 
market relevance and inclusiveness of education and training in Bulgaria. Bulgaria is 
among  the  Member  States  in  which  socio-economic  background  has  the  strongest 
influence  on  learning  outcomes.  Roma  inclusion  in  education  remains  a  challenge, 
with early school leaving being particularly high among Roma and in rural areas. The 
overall level of digital skills is low among the population (aged 16-74), including also 
for the young people (aged 16-19). Improving digital skills, for example through more 
digitally aligned degrees and curricula, could help to adapt to labour market changes 
produced by digitalisation and to the need for digital remote work. At the same time, 
there are still 11% of students who do not have computers and/or internet access and 
2000 teachers without computers. The current remote learning situation risks therefore 
to worsen the already high inequalities in education and training: improving the digital 
knowledge of all students and their access to adequate technical infrastructure would 
have  a  positive  long-lasting  impact  on  their  access  to  education,  in  particular  for 
vulnerable groups, including Roma, thus helping to reduce their high drop-out rates. 

(24)  The  crisis  highlighted  the  strategic  importance  of  an  efficient  public  administration 
and  of  a  well-functioning  digital  government,  including  e-health  and  e-procurement. 
Reforms  in  this  field  have  been  supported  by  the  EU,  but  their  implementation  is 
progressing  too  slowly  and  this  negatively  affected  the  effectiveness  of  the  public 
sector  during  the  lockdown  period.  Bulgaria  is  therefore  lagging  behind  in  the 
provision  of  e-services,  and  their  uptake  by  citizens  and  businesses  should  be 
encouraged. Issues related to  cybersecurity and security of critical infrastructure will 
also  need  to  be  fully  addressed.  Looking  forward,  an  effective  public  administration 
will  be  key  for  ensuring  the  timely  and  effective  implementation  of  the  recovery 
measures.  Cooperation  and  coordination  at  all  levels  of  government,  including  on  
public  contracts  and  concessions,  as  well  as  on  market  surveillance,  remain 
particularly  important.  A  stronger  regulatory  predictability  and  stability,  effective 
control  over  policy  implementation,  and  a  reduction  of  the  administrative  burden, 
would improve the business environment and promote investment, positively affecting 
the speed of the recovery.  

(25)  To  foster  the  economic  recovery,  it  will  be  important  to  front-load  mature  public 
investment  projects  and  promote  private  investment,  including  through  relevant 
reforms. The crisis brought further up the importance of digitalisation and innovation, 
where  Bulgaria,  and  in  particular  its  small  and  medium-sized  enterprises  (SMEs),  is 
performing  well  below  the  EU  average.  One  significant  instance  of  this  issue  is  the  

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spectrum planned to be allocated in the 5G pioneer bands, which falls short of what is 
required to enable timely and effective provision of 5G services. The known issues in 
the  research  and  higher  education  system,  such  as  fragmentation,  low  funding  and 
limited knowledge and technology transfer, still need to be tackled. At the same time, 
Bulgaria  is  the  most  resource,  energy,  and  greenhouse  gas  emission-intensive 
economy  in  the  EU,  with  important  investment  needs  in  the  fields  of  energy  and 
decarbonisation  to  facilitate  the  transition  to  climate  neutrality,  as  described  in 
Bulgaria’s National Energy and Climate Plan.  

(26)  Transformation  efforts  for  tackling  Bulgaria’s  high  energy  intensity,  overreliance  on 
fossil fuels, and inefficient use of energy and resources are at a very initial stage. The 
National Energy and Climate Plan stresses Bulgaria’s commitment to decarbonise its 
economy  by  2050  in  the  context  of  the  European  Green  Deal,  but  also  states  the 
intention to keep Bulgaria’s reliance on domestic lignite sources for 2050 and beyond. 
The coverage and quality of transport infrastructure in Bulgaria remains below the EU 
average  and  the  Trans-European  Transport  Network  is  still  incomplete.  The 
multimodal  platforms  network,  some  rail  and  road  sections,  and  the  European  rail 
traffic management systems and intelligent transport systems remain underdeveloped. 
Significant environmental issues need to be tackled, as they affect sustainable growth 
and created additional health risks during the COVID-19 crisis. Bulgaria is among the 
Member  States  with  the  largest  incidence  of  pollution-related  deaths,  and  waste 
management  and  compliance  with  urban  wastewater  collection  and  treatment 
obligations continue to be a challenge. The programming of the Just Transition Fund 
for the period 2021-2027 could help Bulgaria to address some of the challenges posed 
by the transition to a climate neutral economy, in particular in the territories covered 
by Annex D to the country report8. This would allow Bulgaria to make the best use of 
that fund. 

(27)  Having  a  properly  functioning  insolvency  framework  will  be  important  for  the 
recovery  of  the  real  economy  in  the  aftermath  of  the  COVID-19  crisis,  which  might 
bring a significant increase of bankruptcies.  Such framework would also facilitate a 
their  further 
more  rapid  resolution  of  non-performing 
accumulation.  At  the  same  time,  the  ineffectiveness  of  the  insolvency  framework 
results  in  slow  and  costly  insolvency  proceedings.  In  June  2019,  the  insolvency 
framework roadmap was adopted and identified relevant gaps. Bulgaria has started its 
implementation  and  is  preparing  follow  up  steps,  including  legislative  changes  and 
capacity building activities. 

limiting 

loans, 

thus 

(28)  Bulgaria  adopted  several  laws  in  2019  aiming  at  transposing  the  fourth  and  the  fifth 
Anti-Money  Laundering  Directives  whose  implementation  is  pending.  The  recently 
completed National Risk Assessment shows weaknesses that need urgent mitigation to 
prevent  money  laundering  and  terrorist  financing.  The  risks  linked  to  citizenship  by 
investment  scheme  programs  and  by  virtual  assets  have  not  been  properly  assessed 
yet. Actions need to be designed and implemented to deliver an effective aplication of 
the  anti-money  laundering  framework  by  obliged  entities.  The  effectiveness  of 
implementation and enforcement of the anti-money laundering framework have been 
limited and the use of financial intelligence has been insufficient.  

(29)  While the present recommendations focus on tackling the socio-economic impacts of 
the  pandemic  and  facilitating  the  economic  recovery,  the  2019  country-specific 
recommendations adopted by the Council on 9 July 2019 also covered reforms that are 

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to 

long-term 

to  address  medium- 

essential 
structural  challenges.  Those 
recommendations remain pertinent and will continue to be monitored throughout next 
year’s  European  Semester  annual  cycle.  That  also  applies  to  recommendations 
regarding investment-related economic policies. The latter recommendations should be 
taken  into  account  for  the  strategic  programming  of  cohesion  policy  funding  post-
2020, including for mitigating measures and exit strategies with regard to the current 
crisis. 

(30)  Bulgarian banks are overall profitable and well-capitalised. Despite some declines in 
recent  years,  the  ratio  of  non-performing  loans  (NPLs)  remains  at  7.2%  in  the  third 
quarter  of  2019  among  the  highest  in  the  EU,  notably  by  non-financial  corporations 
and  for  domestically-owned  banks,  whereby  further  efforts  to  promote  a  functioning 
secondary NPL market remain important. NPL provisioning has been on a downward 
path  since  late  2018,  accompanied  sometimes  by  under-provisioning  of  the  existing 
NPLs with long overdue. The comprehensive assessment conducted by the European 
Central Bank revealed the need to increase capital in two banks. The re-capitalization 
is  being  finalised.  Increased  provision  of  liquidity  by  banks  to  mitigate  the  impact 
COVID-19  crisis  and  relaunch  the  economic  growth  should  be  coupled  with  banks’ 
application  of  credit  risk  assessment  and  prudent  credit  standards,  sound  valuation 
practices and accurate reporting of any deterioration in asset quality.   

(31)  The Commission monitors Bulgaria’s progress in the fields of judicial reform and the 
fight against corruption in the context of the cooperation and verification mechanism 
(CVM). The latest CVM report of October 2019 noted that progress made by Bulgaria 
is sufficient to meet Bulgaria's commitments made at the time of its accession to the 
EU.  Bulgaria  carried  out  an  extensive  reform  of  its  anti-corruption  legal  framework, 
however,  a  solid  track  record  of  final  convictions  in  high-level  corruption  cases  is 
needed to build public trust. Furthermore, a number of challenges persist, in particular 
ensuring  effective  criminal  investigations,  rebalancing  the  workload  among  courts, 
and  streamlining  local  prosecution  service  offices.  These  issues  are  the  subject  of 
monitoring under the cooperation and verification mechanism. Under this mechanism, 
the Commission continues to monitor judicial reform and the fight against corruption 
in  Bulgaria.  These  areas  are 
the  country-specific 
recommendations  for  Bulgaria,  but  are  relevant  for  developing  a  positive  socio-
economic environment in the country. 

therefore  not  covered 

in 

(32)  The  European  Semester  provides  the  framework  for  continuous  economic  and 
employment  policy  coordination  in  the  Union,  which  can  contribute  to  a  sustainable 
economy.  Member  States  have  taken  stock  of  progress  regarding United  Nations’ 
Sustainable  Development  Goals  (SDGs)  implementation  in  their  2020  National 
Reform  Programmes.  By  ensuring  the  full  implementation  of  the  recommendations 
below, Bulgaria will contribute to the progress towards the SDGs and to the common 
effort of ensuring competitive sustainability in the Union. 

(33) 

In  the  context  of  the  2020  European  Semester,  the  Commission  carried  out  a 
comprehensive  analysis  of  Bulgaria’s  economic  policy  and  published  it  in  the  2020 
country  report.  It  has  also  assessed  the  2020  Convergence  Programme  and  the  2020 
National  Reform  Programme  and  the  follow-up  given  to  the  recommendations 
addressed  to  Bulgaria  in  previous  years.  It  has  taken  into  account  not  only  their 
relevance  for  sustainable  fiscal  and  socioeconomic  policy  in  Bulgaria,  but  also  their 
compliance with Union rules and guidance, given the need to strengthen the Union’s 
overall  economic  governance  by  providing  Union-level  input  into  future  national 
decisions.  

EN 

8 

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(34) 

In  the  light  of  that  assessment,  the  Council  has  examined  the  2020  Convergence 
Programme and its opinion9 is reflected in particular in recommendation (1) below,  

HEREBY RECOMMENDS that Bulgaria take action in 2020 and 2021 to: 

1. 

2. 

3. 

4. 

In  line  with  the  general  escape  clause,  take  all  necessary  measures  to  effectively 
address the pandemic, sustain the economy and support the ensuing recovery. When 
economic  conditions  allow,  pursue  fiscal  policies aimed  at  achieving  prudent 
medium-term  fiscal  positions  and  ensuring  debt  sustainability, while  enhancing 
investment.  Mobilise  adequate  financial  resources  to  strengthen  the  resilience, 
accessibility and capacity of the health system, and ensure a balanced geographical 
distribution of health workers. 

Ensure adequate social protection and essential services for all and strengthen active 
labour market policies. Improve access to distance working and promote digital skills 
and  equal  access  to  education.  Address  the  shortcomings  in  the  adequacy  of  the 
minimum income scheme.  

Streamline  and  accelerate  the  procedures  to  provide  effective  support  to  small  and 
medium-sized enterprises and self-employed, also ensuring their continued access to 
finance  and  flexible  payment  arrangements.  Front-load  mature  public  investment 
projects  and  promote  private  investment  to  foster  the  economic  recovery.  Focus 
investment  on  the  green  and  digital  transition,  in  particular  on  clean  and  efficient 
production  and  use  of  energy  and  resources,  environmental  infrastructure  and 
sustainable transport, contributing to a progressive decarbonisation of the economy, 
including in the coal regions. 

Minimise  administrative  burden  to  companies  by  improving  the  effectiveness  of 
public  administration  and  reinforcing  digital  government.  Ensure  an  effective 
functioning of the insolvency framework. Step up the efforts to ensure adequate risk 
assessment,  mitigation,  effective  supervision  and  enforcement  of  the  anti-money 
laundering framework.  

Done at Brussels, 

For the Council 
The President 

9 

Under Article 9(2) of Council Regulation (EC) No 1466/97. 

EN 

9 

  EN