Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Bulgaria
Date: 2026-06-03
Institutions: European Commission, Reform and Investment Task Force
Subjects: Bulgaria, budget policy, economic policy, economic recovery, economic reform, education policy, employment policy, energy transition, social policy, stability pact

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 3.6.2026  COM(2026) 202 final  Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Bulgaria {SWD(2026) 202 final}  
 
Recommendation for a 

COUNCIL RECOMMENDATION 

on the economic, social, employment, structural and budgetary policies 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 Regulation (EU) 2024/1263 of the European Parliament and of the Council 
of  29 April 2024  on  the  effective  coordination  of  economic  policies  and  on  multilateral 
budgetary  surveillance  and  repealing  Council  Regulation  (EC)  No  1466/9799  (1),  and  in 
particular Article 3(3) 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) 

1 

2 

Regulation  (EU)  2024/1263  specifies  the  objectives  of  the  economic  governance 
framework,  which  aims  at  promoting  sound  and  sustainable  public  finances, 
sustainable  and  inclusive  growth  and  resilience  through  reforms  and  investments,  as 
well  as  preventing  excessive  government  deficits.  The  Regulation  stipulates  that  the 
Council  and  the  Commission  conduct  multilateral  surveillance  in  the  context  of  the 
European Semester in accordance with the objectives and requirements set out in the 
Treaty  on  the  Functioning  of  the  European  Union  (TFEU).  The  European  Semester 
includes, in  particular, the formulation and the surveillance of the implementation  of 
country-specific recommendations. 

On  16 July 2025,  the  European  Commission  adopted  its  proposal  for  a  Regulation 
establishing  the  European  Fund  for  economic,  social  and  territorial  cohesion, 
agriculture  and  rural,  fisheries  and  maritime,  prosperity  and  security  for  the  period 
2028-2034  and  amending  Regulation  (EU)  2023/955  and  Regulation  (EU,  Euratom) 
2024/2509  (2).  The  proposal  aims  to  increase  the  effectiveness  of  Union  funding  by 

Regulation 

Regulation  (EU)  2024/1263  of  the  European  Parliament  and  of  the  Council  of  29 April 2024  on  the 
effective  coordination  of  economic  policies  and  on  multilateral  budgetary  surveillance  and  repealing 
Council 
ELI: 
http://data.europa.eu/eli/reg/2024/1263/oj). 
Proposal for a Regulation of the European Parliament and of the Council establishing the European Fund for 
economic,  social  and  territorial  cohesion,  agriculture  and  rural,  fisheries  and  maritime,  prosperity  and 
security for the period 2028-2034 and amending Regulation (EU) 2023/955 and Regulation (EU, Euratom) 

(EC)  No 

2024/1263, 

30.4.2024, 

1466/97 

(OJ 

L, 

EN 

1 

  EN 

 
 
(3) 

(4) 

(5) 

(6) 

reducing the fragmentation of the financial architecture and to support Member States 
in the coordination of their economic policy in line with Article 175.  

On  25 November 2025,  on  the  basis  of  Regulation  (EU)  No  1176/2011,  the 
Commission  adopted  the  2026  Alert  Mechanism Report,  in  which  it  did  not  identify 
Bulgaria as one of the Member States for which an in-depth review would be needed. 
The  Commission  also  adopted  a  recommendation  for  a  Council  recommendation  on 
the  economic  policy  of 
the  euro  area,  a  recommendation  for  a  Council 
recommendation on human capital in the European Union, and a proposal for the 2026 
Joint  Employment  Report,  which  analyses  the  implementation  of  the  Employment 
Guidelines  and  the  principles  of  the  European  Pillar  of  Social  Rights.  The  Council 
adopted  the  Recommendation  on  the  economic  policy  of  the  euro  area  (3)  on 
21 April 2026  and  the  Joint  Employment  Report,  as  well  as  the  recommendation  on 
human capital on 9 March 2026.  

On  29 January 2025,  the  Commission  published  the  Competitiveness  Compass,  a 
strategic  framework  that  aims  to  boost  the  Union’s  global  competitiveness  over  the 
next  five  years.  It  identifies  the  three  transformative  imperatives  of  innovation, 
decarbonisation  and  competitiveness,  and  security  as  critical  pillars  for  sustainable 
economic  growth.  The  European  Semester  is  aligned  with  the  Competitiveness 
Compass,  ensuring  that  Member  States’  economic  policies  are  consistent  with  the 
Commission’s  strategic  objectives,  creating  a  unified  approach 
to  economic 
governance that fosters sustainable growth, innovation and resilience across the Union. 

In  2026,  the  European  Semester  for  economic  policy  coordination  continues  to 
develop  alongside  the  final  stage  of  Recovery  and  Resilience  Facility  (RRF) 
implementation (4). Recovery and resilience plans (RRPs), along with cohesion policy 
funding, have been essential for delivering on the policy priorities under the European 
Semester, as the plans were required to effectively address all or a significant subset of 
challenges identified in the relevant country-specific recommendations issued in recent 
cycles, and programmes funded by the European cohesion policy were required to take 
country-specific recommendations into account. As the RRF approaches the end of its 
lifetime,  it  remains  essential  to  sustain  the  reforms  and  investments  supported  and 
implemented  under  the  RRF,  in  particular  those  that  contribute  to  addressing 
challenges identified in the country specific recommendations.,  

On  3 June 2026,  the  Commission  published  the  2026  country  report  for  Bulgaria.  It 
assessed  Bulgaria’s  progress 
relevant  country-specific 
in  addressing 
recommendations  and  took  stock  of  Bulgaria’s  implementation  of  the  recovery  and 
resilience  plan.  On  the  basis  of  this  analysis,  the  country  report  identified  the  most 
pressing  challenges  Bulgaria  is  facing.  It  also  assessed  Bulgaria’s  progress  in 
implementing  the  European  Pillar  of  Social  Rights  and  in  achieving  the  Union 
headline  targets  on  employment,  skills  and  poverty  reduction,  as  well  as  progress  in 
achieving the United Nations Sustainable Development Goals.  

the 

3 
4 

2024/2509 - COM(2025) 565 final. The proposed Regulation is currently the subject of negotiations with the 
co-legislators.  
OJ C, C/2026/2434, 28.4.2026, ELI: http://data.europa.eu/eli/C/2026/2434/oj. 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12 February 2021 
(OJ  L  57,  18.2.2021,  p.  17,  ELI: 
establishing 
http://data.europa.eu/eli/reg/2021/241/oj). 

the  Recovery  and  Resilience  Facility 

EN 

2 

  EN 

 
(7) 

(8) 

(9) 

On  20 June 2025,  the  Council,  upon  the  assessment  and  recommendation  of  the 
Commission, adopted a Recommendation endorsing the national medium-term fiscal-
structural  plan of Bulgaria (5). The plan covers the period  from  2025 until  2028 and 
presents  a  fiscal  adjustment  spread  over  four  years.  The  Council  recommended  the 
following  maximum  growth  rates  of  net  expenditure:  6.2%  in  2025,  4.9%  in  2026, 
4.4%  in  2027  and  4.0%  in  2028,  which  correspond  to  the  maximum  cumulative 
growth rates calculated by reference to the base year of 2024 of 6.2% in 2025, 11.4% 
in 2026, 16.3% in 2027 and 21% in 2028. 

from 

recommendation 

Russia’s  war  of  aggression  against  Ukraine  and  its  repercussions  constitute  an 
existential  challenge  for  the  European  Union.  The  Commission  has  invited  Member 
States  to  request  the  activation  of  the  national  escape  clause  of  the  Stability  and 
Growth Pact in a coordinated manner to support the EU efforts to achieve a rapid and 
significant  increase  in  defence  spending  (6)  and  this  proposal  was  welcomed  by  the 
European Council of 6 March 2025. Following the request of Bulgaria, on 8 July 2025 
the  Council,  upon  a 
the  Commission,  adopted  a 
Recommendation  allowing  Bulgaria  to  deviate  from  the  recommended  maximum 
growth  rates  of  net  expenditure  (7).  The  period  when  the  national  escape  clause  is 
activated  (2025-2028)  allows  Bulgaria  to  reprioritise  government  expenditure  or 
increase  government  revenue  so  that  lastingly  higher  defence  expenditure  would  not 
endanger fiscal sustainability in the medium term. 
On 30 April 2026, Bulgaria submitted (8) informing on adherence to the recommended 
maximum  growth  rates  of  net  expenditure,  and  the  implementation  of  reforms  and 
investments  responding  to  the  main  challenges  identified  in  the  European  Semester 
country-specific  recommendations.  However,  no  fiscal  data  for  2026  were  provided. 
The  Annual  Progress  Report  also  reflects  Bulgaria’s  biannual  reporting  on  the 
progress  made  in  implementing  its  recovery  and  resilience  plan  in  accordance  with 
Article 27 of Regulation (EU) 2021/241. 

(10)  Real  GDP  growth  in  2025  was  3.1%  and  HICP  inflation  stood  at  3.5%.  The 
Commission  Spring  2026  Forecast  projects  real  GDP  to  grow  by  2.5%  in  2026  and 
2.2% in 2027, and HICP inflation to stand at 4.2% in 2026 and 2.6% in 2027. 
(11)  Based  on  data  provided  by  Eurostat  (9),  Bulgaria’s  general  government  deficit 
increased  from  3%  of  GDP  in  2024  to  3.5%  of  GDP  in  2025.  The  increase  in  the 
deficit  in  2025  mainly  reflects  the  increases  in  public  sector  salaries,  notably  in  the 
areas  of  defence  and  security,  increases  in  social  spending,  including  automatic 
pensions indexations, and investment grants in the Bulgarian Energy Holding. Based 
on policy measures known by the cut-off date of the forecast, the Commission Spring 
2026 Forecast projects a deficit of 4.1% of GDP in 2026 and 4.3% of GDP in 2027. 

5 

6 

7 

8 

9 

Council Recommendation of 20 June 2025 endorsing the national medium-term fiscal-structural plan of 
Bulgaria (OJ C, C/2025/3700, 20 August 2025, ELI: https://eur-lex.europa.eu/eli/C/2025/3700/oj). 
Communication  from  the  Commission,  'Accommodating  increased  defence  expenditure  within  the 
Stability and Growth Pact’, Brussels, 19 March 2025, C(2025) 2000 final. 
Council Recommendation of 8 July 2025 allowing Bulgaria to deviate from the maximum growth rates 
of net expenditure as set by the Council under Regulation (EU) 2024/1263 (Activation of the national 
escape 
https://eur-
lex.europa.eu/eli/C/2025/3961/oj). 
The  2026  Annual  Progress  Reports  are  available  on:  https://economy-finance.ec.europa.eu/economic-
and-fiscal-governance/stability-and-growth-pact/preventive-arm/annual-progress-reports_en. 
Eurostat-Euro Indicators, 22 April 2026. 

20 August 2025, 

C/2025/3961, 

clause), 

ELI: 

(OJ 

C, 

EN 

3 

  EN 

 
The increases in 2026 and in 2027 mainly reflect the continued structural increases in 
public sector wages and social benefits in the absence of compensatory measures. 
(12)  Based  on  the  Commission’s  estimates,  the  fiscal  stance  (10),  which  includes  both 
nationally and EU financed expenditure, was expansionary, by 2.3% of GDP, in 2025. 
It  is  projected to  be expansionary, by 1.0% of GDP,  in  2026, and  contractionary, by 
1.6% of GDP, in 2027. 

(13)  Based on data provided by Eurostat (11), Bulgaria’s general government debt increased 
from  23.8%  of  GDP  at  the  end  of  2024  to  29.9%  of  GDP  at  the  end  of  2025.  The 
increase in the debt ratio in 2025 mainly reflects capital injections into the Bulgarian 
Energy  Holding  and  the  Bulgarian  Development  Bank.  Based  on  policy  measures 
known  at  the  cut-off  date  of  the  forecast,  the  Commission  Spring  2026  Forecast 
projects the debt-to-GDP ratio to increase to 32.3% by the end of 2026 and to further 
increase to 35.5% by the end of 2027. 

(14)  Based on Eurostat data (12), total general government defence expenditure in Bulgaria 
amounted  to  1.9%  of  GDP  in  2025.  According  to  the  Commission  Spring  2026 
Forecast, it is projected at the same level in 2026. This corresponds to an increase of 
0.6 percentage points of GDP compared to the reference year 2024. 

(15)  The  Union  continues  to  face  risks  of  energy  supply  disruptions  and  elevated  price 
volatility,  exacerbated  by  geopolitical  tensions  which  affect  global  oil  and  gas 
markets.  Experience  from  the  2022–2023  energy  crisis  has  shown  that  broad  and 
untargeted  measures  entail  large  fiscal  costs  and  are  socially  and  economically 
inefficient.  Since  the  outbreak  of  the  war  in  the  Middle  East  in  February 2026, 
Bulgaria adopted fiscal  policy measures to mitigate the impact of high  energy prices 
on  households  and  firms  (13).  These  include  targeted  monthly  aid  for  low-income 
groups until June 2026 and targeted subsidies for passenger transport carriers servicing 
small  settlements  for  2026.  According  to  the  Commission  Spring 2026  Forecast,  the 
fiscal cost of these measures is projected to amount to less than 0.1% of GDP in 2026. 
According  to  Commission  estimates,  if  these  measures  were  to  remain  in  force  until 
end-2026, their fiscal cost would amount to 0.1% of GDP in 2026. 

(16)  Based on the Commission’s calculations, net expenditure in Bulgaria grew by 12.3% 
in  2025.  The  net  expenditure  growth  in  2025  is  above  the  recommended  maximum 
growth rate, corresponding to a deviation of 2.1% of GDP in annual terms. Taking into 
account the flexibility for higher defence spending provided for by the national escape 
clause, the cumulative deviation of net expenditure amounts to 1.4% of GDP. 

(17)  Based  on  the  Commission’s  calculations,  net  expenditure  in  Bulgaria  is  projected  to 
grow  by  5.5%  in  2026,  and  18.5%  cumulatively  over  2025  and  2026.  The  projected 
net  expenditure  growth  in  2026  is  above  the  recommended  maximum  growth  rate, 
corresponding to a deviation of 0.2% of GDP in annual terms. When considering 2025 

10 

11 
12 
13 

The fiscal stance is defined as a measure of the annual change in the underlying budgetary position of 
the  general  government.  It  aims  to  assess  the  economic  impulse  stemming  from  fiscal  policies,  both 
those  that  are  nationally  financed  and  those  that  are  financed  by  the  EU  budget.  The  fiscal  stance  is 
measured as the difference between (i) the medium-term potential growth and (ii) the change in primary 
expenditure net of discretionary revenue measures and including expenditure financed by non-repayable 
support (grants) from the Recovery and Resilience Facility and other Union funds. 
Eurostat-Euro Indicators, 22 April 2026. 
Eurostat, government expenditure by classification of functions of government (COFOG). 
This reflects the situation at the cut-off date of the Commission Spring 2026 Forecast (4 May 2026). 

EN 

4 

  EN 

 
and  2026  together,  the  projected  cumulative  growth  rate  of  net  expenditure  is  also 
above the recommended maximum growth rate, corresponding to a deviation of 2.2% 
of  GDP  in  cumulative  terms.  Taking  into  account  the  flexibility  for  higher  defence 
spending  provided  for  by  the  national  escape  clause,  considering  2025  and  2026 
together,  the  projected  cumulative  deviation  of  net  expenditure  amounts  to  1.6%  of 
GDP. 

(18)  On  3 June 2026,  the  Commission  adopted  a  report  under  Article  126(3)  TFEU  (14). 
That  report  assessed  the  situation  of  Bulgaria  vis-à-vis  the  deficit  criterion.  In  2025, 
the  deficit  was  below  3%  of  GDP  when  accounting  for  the  increase  in  defence 
expenditure  since  2024  under  the  national  escape  clause  for  defence.  Based  on  the 
Commission Spring 2026 Forecast, the deficit  is projected to exceed the 3% of GDP 
reference  value  in  2026  also  after  considering  the  increase  in  defence  expenditure 
since 2024. The report concluded that, taking into account  all the relevant  factors  as 
appropriate, the deficit criterion is  not fulfilled by Bulgaria.  In light of this and after 
considering  the  opinion  of  the  Economic  and  Financial  Committee  as  established 
under Article 126(4) TFEU, the Commission has proposed to open an excessive deficit 
procedure, by recommending to the Council to adopt a Decision under Article 126(6) 
TFEU  establishing  the  existence  of  an  excessive  deficit  due  to  non-compliance  with 
the  deficit  criterion  in  2026.  On  [DATE],  the  Council  adopted  such  a  Decision  for 
Bulgaria (15), together with a Recommendation (16) under Article 126(7) TFEU with a 
view to bringing the situation of excessive deficit to an end. 

(19)  Bulgaria faces a dual challenge of safeguarding the sustainability of its public finances 
while  improving  the  fairness  and  effectiveness  of  its  tax  system.  One  of  the  key 
features  of  the  system  is  the  flat  income  tax  rate  of  10%,  applied  without  a  tax-free 
allowance, which results in a regressive distribution of the tax burden such that high-
income  earners  face  a  slightly  lower  tax  wedge  than  low-income  earners.  In  recent 
years,  public  expenditure  has  increased,  particularly  in  the  areas  of  pensions  and 
public sector wages. These increases have often been financed through short-term or 
ad-  hoc  measures  rather  than  stable,  structural  measures.  This  has  reduced  the 
predictability  of  fiscal  policy  and  heightened  fiscal  risks,  especially  as  further 
structural 
spending  pressures  are  emerging.  Looking  ahead,  demographic 
developments are expected to play a key role. Population ageing will place sustained 
pressure  on  social  spending,  notably  on  pensions  and  healthcare,  which  in  addition 
face  adequacy  challenges.  At  the  same  time,  additional  expenditure  related  to 
strengthening national and collective defence capabilities is likely to add further strain 
to  public  finances.  In  the  absence  of  policy  adjustments,  these  factors  will  make  it 
more  difficult  to  maintain  fiscal  discipline.  Bulgaria  also  faces  persistent  structural 
challenges on the revenue side. Tax revenues, as a share of GDP, remain significantly 
below the EU average, constraining the country’s ability to finance public services and 
investment.  Revenue  collection  is  further  weakened  by  high  levels  of  tax  arrears.  In 

14  

15  

16  

Report  from  the  Commission,  prepared  in  accordance  with  Article  126(3)  of  the  Treaty  on  the 
Functioning of the European Union, 3.6.2026, COM(2026) 302 final. 
Council Decision (EU) 2026/[OJ: please insert] of [DATE] on the existence of an excessive deficit in 
Bulgaria, (OJ [please insert relevant OJ references]. 
Council  Recommendation  with  a  view  to  bringing  an  end  to  the  situation  of  an  excessive  deficit  in 
Bulgaria, adopted on [DATE]. All documents related to the excessive deficit procedure of Bulgaria can 
be 
found  at:  https://economy-finance.ec.europa.eu/economic-governance-framework/stability-and-
growth-pact/corrective-arm-excessive-deficit-procedure/excessive-deficit-procedures-
overview/Bulgaria_en.  

EN 

5 

  EN 

 
addition, Bulgaria has one of the largest estimated shadow economies in the European 
Union, which undermines tax compliance and limits its revenue capacity. 

(20)  The systematic, meaningful and timely, involvement of local and regional authorities, 
social partners, civil society and other relevant stakeholders remains essential in order 
to  ensure  broad  ownership  for  the  successful  implementation  of  the  of  the  Union’s 
funding instruments, as well as in the context of the European Semester. 

(21)  The implementation  of cohesion  policy programmes,  which encompass support from 
the  European  Regional  Development  Fund  (ERDF),  the  Just  Transition  Fund  (JTF), 
the European Social Fund Plus (ESF+) and the Cohesion Fund (CF),  in Bulgaria has 
been progressing well, especially  in  terms  of project selection. It  is  important to  step 
up  efforts  to  ensure  the  swift  delivery  of  selected  projects,  while  maximising  their 
impact on the ground. At the same time, Bulgaria needs to accelerate implementation 
of the Just Transition Fund (JTF) as resources are due for disbursement by the end of 
2026. It  is  essential  to  ensure  that  the  new  investments  identified  by  Bulgaria  in  its 
mid-term  review  of  the  cohesion  policy  funds,  notably  those  linked  to  the  five 
priorities identified in the Mid-Term Review Regulation (17), are deployed rapidly and 
effectively. 

(22)  Bulgaria  faces  several  challenges  related  to  the  functioning  of  public  administration 
and sub-national governance, the digitalisation of public services, the justice and anti-
corruption framework, public procurement and regulatory quality, the level of research 
and innovation, the decarbonisation of the energy system and industry, energy poverty, 
transport  and  connectivity,  climate  resilience,  shortages  of  labour  and  skills,  social 
inclusion and healthcare. 

(23)  Public administration continues facing capacity constraints, especially at sub-national 
level,  and  further  efforts  seem  necessary  to  meet  the  expectations  of  citizens  and 
businesses.  Bulgaria  has  the  lowest  share  of  civil  servants  participating  in  adult 
learning,  which  hinders  skills  development  both  at  national  and  sub-national  level. 
Additionally, municipalities encounter persistent difficulties in attracting and retaining 
qualified  experts  to  implement  EU-funded  initiatives  and  projects,  which  poses 
challenges  in  the  management  of  EU  funds.  The  fragmentation  of  governance  and 
planning  processes  at  sub-national  level  pose  additional  constraints  for  effectively 
managing  EU-funded  projects,  as  well  as  for  aligning  priorities  within  a  broader 
territorial  strategy.  More  digital  public  services  have  become  available  and  are 
regularly used by businesses and citizens, but the opportunities offered by the digital 
government  infrastructure  have  not  been  fully  utilised  due  to  high  administrative 
complexity and low user-friendliness. To remedy  these shortcomings, key  remaining 
priorities  are  ensuring  the  interoperability  across  levels  of  government,  simplifying 
and digitalising internal workflows, and expanding the provision of end-to-end online 
public  services.  Efforts  are  ongoing  to  simplify  regulation,  improve  regulatory  tools 
and reduce administrative burden, but their impact has not yielded tangible results yet. 
Regulatory  and  administrative  barriers  to  the  single  market  affect  intra-European 
Economic  Area  goods  trade  (including  cross-border  logistics  chains),  as  well  as 
provision of professional services, and business establishment. 

17 

Regulation  (EU)  2025/1914  of  the  European  Parliament  and  of  the  Council  of  18 September 2025 
amending  Regulations  (EU)  2021/1058  and  (EU)  2021/1056  as  regards  specific  measures  to  address 
strategic challenges in the context of the mid-term review. 

EN 

6 

  EN 

 
(24)  Strengthening  the  prosecution  of  corruption  remains  key  to  maintain  a  stable  and 
predictable economic environment based on the rule of law. Bulgaria has not yet set a 
robust  track-record  in  investigating  and  prosecuting  corruption,  particularly  in  high-
level corruption cases. The legal framework governing an anti-corruption commission, 
introduced in 2023, did not ensure the body’s political independence, and was repealed 
in  2026,  before  the  anti-corruption  commission’s  new  management  could  be 
appointed. Bulgaria has taken preparatory steps in relation to a revised anti-corruption 
law but adoption by Parliament is still pending. Furthermore, the independence and the 
effective  functioning  of  the  Supreme  Judicial  Council,  as  the  judiciary’s  self-
governance  body,  are  essential  for  the  proper  working  of  both  the  courts  and  the 
prosecutor’s  office, particularly  in  high-level  corruption  cases. The Supreme Judicial 
Council has operated with an expired mandate since 2022, which negatively impacts 
its legitimacy and prevents it from exercising some of its functions, such as appointing 
a new Prosecutor General. Given the leading role of the prosecutor’s office in carrying 
out criminal investigations, addressing the shortcomings related to the functioning of 
the  Supreme  Judicial  Council  may  further  support  the  anti-corruption  efforts  in  the 
country. 

(25)  Structural governance and implementation weaknesses in public procurement continue 
to  constrain  competitiveness.  Rising  shares  of  directly  awarded  lots  and  procedures 
with  a  single  bidder,  as  well  as  a  significant  number  of  unsuccessful  or  cancelled 
contracts,  discourage  participation  and  weaken  trust  and  perception  of  fairness  by 
businesses.  While  some  procedural  improvements  have  been  implemented  under  the 
the  governance  structure, 
Recovery  and  Resilience  Plan,  further  review  of 
strengthening of safeguards and cooperation between public procurement bodies, and 
increased capacity and expertise of relevant agencies are needed to address structural 
challenges.  Bulgaria  took  some  steps  to  renew  the  mandates  of  certain  regulatory 
authorities,  but  concerns  about  their  independence  remain  unaddressed.  Resource 
constraints and undue political influence hinder the quality of their regulatory output. 
Insufficient  safeguards  for  the  independence  of  regulatory  bodies  from  market 
participants remain, particularly in sectors like energy, where state-owned enterprises 
hold  significant  influence.  With regards to  justice, concerns  about the functioning  of 
the  Inspectorate  to  the  Supreme  Judicial  Council  and  the  risk  of  political  influence 
persist, as its mandate expired in 2020 without renewal. 

(26)  Bulgaria’s  research  and  innovation  system  continues  to  face  significant  challenges, 
with  low  public  and  private  R&D  investment  well  below  EU  averages,  and  a 
fragmented  institutional  landscape  that  limits  effectiveness,  as  outlined  in  the  policy 
support  facility  report.  Despite  progress  in  the  governance  framework,  including 
through the adoption of the Law on Research and Innovation and establishment of the 
Innovation  and  Research  Council,  consistent  and  clear  implementation  remains 
necessary. Furthermore,  institutional mandates for research organisations and higher-
education institutions remain unclear, and research activities are overly concentrated in 
the  capital  region,  exacerbating  regional  disparities.  Commercialisation  of  research 
output  is  hindered  by  weak  academia-business  links,  as  well  as  a  less  developed 
technology transfer ecosystem. While cohesion policy funds support a new technology 
transfer  hub,  and  digital  transformation  of  SMEs  is  gradually  improving,  increased 
public  and  private  R&D  investment,  paired  with  clearer  institutional  mandates  and 
strengthened commercialisation mechanisms, is needed to boost innovation impact. 

(27)  Bulgaria's  wholesale  electricity  prices  remain  among  the  highest  in  the  EU.  While 
some  progress  has  been  made  in  reducing  reliance  on  fossil  fuels  in  electricity 

EN 

7 

  EN 

generation, thanks to the phase-out of power purchase agreements and public service 
obligations  directly  supporting  coal-fired  power  plants,  the  electricity  system  in 
Bulgaria remains dependent on these plants to meet demand.  The significant roll-out 
of solar generation capacities has not been accompanied by equivalent deployment of 
onshore  or  offshore  wind  capacities  despite  existing  potential  in  Bulgaria.  Expected 
deployment of large capacities of battery storage can, if combined with strengthening 
of  distribution  grids  in  need  of  upgrades  and  additional  capacity,  allow  for  more 
flexible  and  decarbonised  supply  of  electricity.  Improving  flexibility  of  demand 
making  retail  prices  for  households  more  responsive  to  wholesale  price  signals  and 
develop  further smart-metering.  Flexible supply  and demand  are necessary to  reduce 
the  reliance  on  fossil  fuels  and  decarbonise  the  electricity  system,  leading  to  more 
affordable  electricity  prices  with  additional  RES  /  low-carbon  generation  and 
improved grids. The Bulgarian Energy Holding,  which encompasses  Bulgarian state-
owned  enterprises  across  low-carbon  generation  (nuclear,  hydropower);  fossil-fuel 
assets  (coal-fired  power  plant  and  coal  mining,  as  well  as  natural  gas  assets);  and 
regulated  assets  –  transmission  system  operators  (TSO),  needs  reforming  to  improve 
its transparency and dispel concerns of cross-subsidisation of coal assets. This reform 
would  also  contribute  to  reduce  reliance  on  fossil  fuels  and  would  allow  regulated 
assets – in particular the electricity TSO – to focus on their core business.  

(28)  District  heating  systems  in  Bulgaria  continue  to  rely  on  natural  gas  and  coal.  While 
progress has been made in phasing out fossil fuel subsidies for electricity production, 
subsidies channelled to district heating with no phase-out planned before 2030 remain 
unaddressed.  Fossil  fuel  subsidies  that  neither  target  energy  poverty  nor  address 
genuine  energy  security  concerns,  hinder  electrification,  and  are  not  essential  to 
industrial competitiveness could be considered a priority for phase-out. Feed-in tariffs 
for  combined  heat  and  power  plants  supplying  district  heating  networks  prolong  the 
economy viability of fossil fuel-based heat generation and delay the modernisation of 
generation  and  network  assets  to  high-efficiency  standards.  Reforming  these  tariffs 
would free fiscal space that could be redirected towards the decarbonisation of district 
heating and targeted support for energy-poor households.  

(29)  Energy poverty remains a structural challenge in Bulgaria, driven by a lack of support 
mechanisms targeted to the most in need, which leaves the share of people unable to 
keep  their  homes  adequately  warm  well  above  the  EU  average.  While  support  is 
currently  focused  on  broad  measures,  such  as  universally  low  regulated  retail 
electricity  prices  and  feed-in  tariffs  for  combined  heat  and  power  plants  supplying 
district  heating networks, targeted  assistance  continues to  lag. This  inefficient use of 
fiscal resources leaves the most vulnerable households exposed, highlighting the need 
to tackle energy poverty through the design of adequate, targeted policy measures.  

(30)  Despite limited progress in improving energy efficiency in industry, further reducing 
energy  consumption  by  industrial  users  remains  critical,  as  the  energy  intensity  of 
Bulgaria’s  manufacturing  sector  remains  among  the  four  highest  in  the  Union. 
Additionally,  a  significant  share  of  the  industrial  greenhouse  gas  emissions  (45%, 
compared  to  the  EU  average  of  35%)  stems  from  non-energy-related  processes, 
underscoring  the  need  for  comprehensive  decarbonisation  measures  beyond  energy 
efficiency  alone.  Accelerating  industrial  decarbonisation  –  particularly  in  high-
emission  manufacturing  sectors  –  would  contribute  to  enhancing  competitiveness 
while reducing dependency on greenhouse gas-intensive resources and energy. 

(31)  Transport  continues  to  be  among  the  sectors  with  the  highest  GHG  emission  in 
Bulgaria in 2023, while the uptake of electric vehicles remains significantly below the 

EN 

8 

  EN 

EU average, at 0.56% in 2024. Charging infrastructure deployment is slow, with less 
than 15% of the mandated electric recharging infrastructure for 2030 being deployed. 
Lack of public transport infrastructure leads to connectivity challenges, in particular in 
the Northern region. Further action is needed to  accelerate infrastructure investments 
in  public  transport,  modernise  railway  infrastructure,  including  with  ERTMS 
electrification,  and  expand  charging  infrastructure  for  electric  vehicles,  while 
effectively enforcing road safety measures and improving the connectivity of Northern 
region and across borders, with the completion of TEN-T. 

is  exposing  high  vulnerabilities  of 

(32)  Bulgaria remains vulnerable to increasing climate risks (notably floods, droughts and 
declining water levels), which pose challenges to the country’s economic and societal 
resilience.  Climate  change 
transport 
infrastructure. Water infrastructure remains underdeveloped, with very high losses and 
wastewater treatment compliance well below EU requirements,  pointing to persistent 
shortcomings  in  water  and  waste  management.  The  national  adaptation  framework 
provides a basis for action, but its implementation remains uneven due to fragmented 
climate  governance  and  broader  institutional  weaknesses,  including  the  absence  of 
mandatory  climate  risk  assessments.  Further  actions,  including  some  supported  by 
cohesion policy, aim to improve water and waste infrastructure and strengthen climate 
resilience.  However,  investment  remains  below  EU  averages,  while  the  uptake  of 
nature-based  solutions  and  insurance  coverage  against  climate-related  risks  remain 
limited, constraining the sustainable use of resources and overall resilience, including 
that of marine ecosystems. 

the 

(33) 

In light of the crucial role of human capital in enhancing the Union’s competitiveness 
and  strategic  autonomy,  in  2026  the  Council  recommended  that  Member  States  take 
action  to  urgently  address  human  capital-related  structural  challenges  in  the  areas  of 
skills  and  education,  which  hamper  competitiveness.  The  2026  country-specific 
recommendations  addressed  to  Bulgaria  can  contribute  to  the  implementation  of  the 
Council Recommendation on human capital in the Union. 

(34)  Bulgaria’s weak performance in basic skills reveals structural challenges that constrain 
human  capital  development  and  competitiveness.  Around  half  of  Bulgarian  15-year-
olds do not reach minimum proficiency in basic skills, which is about double the EU 
average. Underperformance is linked to challenges in the school curricula and teaching 
quality. There is an insufficient use of competence-based, learner-centred approaches, 
with  too  little  focus  on  basic  skills  development  and  on  STEM  competences. 
Participation in early childhood education and care remains low and uneven, limiting 
early 
inequalities.  Those  particularly  affected  are 
disadvantaged groups, including Roma children. Bulgaria’s higher education continues 
to face significant challenges in developing high-skilled talent, particularly in STEM, 
with implications for productivity and innovation. Teaching quality continues to suffer 
from  shortages  of  teachers,  especially  in  STEM,  insufficient  and  non-targeted 
professional  development  opportunities  as  well  as  a  weak  link  between  performance 
and pay. 

learning  and  exacerbating 

(35)  Bulgaria’s labour market remained tight in 2025, with the employment rate increasing 
to 77%, slightly above the EU average. At the same time, overall employment fell for 
a  fourth  consecutive  year,  in 
line  with  broader  demographic  trends,  while 
unemployment  stayed  at  a  historic  low  of  3.5%.  Labour  shortages  continued  despite 
some signs of weaker demand, with employers still reporting a need for over 230 000 
additional  workers.  Significant  regional  disparities  persist,  with  employment 
differences  between  the  best  and  worst  performing  regions  reaching  more  than  10 

EN 

9 

  EN 

percentage points. The share of young people neither in employment nor in education 
and  training  remained  high  compared  with  the  EU  average,  especially  among  those 
with  disabilities  and  Roma.  Labour  market  outcomes  also  remained  uneven  for 
vulnerable groups: the disability employment gap was still wide, and despite notable 
progress  in  recent  years,  Roma  employment  continued  to  trail  the  national  average, 
while NEET rates among young Roma remained as high as 46%. 

(36)  Skills  shortages  continue  to  hamper  competitiveness.  Although  the  share  of  people 
with  at  least  basic  digital  skills  increased  in  2025,  it  remained  far  below  the  EU 
average,  limiting  labour  market  performance  and  access  to  online  services  while 
risking wider social and regional divides. The share of ICT specialists also remained 
comparatively  low, and  business  uptake of AI was still modest. Despite the ongoing 
roll-out  of  VET  reforms  and  relatively  high  participation  in  upper-secondary  VET, 
persistent skills mismatches continue to weigh on outcomes, as the employment rate of 
VET  graduates  remains  well  below  the  EU  average  and  insufficiently  aligned  with 
labour market demand. Bulgaria continues to lag significantly behind the EU average 
in  adult  learning  participation  rate,  including  among  employed  adults.  Addressing 
these challenges would also contribute to improving job quality. 

(37)  Bulgaria continues to face structural challenges related to poverty reduction, inequality 
and  social  protection.  The  social  protection  system  has  been  strengthened  through  a 
reform  of  the  minimum  income  scheme,  complemented  by  wage  growth,  which  has 
supported  household  incomes  and  reinforced  the  financing  base  of  social  insurance. 
The  reform’s  long-term  impact  on  adequacy  and  coverage  remains  to  be  evaluated. 
The share of people at risk of poverty has declined but remains high, in particular for 
vulnerable  groups,  signalling  limited  effect  of  social  transfers  on  poverty  reduction. 
The in-work poverty rate decreased but remains the highest in the EU. The at risk of 
poverty and social exclusion rate (AROPE) for Roma and persons with disabilities was 
especially  high,  at  78.3%  and  43.8%  respectively,  and  the  AROPE  rate  for  children 
remains  well  above  the  EU  average.  The  accessibility,  affordability  and  quality  of 
social services have been improving, thanks to targeted reforms related to quality and 
mapping  of  social  services,  showing  progress  in  the  shift  from  institutionalised  to 
community and home-based care. Nevertheless, social service needs, in particular for 
long-term care, remain high and challenges persist. The rapidly ageing society further 
weighs on increased demand for elderly care and staff shortages (18). 

(38)  Bulgaria continues to face major barriers to access to healthcare, with negative impact 
on life expectancy and rates of preventable and treatable mortality. The health system 
remains  heavily  hospital-centred,  with  a  very  low  share  of  spending  devoted  to 
outpatient care,  primary  care  and disease prevention despite high  number of hospital 
beds,  high  hospital  discharge  rates  and  comparatively  low  occupancy  and  average 
length of stay. The payment model incentivises standardised hospital treatment rather 
than care tailored to individual needs. At the same time, access is further constrained 
by shortages and uneven distribution of health professionals, especially nurses, against 
the  backdrop  of  an  ageing  workforce.  High  out-of-pocket  payments  also  remain  a 
significant  barrier  to  access,  with  Bulgaria  recording  the  highest  share  of  such 
payments in total healthcare expenditure in the EU, alongside a high share of private 
spending on outpatient care. Access to healthcare is further hindered by the slow and 
uneven uptake of e-health services across patients and health professionals. 

18 

SWD(2026)  122  –  Second-stage  country  analysis  on  social  convergence  in  line  with  the  Social 
Convergence Framework (SCF), 2026. 

EN 

10 

  EN 

 
(39) 

In view of the close interlinkages between the economies of euro-area Member States 
and  their  collective  contribution  to  the  functioning  of  the  economic  and  monetary 
union,  in  2026  the  Council  recommended  that  the  euro-area  Member  States  take 
action,  including  through  their  recovery  and  resilience  plans,  to  implement  the  2026 
Recommendation  on  the  economic  policy  of  the  euro  area.  For  Bulgaria,  the 
third 
recommendations  (1)  helps 
recommendation  on  the  euro  area,  recommendation  (2)  helps  implement  the  fourth 
recommendation  on  the  euro  area,  recommendation  (3)  helps  implement  the  seventh 
and ninth recommendations on the euro area, recommendation (4) helps implement the 
seventh recommendation on the euro area and the recommendation (5) help implement 
the fifth recommendation on the euro area. 

the  second  and 

implement 

the  first 

the 

HEREBY RECOMMENDS that Bulgaria take action in 2026 and 2027 to:  

1. 

2. 

3. 

4. 

Adhere  to  the  maximum  growth  rates  of  net  expenditure  recommended  by  the 
Council  on  [date],  with  a  view  to  bringing  an  end  to  the  situation  of  an  excessive 
deficit, while making use of the flexibility under the national escape clause for higher 
defence  expenditure.  Reinforce  defence  spending  and  readiness  while  ensuring 
spending efficiency and gradually adapting the budget to sustain structurally higher 
defence spending. Ensure that any measures taken to mitigate the impact of the hike 
in  energy  prices  are  temporary,  targeted  at  protecting  vulnerable  households  or  at 
addressing  the  needs  of  energy-intensive  firms,  preserve  incentives  for  energy 
savings  while  ensuring  that  their  fiscal  cost  is  compatible  with  the  commitments 
under  the  EU  fiscal  framework.  Take  measures  to  address  the  shadow  economy, 
including  by  reducing  the  incentives  for  income  underreporting  and  omission,  and 
improve  the  fairness  of  the  tax  system.  Strengthen  tax  collection,  including  by 
improving  the  recovery  of  arrears,  supporting  tax  compliance  and  broadening  the 
revenue base. 

Ensure continuity of reforms and investments implemented under the Recovery and 
Resilience  Facility.  Step  up  efforts  to  implement  cohesion  policy  programmes, 
building, where appropriate, on the reallocation to strategic priorities and flexibilities 
in the mid-term review of the cohesion policy framework. 

Improve the functioning of the public administration, especially at subnational level, 
by  simplifying  regulation  and  improving  regulatory  tools;  streamlining  and 
digitalising  workflows  and  services,  increasing  interoperability  across  levels  of 
government;  and  developing  further  the  skillset  of  civil  servants.  Improve  the 
effectiveness of anti-corruption measures, particularly in high-level corruption cases, 
including  by  strengthening  the  independence  and  effective  functioning  of  the 
Supreme  Judicial  Council.  Improve  the  quality  and  effectiveness  of  public 
procurement  procedures  and  strengthen  the  independence  and  functioning  of 
regulators. Increase the impact and effectiveness of public R&D investment. 

Further decarbonise the electricity system and reduce reliance on fossil fuels- based 
generation,  including  by  promoting  roll-out  of  onshore  and  offshore  wind  power 
generation,  enabling flexibilisation of supply and demand, upgrading  the  electricity 
grid infrastructure at distribution level and reforming corporate governance of state-
owned  companies 
transparency.  Promote 
modernisation of district heating systems by phasing-out fossil fuel subsidies. Tackle 
energy  poverty  through  targeted  measures.  Encourage  decarbonisation  of  industry. 
Promote  the  roll-out  of  clean  urban,  public  and  rail  transport,  including  by 
accelerating investments into the development of the necessary infrastructure and the 

the  energy  sector 

improve 

to 

in 

EN 

11 

  EN 

5. 

connectivity  in  northern  region.  Improve  climate  and  water  resilience  and  waste 
management. 

teacher 

the  quality, 
training. 

Strengthen competence-based learning. Further improve teaching quality with needs-
labour  market  relevance  and 
based 
training.  Improve 
the  employment  of 
inclusiveness  of  education  and 
underrepresented  groups.  Strengthen  skills  acquisition,  including  adult  learning,  to 
boost  competitiveness.  Address  social  inclusion  by  improving  access  to  better 
integrated employment and social  services,  community-based long-term  care, and  а 
more effective minimum income support. Strengthen effectiveness and accessibility 
of the health system, including by reallocating resources from hospital-based towards 
outpatient  care,  reducing  out-of-pocket  payments  and  addressing  shortages  and 
uneven distribution of health professionals across the country. 

Increase 

Done at Brussels, 

For the Council 
The President 

EN 

12 

  EN