Bulgaria’s Budget Dilemma: Economist Warns of Local Strains, Eurozone Stability Intact

Economist Vasil Karaivanov has weighed in on the upcoming discussions over Bulgaria’s 2026 budget, noting that much of the political debate is likely to revolve around promises of increased spending ahead of potential early elections. Speaking to Bulgarian National Radio, he said, “The fight will be about how to promise more spending if we are going to go to early elections, so as to accumulate political dividends.” He added that it is typical for tensions surrounding the budget to peak at this time of year and subside by January or February.

Further reading: Political Drama in Bulgaria Escalates: Early Elections Loom as Coalition Cracks Widen

Karaivanov stressed the importance of passing a budget before the start of the new year, while acknowledging that delays remain possible. He suggested that the budget could initially remain in its current form, covering both this year and the next, and be executed according to the standard 1/12 rule, meaning only revenues collected from various sources would be spent. “This is not such a bad option,” he noted, framing it as a pragmatic approach to ensure continuity.

On the issue of Bulgaria’s eurozone membership, Karaivanov emphasized that there is no immediate risk. “The risk is with the measures that need to be taken regarding the budget and the expenses that will be made afterwards,” he explained. He highlighted that even with an approved budget, it is not obligatory to execute all planned expenditures, as actual revenues often fall short of the forecasts.

According to the budget projections, there is minimal growth in spending, marking a shift from the substantial increases seen in previous years. Karaivanov noted that this trend may result in a freeze or slower growth of salaries in certain public sectors. He also warned that politicians will likely attempt to negotiate increased expenditures in communities where they can gain the most political advantage, potentially triggering protest activity.

Karaivanov expressed hope that lawmakers would resist succumbing too readily to public pressure, arguing that yielding once could set a precedent for further demonstrations. He pointed to recent “price shocks” in Bulgaria, sudden and seemingly unjustified price increases, and the difficulty consumers face in coping with them.

Despite the political debates and public frustrations, Karaivanov stressed that Bulgaria remains one of the few EU countries with a regular government. “Bulgaria is not Europe’s biggest problem,” he said, calling political disagreements a natural part of democratic life. The economist concluded by noting that while the EU may not see Bulgaria as a crisis, ongoing instability and policy mismanagement would be felt most acutely by Bulgarian citizens.