Bulgaria's Pension System Faces €0.5bn Deficit and EU Sanction Risk

Economist Shtério Nozharyov warned that Bulgaria's pension system is confronting a shortfall of roughly €0.5 billion for the 2026 budget. Covering the gap would require a state transfer of about 47 % of pension funds, while outdated definitions of first‑ and second‑category labour, unchanged since the 1990s, drive high payouts. Calculations show €400 million is needed for these categories, plus an additional €60 million for the 20‑salary pension benefit granted to civil servants and security sector staff. By contrast, engineers and IT specialists in the private sector receive only two to six salaries upon retirement, while officials receive twenty.

The deficit pushes the 2026 budget 1.8 billion euros above the ECofin ceiling, triggering a formal excess‑deficit procedure that could lead to automatic EU sanctions and forced budget cuts as early as autumn. State spending already accounts for 45‑46 % of GDP, limiting private‑sector competition and raising recession risks. Savings from reform could allow a pension uplift of up to 16 %. To retain EU funding under the 2028‑2034 multi‑annual financial framework, which emphasizes AI gigafactories and renewable energy, Bulgaria must align its investment priorities and address a serious labour‑force shortage.