Temenuzhka Petkova, Minister of Finance
Mrs. Petkova, July 8, 2025, turned out to be key for Bulgaria regarding our eurozone membership. How will you remember this day—both professionally and personally?
On this date, the ECOFIN Council adopted legally binding acts regulating our accession to the eurozone, and Bulgaria achieved a historic success. This decision marks realizing a long-term strategic goal for our country and personally for me as Minister of Finance. The feeling of pride and joy on that day was immense, resulting from many years of consistent efforts, resilience, and a clear vision for Bulgaria's future.
I believe that eurozone membership will bring significant benefits, such as greater financial stability, a better investment climate, and improved opportunities for economic development. This is a success not only for the institutions but also for every Bulgarian citizen—I am convinced that each of us will feel the advantages in our daily lives. For me, that day remains a symbol of confidence that we can achieve great goals with joint efforts, consistent policies, and hard work.
How will joining the eurozone affect Bulgaria's budgetary policy in the medium term?
Accession to the eurozone will positively impact our country's budgetary policy in both the medium and long term, since eurozone membership entails even stricter monitoring of fiscal policies and compliance with the economic policy guidelines under the Stability and Growth Pact and the European Semester.
Do you plan changes to the fiscal framework and the Public Finance Act in the context of future membership?
As you know, the revised framework for economic governance of the European Union was adopted on April 30 of last year. Its entry into force requires aligning national legislation, including the Public Finance Act, with EU law.
There is an immediate need for changes in budget legislation—the Public Finance Act, the Fiscal Council Act, and automatic corrective mechanisms arising from our eurozone membership as of January 1, 2026. One of the most significant elements of the new framework is the replacement of the previous medium-term documents (the Convergence Programme for non-eurozone members, the Stability Programme for eurozone members, and the National Reform Programme) with an entirely new document—the National Medium-Term Fiscal-Structural Plan for a four-year period, covering the government's mandate. This plan must include commitments to specific reforms and investments and, in this sense, will be considerably more binding for states in terms of compliance with country-specific Council recommendations as well as the EU's common priorities.
Bulgaria's first National Medium-Term Fiscal-Structural Plan for 2025–2028, after a requested deferral due to the political situation at the end of 2024 and the absence of an adopted budget framework, was approved by the Council of Ministers on February 26, 2025, very shortly after the formation of the current regular government.
Unlike the previous documents, the National Medium-Term Fiscal-Structural Plan will not be updated annually. Still, it may only be revised in the event of a new government or certain extraordinary circumstances, while its implementation will be monitored through annual progress reports. The government adopted Bulgaria's 2025 Progress Report in early May this year.
Another key element stemming from the reformed EU economic governance framework is the introduction of a new fiscal rule in the form of a single operational indicator—"net expenditure growth," which, on the one hand, allows for the implementation of planned reforms and investments, and on the other, ensures control so that the budget deficit-to-GDP ratio does not exceed 3% and the public debt-to-GDP ratio remains under 60%. This changes the previous philosophy of fiscal rules.
How will public debt sustainability be ensured under the eurozone's common fiscal discipline?
In implementing public debt management policy, we already comply with the fiscal rules of the reformed EU economic governance framework, namely, that the general government sector debt should not exceed the sustainable level of 60% of GDP. According to the latest Eurostat data, at the end of the first quarter of 2025, Bulgaria's "general government debt-to-GDP" ratio was the lowest within the EU. The value of this indicator for Bulgaria is 23.9%, compared to the EU average of 81.8% and the eurozone average of 88.0%.
National debt fiscal rules, regulated in the Public Finance Act, act as a preventive mechanism. Each year, the State Budget Act sets limits on the maximum amount of new debt that may be incurred during the year and the maximum amount of public debt at the end of the respective year.
What are the expected effects on the budget deficit after joining the eurozone? Will additional consolidation measures be needed?
Eurozone accession is a step toward better and more realistic budget planning and greater transparency of fiscal policy, but it does not directly affect the budget deficit and, in this sense, does not require additional consolidation measures due to accession.
Do you plan to propose a new medium-term budget strategy reflecting the expectations and commitments to the eurozone?
The new medium-term budget strategy is in fact the National Medium-Term Fiscal-Structural Plan, which, on the one hand, regulates much more specifically the fiscal strategy and the commitments for reforms and investments in the medium term, and on the other hand, provides greater stability, since there is no option for annual updating. Once committed, these reforms and investments must be implemented within the expenditure growth framework set out in the plan. The plan also ensures alignment with the government's program and its priorities, goals, and measures for the duration of its mandate. In this respect, national medium-term budgetary documents (such as the medium-term budget forecast and its update) should be consistent with the plan.
Will the structure of expenditures in the state budget change, for example, in social policy or capital expenditures?
Bulgaria's accession to the eurozone and the adoption of the euro itself do not require a change in the structure of expenditures or a redistribution of spending across individual sectors such as education, healthcare, social policy, or defense.
National budgetary policy will remain under the Bulgarian government's control, but there are nonetheless important limitations and requirements that our country must comply with. These include the fiscal requirements of the Stability and Growth Pact, including keeping the budget deficit below 3% of GDP and limiting public debt to below 60% of GDP. This will require a balanced approach to public finance management.
When planning budget expenditures for the respective year, the government will have to strike a balance between economic discipline and social expectations. On the one hand, the state's social role should be preserved and enhanced through targeted support for vulnerable population groups. However, this must be accompanied by targeted measures to ensure the long-term sustainability of social systems, including through reforms, improved expenditure efficiency, and control over demographic and fiscal risks.
On the other hand, a clear priority must be placed on capital expenditures aimed at economic growth and productivity increases. In this respect, better absorption of EU funds and instruments, including strengthening administrative capacity and strategic planning, is of key importance.
Do you foresee changes in tax policy to support competitiveness within the eurozone?
We do not foresee changes in tax policy, since the primary measure supporting competitiveness continues to be the corporate tax rate of 10 percent. The philosophy of Bulgaria's tax policy is to maintain a low tax rate and a broad tax base for corporate taxation, with a limited number of additional tax preferences. This policy is seen as one of the most important incentives for investment and economic growth, because it attracts new investors and allows for a larger share of profits to be reinvested. The overall 10 percent corporate tax rate is among the lowest within the EU and globally. It should always be borne in mind that any change or new measure must be considered and assessed in the context of a country's overall tax policy, including its objectives, the breadth of its tax base, the level of corporate or personal income tax, as well as other factors relevant to each specific case.
What lessons can Bulgaria learn from the experience of other countries in the region that have adopted the euro?
In preparing for eurozone accession, we carefully reviewed and studied the experience of countries that had already gone through this process. The lessons from the Baltic states were particularly valuable for us, as they, like Bulgaria, are small and open economies with currencies that had long been pegged to the euro. Their experience showed us that adopting the euro is smooth and brings lasting benefits when reforms are consistent and well managed.
At the same time, moving in parallel with Croatia after we enter into the Exchange Rate Mechanism II, we had the opportunity to draw directly from its transition experience. We considered the good practices Croatians applied in public communication, price monitoring, and technical preparation. In many respects, Croatia is a good example of successful eurozone membership—the country is today among the fastest-growing economies in the EU (according to World Bank data for 2024, Croatia's GDP grew by 3.8%, ranking second among EU member states). This is a clear sign that the benefits of adopting the euro are substantial, and we expect that they will materialize for Bulgaria as well, both at the macroeconomic level and in the everyday lives of our citizens and businesses.
What is the greatest challenge for you personally as Minister of Finance in the process of Bulgaria's accession to the eurozone—and how do you intend to overcome it?
The greatest challenge in the process of Bulgaria's eurozone accession, for me as Minister of Finance, is related to the scale and complexity of the tasks ahead. These include effectively implementing the information campaign in all its components, adapting the secondary regulatory framework, drafting the first state budget in euro, and preparing for Bulgaria's active participation in EU Council formats where only eurozone countries are present. In addition, as national coordinator of Bulgaria's preparations for eurozone membership, I bear responsibility for the coordination and timely implementation of the activities of all institutions involved in the process.
Of course, all this is part of an extremely demanding process that requires persistence, consistency, and attention to detail. I am convinced, however, that together with the other relevant institutions and organizations and with the team of experts supporting me, we are well prepared to meet the challenges. I believe that with joint efforts, we will ensure a successful, smooth, and fair transition to the euro so that the process is as clear and predictable as possible for both institutions, citizens, and businesses.
