EU's Economic and Financial Affairs Council (ECOFIN) has confirmed the decision of the European Commission to terminate the excessive deficit procedure against Bulgaria.
European Union Finance Ministers met in Brussels on February 14 and 15, 2011, confirming the recent position of the EC that Bulgaria needs take no further steps to curb its budget deficit under the bloc's rules on government finances.
The European Union's executive said on January 27 that four countries, including Bulgaria, have been stricken off its deficit watch list as they have taken adequate steps to correct it.
"The Commission concluded that on the basis of currently available information Cyprus, Finland, Bulgaria and Denmark have taken action representing adequate progress toward the correction of the excessive deficit," it said in a statement.
"[For] these member states, no further steps in the excessive deficit procedure are needed at present," the EU's executive arm said in a brief statement.
The European Commission launched in July last year an excessive budget deficit procedure against Bulgaria and 24 other EU member-states to ensure that the countries reduce swiftly their state spending, and keep their budget deficit below 3% of the GDP, as stipulated by EU's Stability and Growth Pact. The excessive deficit procedure against Bulgaria was confirmed by the EU Council on July 13, 2010.
On Tuesday, ECOFIN has concluded that the Bulgarian authorities have prevented a worsening of the budget balance in 2010, and have undertaken measures for fiscal consolidation with respect to the 2011 budget. Based on these steps, ECOFIN believes that no further additional "excessive deficit procedure" steps are needed on part of Bulgaria, the press office of the Bulgarian Cabinet pointed out in a statement Tuesday night.
However, ECOFIN still recommends close supervision of the execution of Bulgaria's 2011 budget. It also recommend that the Bulgarian government should be ready at any moment to adopt additional measures, should the 3% threshold of the deficit be surpassed.
At the end of April 2010, Bulgaria's Prime Minister Boyko Borisov and Finance Minister Simeon Djankov said the previous Socialist-led government had kept them in the dark over BGN 2.16 B contracts, which pushed the 2009 deficit up from a projected 1.9% to 3.7% of GDP
In the first of its twice-yearly reviews of government finances in the 27-member bloc, Eurostat said the Bulgarian government's budget deficit in 2009 was 3.9% of gross domestic product.
Prime Minister Boyko Borisov placed the blame squarely on the shoulders of the country's former Socialist-led administration, saying the government has lied to the EU colleagues about the country's readiness for the euro zone, being unaware of this trap.
The EU's Stability and Growth Pact requires governments to maintain public deficits below 3% of gross domestic product.
Final Eurostat data showed that Bulgaria ended 2009 with a deficit of 4.7%, while the 2010 projections were for a deficit of 4.8%.
Yet, preliminary date released in January 2011, showed that Bulgaria did better than expected in 2010 in terms of state finances. It registered a budget deficit of 3.9% in 2010 instead of the forecast 4.8%.
According to estimates of the Finance Ministry, Bulgaria's deficit under the consolidated fiscal framework on cash basis was BGN 2.8 B in 2010, or 3.9%.
The accrual deficit, which is measured according to EU accounting rules, was 3.6%. According to Bulgaria's revised 2010 State Budget Act approved in June, the expected 2010 budget deficit was 4.8%, or BGN 3.691 B.
Thus, even though its state finances performed better than expected, Bulgaria still failed to keep its deficit under 3% as required by the EU Stability and Growth Pact; after its 2009 deficit exceeded 3%, since the summer of 2010, Bulgaria has been placed under the EU Excessive Deficit Procedure, a program for reducing the deficit below 3%.
In early December 2010, the Bulgarian Parliament approved the 2011 state budget, which provides for an economic growth of 3.6%, and a budget deficit of about 2.75% of the GDP, barely below the 3% threshold of the EU Stability and Growth Pact, which is also required for ERM II and euro zone accession.