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Bulgaria’s government announced on Thursday it was withdrawing its 2026 draft budget following street protests at home and warnings from abroad over huge tax increases included in the budget.
The surprise move was announced by Boyko Borissov, leader of the ruling center-right GERB party, who called on the government to resume talks with employers and labor unions to reach a consensus on state finances. The turmoil over the budget comes as the Balkan country prepares to join the euro currency union next year.
The protests have expressed widespread concern over the economic impact of the budget on individuals and businesses. The controversial budget included increasing social security contributions and doubling the dividend tax.
Prime Minister Rosen Zhelyazkov said the budget, which had already been approved on first reading in parliament, would be revised after negotiations with social partners and opposition parties to address its “flaws”.
“The new budget package should keep things balanced and match the goals of the parties in the government coalition. This will ensure that Bulgaria can join the euro zone on January 1 without any problems,” he said.
The opposition and business groups have warned that higher taxes, increased social security contributions and increased spending than planned in the budget could restrain investment and expand the shadow economy.
Earlier this week, European Commission warned that Bulgaria’s draft budget risks breaching EU-recommended limits on net spending growth, while the International Monetary Fund urged the Balkan country to adopt tighter fiscal policy.
People People have taken to the streets to protest against the budget, the biggest protest took place on Wednesday night. Thousands gathered in front of parliament to condemn government plans to raise state pension insurance contributions by 2 percentage points and double the tax on dividends to 10%.
the protesters Also demanded full transparency in public spending and criticized record-high government spending of nearly 46% gross domestic product Plans were made for next year. Organizers estimated that more than 20,000 people attended the protest.
Opponents of the budget argued that the plan to increase spending would have been financed primarily through higher taxes on businesses and workers, as well as a sharp increase in the public debt. He argued that this would lead to inflation without improving the efficiency of public services.