Bulgaria's government withdraws 2026 draft budget after protests

SOFIA, Dec 2 (Reuters) - Bulgaria's government on Tuesday withdrew its 2026 budget plan, the first drafted in euros before the European Union member state adopts the currency on January 1, following nationwide protests against planned tax hikes to finance higher spending.

The minority government of Prime Minister Rosen Zhelyazkov asked parliament in a statement to withdraw the budget.

"After a decision of the parliament the cabinet will launch a new budget procedure," the statement said. A parliamentary committee had adopted the budget plan on a first reading on November 18.  

Thousands of people joined protests on Monday evening in the capital Sofia and several other cities against the draft budget.

BULGARIANS UNHAPPY ABOUT STATE CORRUPTION, TAX HIKES

Opposition parties and other organisations say they were protesting against government plans to hike social security contributions and taxes on dividends to finance higher spending, as well as against state corruption.

"The process of redoing the budget will be rocky, with increased scrutiny from unions, business groups and the public," said Mario Bikaraski, Senior Europe Analyst at risk intelligence company Verisk Maplecroft.

"There is broad consensus about the need for fiscal prudence. However, repeated attempts to increase taxes are likely to inflame social tensions further," he added.

    Around half of Bulgarians oppose adopting the euro, fearing it will impinge on national sovereignty and that retailers will exploit the switch from the national lev currency to the euro to raise prices.

Last week the government had promised to resubmit the 2026 spending plan to parliament after earlier street protests, saying it would allow more time for consultations with opposition parties, trade unions and employers.

Deputy Minister of Labour and Social Policy Ivan Krastev warned on Tuesday that if a new budget were not adopted, payments to those living below the poverty line would be affected, Bulgaria's BTA news agency reported.

"I hope that common sense and political will be found by all participants in the process to ensure the most vulnerable groups in our society are protected," he said. 

(Writing by Ivana SekularacEditing by Gareth Jones)