Talks on the next EU budget could drag on until December 2027 if France and Germany fail to agree by the end of this year, deputy prime minister Atanas Pekanov has warned. That would also delay the start of the budget, planned for mid-2028, and with it investment in competitiveness.
Pekanov was answering a question at the OMFIF Sofia Forum at the Boyana Residence, in a discussion on the EU's next multi-year financial framework.
Bulgaria backs a European Competitiveness Fund, he said, but wants cohesion funding kept. It belongs to the "Friends of Cohesion" group, along with 16 other states. The group wants the budget to include money for public and educational facilities, regional development and transport links.
Pekanov said the final deal must balance the two aims. EU money should go to the best ideas, companies and research bodies, so that Europe has big corporations with a place on the world market. In other large economies, leading firms get state subsidies, tax schemes and other support, and Europe should also back such firms, he said.
The risk is that investment will pile up in countries and regions that already have top research centres, universities and tech firms, he said. If the developed core and the weaker edge drift too far apart, the EU will face serious economic and political problems, he warned.
Concentrating economic and scientific strength in a few centres also has demographic effects. Pekanov wants young and talented people to return and build their careers in their home countries.
"We must act fast, because otherwise the others will not wait for us," he said. Artificial intelligence and robotics are changing the world too quickly, and Europe cannot put off investment. It has fallen behind on competitiveness and productivity in recent years and must catch up.
Pekanov pointed to warnings from Mario Draghi and Enrico Letta that Europe is losing ground to other big economies. Twenty to 25 years ago it led in some tech sectors, but now it is losing market share. US economist Paul Krugman takes a milder view. He says the gap is not large and living standards in Europe remain fairly high. Pekanov said he shares the gloomier view and finds it more realistic.
He sees the same lag in artificial intelligence. In the 1990s the US gained more than others from the information and communications technology revolution, because it built the technology deeper into its economy. Europe risks repeating that mistake, Pekanov said.
The issue is not whether people start using the new technology, but how deeply it reaches into the economy, he said. More and more people use ChatGPT for everyday tasks, searches and summaries, but that does not change the basic way firms and institutions work.
For that to change, firms, institutions and governments must change how they work and how they are run. That calls for hard decisions on management, politics and institutions. Pekanov is sure the effect of AI on productivity will show up in the macroeconomic data sooner or later.
Bulgaria has companies and research bodies that can compete in the tech fields the EU treats as priorities, he said. The satellite firm EnduroSat is a "unicorn", has grown fast over the past five years and offers competitive prices. It won EU funding from the STEP Scale-up fund, beating German, Finnish and other firms.
Another example is INSAIT, the Institute for Computer Science, Artificial Intelligence and Technology. It is a partnership between Sofia University and two Swiss institutions, EPFL in Lausanne and ETH Zurich. It ranks among the top ten in Europe for computer science papers.
INSAIT won a €2.5m grant from the European Research Council. Before that, other Bulgarian engineering research bodies had tried about 170 times to win such a grant, without success.
The institute attracts leading lecturers from the US, Israel, Switzerland and the UK, who leave posts at other universities. Its work did not stop during six years of political crisis: successive governments gave it extra funding, and Sofia University backed it strongly. Pekanov said Bulgaria should show such success stories more often and build partnerships with other European countries.
On energy, the deputy prime minister still backs the European Green Deal and investment in renewable power. The renewable capacity and batteries that Bulgaria has brought in since summer 2026, paid for from the Recovery and Resilience Plan, have helped make the energy system more stable, he said. Pekanov hopes the batteries will bring prices down, but he sees no such effect so far.
Europe's energy sector is in serious trouble, he said. Energy in Europe costs twice as much as in the US, and in some cases three times as much. Natural gas on European markets costs 11 times as much. Industry feels strong pressure from these gaps.
For that reason Pekanov proposes a review of the EU emissions trading scheme. In his view it is a tool for the green transition and for bringing renewable power into the grid, but it now adds to the competitiveness problems. Its targets for the coming years should be rethought, along with the timing of some parts, including the market stability reserve.
The deputy prime minister also wants to change how the price of electricity is set. At present it is often set by the last source the market needs, and that is often gas. So a fuel whose price depends on geopolitics and on decisions outside Europe sets the price of all electricity. At some times the price depends on coal, which is getting dearer because of the costs under the emissions scheme.
Renewable power sets the market price only for fairly short periods, so its effect on end consumers' bills is still limited, Pekanov said.