Bulgaria’s government on Thursday announced it is withdrawing its draft 2026 budget following widespread street protests against steep tax hikes and international warnings over fiscal plans.

The decision was announced by Boyko Borissov, leader of the ruling center-right GERB party, who called for renewed dialogue with employers and labor unions to reach a consensus on the state budget. The turmoil comes as Bulgaria prepares to join the eurozone next year.

The proposed budget had sparked public concern for its economic impact, including increased social security contributions and a doubling of the dividend tax. Prime Minister Rosen Zhelyazkov said the budget, approved in parliament on a first reading, will be revised after consultations with social partners and opposition parties to correct its “defects.”

“The new budget package should remain balanced and align with the goals of the government coalition. This will ensure Bulgaria can join the eurozone on January 1 without problems,” he said.

Opposition groups and business representatives warned that higher taxes and planned spending could hinder investment and expand the shadow economy. Earlier, the European Commission said the draft budget risked breaching the EU’s recommended cap on net expenditure growth, while the IMF urged tighter fiscal measures.

The largest protests occurred Wednesday night, with thousands gathering in front of parliament to oppose a 2-percentage-point rise in pension contributions and a 10% dividend tax. Demonstrators also demanded transparency in public spending and criticized planned government expenditure, estimated at a record 46% of GDP for next year. Organizers said more than 20,000 people took part.

Critics argued that the higher spending would rely on increased taxes on businesses and workers, along with rising public debt, potentially fueling inflation without improving public service efficiency.