ATHENS — The country that almost got kicked out of the eurozone is now running the powerful EU body that rescued it from bankruptcy. Greece’s finance minister, Kyriakos Pierrakakis, on Thursday beat Belgian Deputy Prime Minister Vincent Van Peteghem in a two-horse race for the Eurogroup presidency. Although an informal forum for eurozone finance ministers, the post has proved pivotal in overcoming crises — notably the sovereign debt crisis, which resulted in three bailouts of the Greek government. That was 10 years ago, when Pierrakakis’ predecessor described the Eurogroup as a place fit only for psychopaths. Today, Athens presents itself as a poster child of fiscal prudence after dramatically reducing its debt pile to around 147 percent of its economic output — albeit still the highest tally in the eurozone. “My generation was shaped by an existential crisis that revealed the power of resilience, the cost of complacency, the necessity of reform, and the strategic importance of European solidarity,” Pierrakakis wrote in his motivational letter for the job. “Our story is not only national; it is deeply European.” Few diplomats initially expected the 42-year-old computer scientist and political economist to win the race to lead the Eurogroup after incumbent Paschal Donohoe’s shock resignation last month. Belgium’s Van Peteghem could boast more experience and held a great deal of respect within the eurozone, setting him up as the early favorite to win. But Belgium’s continued reluctance to back the European Commission’s bid to use the cash value of frozen Russian assets to finance a €165 billion reparations loan to Ukraine ultimately contributed to Van Peteghem’s defeat. NOT TYPICAL Pierrakakis isn’t a typical member of the center-right ruling New Democracy party, which belongs to the European People’s Party. His political background is a socialist one, having served as an advisor to the centre-left PASOK party from 2009, when Greece plunged into financial crisis. He was even one of the Greek technocrats negotiating with the country’s creditors. The Harvard and MIT graduate joined New Democracy to support Prime Minister Kyriakos Mitsotakis’ bid for the party leadership in 2015, because he felt that they shared a political vision. Pierrakakis got his big political break when New Democracy won the national election in 2019, after four years of serving as a director of the research and policy institute diaNEOsis. He was named minister of digital governance, overseeing Greece’s efforts to modernize the country’s creaking bureaucracy, adopting digital solutions for everything from Cabinet meetings to medical prescriptions. Those efforts made him one of the most popular ministers in the Greek cabinet — so much so that Pierrakakis is often touted as Mitsotakis’ likely successor for the party leadership in the Greek press. Few diplomats initially expected the 42-year-old computer scientist and political economist to win the race to lead the Eurogroup after incumbent Paschal Donohoe’s shock resignation last month. | Nicolas Economou/Getty Images After the re-election of New Democracy in 2023, Pierrakakis took over the Education Ministry, where he backed controversial legislation that paved the way for the establishment of private universities in Greece. A Cabinet reshuffle in March placed him within the finance ministry, where he has sped up plans to pay down Greece’s debt to creditors and pledged to bring the country’s debt below 120 percent of GDP before 2030.

BRUSSELS — The European Commission on Tuesday slapped a red flag on Finland for spending too much and warned others to tighten their belts to avoid getting the same treatment.  The EU executive unveiled the full list of countries that are overspending, as part of the Commission’s biannual “European Semester” that checks whether governments are within the EU’s rules for public spending.  Red flags, known as excessive deficit procedures (EDPs), signal concerns about countries’ financial health to investors. Brussels can impose a fine if governments refuse to adopt measures to bring their finances back in line. Brussels reintroduced the EU’s rules for public spending last year after the Commission gave capitals free license during the pandemic, which plunged the EU’s economy into the worst recession since the Second World War. While the bloc’s economy has picked up this year, many governments are struggling to comply with the EU’s rules amid trade tensions with the U.S. and mounting defense budgets to deter Russian aggression. One of the countries on Russia’s doorstep, Finland, was reprimanded for exceeding the EU’s cap on budget deficits, which limits how much a country can spend beyond what it collects in taxes.  Economy Commissioner Valdis Dombrovskis. | Thierry Monasse/Getty Images The rules limit the deficit to 3 percent of a country’s economic output. Recent tweaks to the rules allow governments to spend an additional 1.5 percent of GDP on defense. But the numbers still don’t add up for Helsinki. “The deficit in excess of 3 percent of GDP is not fully explained by the increase in defense spending alone,” Economy Commissioner Valdis Dombrovskis told reporters in Strasbourg. Germany narrowly avoided the same punishment. Separately, the Commission checked whether governments’ expected spending in 2026 complies with their five or seven-year plans that were approved by Brussels. So far, Croatia, Lithuania, Slovenia, Spain, Bulgaria, Hungary, the Netherlands, and Malta aren’t doing enough. Failure to act could see Brussels reprimand the eight countries at the next European Semester in June.  POLITICO took a deeper look at some of the key countries and graded their current performances. FINLAND: E The Nordic state got a slap on the wrist from Brussels as its deficit is set to exceed the EU’s limit for the next two years. Once a paragon of fiscal stability, Finland is now in the same EDP basket as the indebted nations of France, Italy, and Belgium. As a result, Helsinki will have to reduce the deficit. That’s a tall order for a country facing overstretched social and health budgets, as well as a ballooning defense bill. ROMANIA: D+ Romania can breathe a sigh of relief after today’s announcement. Dombrovskis praised the country’s recent economic reforms and ruled out triggering the nuclear option — a suspension of the country’s payouts from the EU budget, which are worth billions.  But the country is not out of the woods. At 8.4 percent of GDP, its 2025 deficit remains by far the highest in the EU, and painful domestic reforms will be required to reduce it significantly in the years to come. GERMANY: C The country’s budget deficit is expected to reach 3.1 percent of GDP this year. That’s technically a breach of the rules. But Brussels refrained from punishing the bloc’s economic powerhouse, because the breach is “fully explained by the increase in defense spending,” the Commission said in a statement. But there is trouble ahead. Germany plans to continue its spending spree next year to juice growth, only curbing expenditure later. That won’t be easy, as China threatens the country’s export-driven economy and Chancellor Friedrich Merz’s grand coalition needs to deliver reforms to revive growth. Berlin is taking a huge gamble. Brussels too. FRANCE: C- France is in the middle of a budget crisis and is not even sure that it will manage to adopt the 2026 budget by the end of this year. That doesn’t seem to worry Brussels too much for the time being, especially considering that France received its EDP red flag in 2023. The Commission found that the French budget plans for next year are compliant with its recommendations and encouraged Paris to continue on this path.  But not even France’s prime minister knows what his budget for next year will look like. Sébastien Lecornu has pledged to bring the deficit down to 5 percent of GDP. But that goal is at risk, as contradictory amendments to the draft budget in parliament undermine the chances of a deal before Christmas. HUNGARY: F  Hungary is facing a worrying situation because it’s not making the necessary cuts in 2026 to exit the EDP. For now, the Commission has merely warned Hungary to cut spending in 2026. But if Budapest ignores such calls, Brussels might threaten to issue fines during its next budget review in Spring. Hungarian Prime Minister Viktor Orbán is unlikely to heed Brussels’ calls as the country is heading to the polls next spring and he faces the risk of losing power after almost a decade.  ITALY: B- Has Europe’s perennial fiscal bad boy turned good? That’s what it looks like, with Italy’s deficit set to fall to 2.6 percent of GDP next year, while government spending is forecast to stay below the limits imposed by the EU’s fiscal rules. That puts it on track to exit its EDP, if it can prove that debt is set to trend lower in the long term. Other good news: Rome’s tax take is trending above economic growth, helping to fill its coffers and pay down debt.  It’s not all good news. Italy remains the second-most indebted country in the EU. That isn’t changing next year, with government debt expected to increase to 137.9 percent of GDP. But any positive change is welcome, especially when it’s the class clown who is finally hitting the books.

The European Commission is considering tying pension reform to cash payouts from the EU’s next €2 trillion budget as it attempts to protect member countries’ finances from a looming demographic crisis. Three EU senior officials told POLITICO that the EU executive’s economic and finance legislative arms are looking into buttressing countries’ creaking state pension systems by recommending retirement savings policies to individual countries. If EU capitals ignore these country-specific recommendations, or CSRs, then they might not get their full share of the EU’s seven-year budget from 2028. “Our job in the Commission is to help countries do the difficult stuff,” said a senior Commission official, who, like others quoted in this story, spoke on the condition of anonymity to speak freely. “CSRs would be well suited to do it” by “linking reforms to investment.” The EU faces a toxic cocktail of high debt, an aging population and declining birthrates. Combined, they will cripple any public “pay-as-you-go” pension system that relies on taxpayers to provide retirees with a source of income. That’s a problem today as well as tomorrow. Over 80 percent of EU pensioners relied on a state pension as their only source of income in 2023. That overreliance has left one in five EU citizens above the age of 65 at risk of poverty, the equivalent of 18.5 million people. Brussels’ goal is twofold: Alleviate the pressure on the state coffers to keep pensioners afloat, and help create a U.S.-style capital market by putting people’s long-term savings to work. The idea, while well-intended, would be politically difficult and has deputy finance ministers wincing at the thought. Pension policy lies well outside of the EU executive arm’s legal reach. Even then, the risks of tying EU funds to politically toxic issues could spell disaster for governments, especially when democracy’s most loyal participants are above the age of 50. “You can’t buy pension reform,” said a deputy finance minister. “It’s going to hit the nerve of what democracy is about.” Over 80 percent of EU pensioners relied on a state pension as their only source of income in 2023. | Dumitru Doru/EPA Pension reform also has a habit of bringing protesters onto the streets. In Brussels, police clashed with trade unions on Tuesday, who were demonstrating over austerity measures that include raising the age of retirement from 65 to 67 by 2030. Belgium got off lightly when compared to France, which witnessed months of protests in 2023 when President Emmanuel Macron raised the retirement age from 62 to 64. Even then, France’s recently reinstated prime minister, Sébastien Lecornu, announced Tuesday that he’d put Macron’s pensions reforms on ice to overcome a parliamentary crisis that’s made it impossible to pass a budget. Postponing the reforms could cost Paris up to €400 million next year at a time when the government tries to tighten its belt and reduce the country’s ballooning debt burden. The Commission’s focus would stop short of setting retirement age or mandating monthly payouts to pensioners. Brussels’ reform plans instead home in on incentivizing citizens to save for retirement and encouraging companies to offer corporate pension plans to employees. CSRs are part of an annual fiscal surveillance exercise that the Commission uses to coordinate economic policies across the bloc. These recommendations are negotiated with EU capitals in a bid to fix a country’s most pressing economic problems. The Commission doesn’t consider this coercion, just sound economics. “If it’s on pensions, then so be it,” a second senior Commission official said. POST-PANDEMIC CARROTS AND STICKS EU capitals have had a habit of ignoring CSRs in the past. That could change if the Commission adds cash incentives, an idea that was born out of the EU’s €800 billion post-pandemic recovery fund. The Commission also saw an opportunity to incentivize governments to enforce costly reforms to modernize the bloc’s economy by setting targets that’d unlock EU funds in tranches. For countries like Spain, these included pension reform. The carrot and stick strategy proved such a hit within the Berlaymont that it wants to use the same system in the next EU budget, especially if it helps add teeth to CSRs. Not everyone’s a fan. The mountains of paperwork that governments had to amass to prove they’d met the Commission’s demands slowed progress, leaving hundreds of billions of euros on the table. “We don’t know why the Commission is so fond of this model,” said another deputy finance minister, who poured cold water on the idea. “[Pension reform is] hugely controversial. I highly doubt anyone’ll do it.” Giorgio Leali contributed reporting from Paris.

A jailed Bulgarian mayor whose detention is increasingly seen as a litmus test of the rule of law in the Balkan country says the EU should ramp up its pressure on Sofia to halt its descent toward authoritarianism. Mayor Blagomir Kotsev of Varna, Bulgaria’s third-largest city, was arrested July 8 on graft charges, which he has denied. His liberal anti-corruption We Continue the Change party insists the high-profile case is politically motivated and shows the country’s judiciary has been weaponized. The arrest has sparked nationwide protests and triggered a renewed outcry over the influence of organized crime in the country of 6.7 million people. Former Prime Minister Nikolai Denkov, from Kotsev’s pro-EU party, said Bulgaria was in a “state of dictatorship.” Kotsev’s plea for Brussels to take action comes as liberals in the European Parliament call for Bulgaria’s EU funds to be cut over the arrest. Valérie Hayer, chair of the Renew group, said Kotsev’s detention revealed the country’s “institutional perversion.” Bulgarian President Rumen Radev has argued it is “increasingly difficult for Europe to be lied to about what is happening in Bulgaria,” accusing the judiciary of “mercilessly” pursuing the opposition while turning a blind eye to those in power. Speaking to POLITICO during his daily 10-minute slot for telephone calls from jail, Kotsev said the EU should exert “more political pressure” on the Bulgarian government. Before his arrest, he said, he had been warned he was under political attack. The blitz was due to his party, which runs on an anti-mafia platform in a Black Sea city notorious for politically-connected mob crime and Russian influence. Kotsev said he was threatened that he could end up like jailed Turkish mayors opposed to the rule of President Recep Tayyip Erdoğan. “Some people were saying to me: ‘I heard that you should [quit] this party because it’s going to be dangerous for you.’ I received a signal that ‘if you don’t do it, this will happen; look what happened in Turkey; look at what happened in other places.’ And actually, the scenario is very similar to what I see in other places outside of Bulgaria, but they’re not in the EU,” he said. “I’m very much concerned that we’re an EU member country and these things are happening here.” Prime Minister Rosen Zhelyazkov from GERB said in July that the country’s independent judiciary should be left to do its job. CAPTURED STATE Rule of law has long been a concern in Bulgaria. Reformist politicians and investigative journalists say they live in a “captured state” where the judiciary and Bulgaria’s sprawling security apparatus are linked to organized crime. The European Commission has noted the perception of judicial independence in Bulgaria is “very low.” The reformist opposition, including Kotsev’s We Continue the Change, argues it is being targeted for its success in winning regional elections in large cities such as Sofia and Varna — infuriating the old political order, which has lost lucrative public contracts as a result. Bulgarian President Rumen Radev has argued it is “increasingly difficult for Europe to be lied to about what is happening in Bulgaria,” accusing the judiciary of “mercilessly” pursuing the opposition while turning a blind eye to those in power. | Hristo Rusev/Getty Images Indeed, public contracts play a key role in the case against Kotsev. Plamenka Dimitrova, a catering manager who received lucrative contracts from the previous Varna administration, has accused Kotsev of trying to extort money from her for new contracts. The embattled mayor has been charged with seeking a 15 percent cut from school and kindergarten meals. “If I, as the mayor of the country’s third-largest city, can be targeted, it could happen to any ordinary citizen,” Kotlev said. “Anyone can be jailed while under investigation. It can take months or even years, and even if you’re innocent, you can remain in custody until someone decides to release you.” “I’m very worried, and it’s not just me — many people in Bulgaria are asking where we stand in terms of our judicial system,” he added. “This concerns me deeply because instead of improving as a member of the European Union, things are getting worse.” STRATEGIC PORT Varna, Bulgaria’s largest port, is strategically important for NATO and European security. It is also a hub of Russian cultural and economic influence and is home to several thousand Russian citizens. For decades it was run by the GERB party of PM Zhelyazkov and former premier Boyko Borissov, who is still one of the country’s main powerbrokers. Former PM Kiril Petkov, now a lawmaker with We Continue the Change, described the case against Kotsev as part of a broader campaign against opposition parties. The drive, he said, had been orchestrated by the country’s chief prosecutor, Borislav Sarafov, to protect the interests of Borissov and sanctioned oligarch Delyan Peevski, head of the DPS-New Beginnings election coalition that de facto supports the current government. President Radev has also focused attention on Borissov and Peevski in discussions of the rule of law, saying: “Everyone sees that democracy in our country is a façade, the government is a decoration for the Peevski-Borisov duo, and justice is selective.”  Petkov said it was important that the EU wakes up to the fact that this is not “just a Bulgarian issue” but could also affect Black Sea security. “A city without a mayor benefits Putin’s regime,” Petkov told POLITICO. POLITICO contacted both GERB and DPS-New Beginnings but received no response. The latter has dismissed We Continue the Change as a party of “corrupt and compromised politicians” in its statements. In July, Zhelyazkov from GERB said: “In a democratic state governed by the rule of law, there are two basic principles. The first principle is the presumption of innocence. The second basic principle is the independence of the judiciary. If we want to be a state governed by rule of law, we must respect both principles.”  In the meantime, the political drama has led to theatrics. Seeking to confound his critics, who accuse him of seeking revenge against We Continue the Change for his own arrest in 2022, Borissov said he’d happily lobby for Kotsev’s release. “If they give me a Blago Kotsev T-shirt, I’ll wear it!” he said earlier this month. In typically pugnacious form, Peevski last week ended up in a vulgar dispute on a street in front of the parliament with Assen Vassilev, chairman of We Continue the Change. “Go off and get screwed at home!” Peevski barked at him. From jail, Kotsev said people were scared by Bulgaria’s descent from the rule of law. “I’m really afraid of the fear I see outside,” Kotsev said. “People are afraid to speak up against what is happening.”