The debate on anti-crisis measures in Bulgaria

published on 3/23/10 12:46 PM

Luchezar Bogdanov of Industry Watch

Photo: Архив

After a great deal of emotions and public discussions on various ideas for tackling the crisis “en passant” the government, trade unions and employers joined efforts to discuss the measures they needed to adopt to stabilize the Bulgarian financial system. According to government sources, for the first two months of the year alone the budget deficit exceeded nearly 700 million euros. This is due to past debts and decreased revenues. The task before the Bulgarian government now is to raise almost 1 billion euros with which to keep the budget deficit below the 3% threshold throughout the year.

“We have reached consensus on 80% of the measures proposed to trade unions and employers,” Finance Minister Simeon Dyankov said. One of the suggestions is to introduce a 10% tax ease on real estate, acquired through income from the shadow economy. Prime Minister Boyko Borissov did not approve of the idea of increasing flat tax, but nevertheless suggested the introduction of a “luxury tax” on expensive yachts, private jets, powerful cars and large real estate. The idea was dismissed as a populist rather than a fiscally feasible one.

Much to the surprise of trade unions and employers the anti-crisis package includes a proposal to raise VAT to 22 instead of the current 20% for the duration of one year. Some experts claim that this is the fastest way to increase budget revenues, while others fear it is yet another blow on the economy. So far the privatization of the state-owned shares of the large companies such as Sofia’s central heating utility and the National Palace of Culture is certain, as well as the sale of unnecessary state-owned property rented at symbolic prices, etc.

“I find it strange that the trade unions and the employers manage to reach such an agreement while they should be in conflict at least as regards some of the ideas of the economic policy,” economy analyst Luchezar Bogdanov of Industry Watch, told a Radio Bulgaria reporter, and added,

“I think the proposed measures are dominated by a sense of extravagance and exoticism and rely on ‘miracles’ happening. I mean the tax ease, the ‘luxury tax’ and the limitation of the remuneration of the state administration, whose salary exceeds that of the prime minister. All of this could lead to a disturbance in social attitudes, and fierce debates ‘in favour’ or ‘against’ might stir, but these measures fail to address the challenges the Bulgarian economy faces, and what is more, they fail to tackle the issue of the state budget. No country has ever solved a serious fiscal problem by introducing a tax on ‘luxury’ possessions or the one-off taxing of property in the guise of a tax amnesty. No such sources have ever been able to be the pillar of the revenue system in any economy in the world.”

For the time being the Bulgarian budget is faced with the heavy trial to resist the pressure from various branch organizations to increase expenditure. On the other hand, the revenues drop. Bulgaria fears to enter a spiral of an increasing budget deficit and a collapse of its financial stability, which the country has been building for 13 years.

“We need to have a clear will to restore the budget balance in order to do something about it,” Luchezar Bogdanov maintains. “The Finance Ministry does not have a clear prognosis how big the hole in the budget by the end of the year will become. We need serious measures that will raise the efficiency in the public sector, which means that the expenditures in the state should be curbed. We need measures that restrict salaries, investment costs, maintenance costs, etc., but we see the whole rhetoric is aimed at the opposite. Everyone sees the state as some sort of saviour, who will spend a few billion more and things will be all right. The reality however is that the budget is heading towards a huge deficit, while the people proposing the measures claim the government is spending little. Apparently these two don’t go together, which means that one of them is wrong.”

English version by Radostin Zhelev

По публикацията работи: Tanya Harizanova

Последвайте ни и в Google News Showcase, за да научите най-важното от деня!

Share

The debate on anti-crisis measures in Bulgaria

More from category

Balkan developments

Balkan countries are gaining experience on their way to the EU

On the draft composition of the caretaker cabinet and the factors underlying the political situation in Bulgaria

Balkan developments