Cause and Effect in European Politics and Law

It's the economy stupid. Bulgaria needs a quick agreement with the IMF

Adelina Marini, June 26, 2009

The parliamentary elections are approaching thus increasing the expectations who the winner would be and whether he really would be a winner. And if the American presidential elections, for the first time in many years, smelled of change and enthusiasm, in Bulgaria things are slightly different. The difference is that the Americans were pretty much aware what they wanted from their new president - reforms, change of the economic and political system. They wanted order and stability. But is this what the Bulgarians want is a question that cannot be answered easily. For those who have overcome the club-type voting and are more interested in the future of their company. family budget, job or security, maybe the discussion about the economic programmes of the parties would be more interesting. That is why euinside offers you the main measures which the bigger parties with chances to enter Parliament, included in their platforms. We will mention the platform of the Bulgarian Greens as well, although it is not quite certain whether they will make it for Parliament, but I have never seen more detailed and radical governing programme so far, even in the economic field.

All parties, whose economic platforms are available, insist on enhanced membership to the euro area, whatever that means. From the point of view the procedures for euro area accession, there cannot be any enhancement. What is needed is several criteria to be implemented: a high degree of price stability, sound public finances, a stable exchange rate, which in our case is implemented as our currency is fixed to the euro, low and stable long-term interest rates. In a crisis situation like this a large part of these criteria are difficult to implement at this stage and the ECB said several times that the euro area will not accept members that are not well prepared because this would increase the risk of instability. Speeding up negotiations for euro area membership started to prevail political talking at the end of last year when the profile of the crisis in Bulgaria started to become more clear. One of the reasons, according to euinside, most parties to take this as their strategic goal is that the business wants it. In the end of last year Ivo Prokopiev, president of the Confederation of employers and industrialists in Bulgaria publicly called for the urgent introduction of the euro as a measure against the crisis. (There were even discussions about unilateral introduction of the euro).

We start with GERB (Citizens for the European Development of Bulgaria) because, probably, they will be a first political force at the upcoming Parliamentary elections on the 5th of July. In and interview for the daily "Dnevnik" the economist from the World bank and now and ideologist of the economic ideas of GERB Simeon Dyankov says that, given the crisis and the uncertainties surrounding the budget and its implementation, the following measures would be especially urgent: "From day 1 the budget should be reprogrammed and negotiations with the IMF should start. If we don't have a good budget and if we have a large deficit, the stability of the currency would be jeopardized. Second is the application for the ERM2 and membership to the euro are. Somewhere in between we will have to cut administrations - like the Ministry of state administration and the Ministry of emergencies. The programmes of ministries must be analyzed, some departments might be kept and transferred to other ministries. The bureaucracy of the Ministry of defence must be cut in two", also said Simeon Dyankov, adding that the social securities will also be cut and minimum capital for starting a business will be introduced.

The second political force, most probably, would be the BSP (Bulgarian Socialist Party). There's not much clarity what they intend to do, reading their programme, as euinside wrote recently. One of their ideas is also cut of social securities but it is not mention with how much, and also enhanced increase of income, whatever that means. Obviously, so as not to lag behind, the socialists also want speeding of the ERM2 membership and possible euro area membership as soon as possible. I say that they obviously are trying not to lag behind because they had 4 years to finish the negotiations with the ECB and the Commission and not to interrupt them, as it happened and to behave arrogantly, as sources, close to the negotiations said. Most measures, directed to stimulating the business and included in the governing projects of the BSP, are actually related to more spending instead of saving. For example they want the creation of new mega structures in the country and abroad.

It is not quite certain which one would be a third power the DPS (Movement for rights and freedoms of the Turkish minority) or ATAKA (a nationalist party) but either way none of them has announced publicly their economic intentions. If something appears, we will include it in the analysis.

One of the most detailed and well considered governing programmes is that of the youngest Bulgarian political party - the Bulgarian Greens, composed by ecologists, environmentalists and people that want to save the nature for the future generations and also radical change of the system in the state. To that extent that they want a change in the Parliamentary system by making it with 2 chambers. But, with regard to the economy: decrease of the VAT rate to 18% from the current 20% and introduction of lower rates for culture, education, social services and science; obligatory recovery of 5% of VAT for house expenses against a ticket (there is a similar practice in the US); companies that are registered in off-shore zones will not be allowed to take part in public tenders and other projects, related to public property or natural resources. The Greens don't mention anything about the euro area in their documents.

new 13:35 As euinside promised, we are now giving you some details about the economic platform of the NDSV (The National Movement for Stability and Progress, led by the ex Bulgarian tsar Simeon Saxecobourggotta). Their platform is enormous and quite detailed which is in a way a surprise because the opinion polls do not give many chances to the party for a big representation in the 41st National Assembly and within the tripartite coalition now they could not get support for some of their most advanced proposals. In fact a large part of the 26-page platform is a kind of report of what's been done so far by the government of Simeon Saxecobourggotta (2001-2005) who had a majority in Parliament and as a minor partner in the current tripartite coalition (2005-now). The NDSV is ready to take part in the next government only if the following priorities are to be leading: modernisation of the unreformed sectors of the economy and the budgetary field, improvement of the international image of Bulgaria and a determined fight with corruption.

the NDSV also insists in its economic platform on a standby agreement with the IMF and 2013 to be the deadline for Bulgaria to join the euro area. Beside this, the party wants the health and social insurances to be decreased by 5 percentage points, decrease of the income taxes of the single traders to 10% in 2010, the tax over dividends to drop to 2,5% next year, decrease of the term for return of VAT to 1 month and also, if the budget could afford it - decrease of VAT to 18% from the current 20%. The yellow party also would like to continue its idea to stimulate a first mortgage through different tax alleviation.

The NDSV would also stand for something that would be quite hard to realise given the complex coalition formulas - cutting of unnecessary or restructuring of ineffective administrative structures, cutting of the number of deputy ministers and deputy district governors. 1/10th cut each year of the administrative expenses. By 2013 the budgetary sphere should be diminished by 15-20%, is also part of the priorities of the NDSV.