Bulgaria Opposition, Govt Allies Dread Tax Hikes, IMF Bailout in 2011

BSP leader Stanishev (right) and Secretary Ninova (left) have slammed the government for its fiscal policies. Photo by BGNES

The opposition Bulgarian Socialist Party and the right-wing Blue Coalition, which backs the GERB government, have expressed serious misgivings about the revision of the 2010 state budget.

The draft act for the revision of the 2010 budget is expected to be tabled to the Parliament by the end of the week. Among other modifications, it provides of a state deficit of 4.8% of the GDP in 2010, and allows the Cabinet to use funds from the fiscal reserve, which currently stands at BGN 6.7 B, the only requirement being to have a reserve of BGN 4.5 B in December 2010.

“A second revision of the state budget might be necessary before the end of the year,” declared Tuesday the leader of the Bulgarian Socialist Party and former Prime Minister, Sergey Stanishev.

BSP MP Dimcho Mihalevski also warned that a second revision might be needed in the fall of 2010.

Stanishev pointed out that if the policies of the government don’t change, the projected state revenues will be down by BGN 2.4 B, rather than by only BGN 2 B, as the revised budget forecasts.

“If the GERB Cabinet implements the state budget in its updated version, at the end of the year, they will be facing the question about how to fund the deficit for 2011. They will have to either increase the taxes sharply, or to seek a bailout loan from the International Monetary Fund, or both. 2011 might turn out to be even harder than 2010 for the people, for the economy, and for the country as a whole,” the former prime minister said.

The BSP Secretary Korneliya Ninova backed his claims by emphasizing the fact that no Bulgarian government had had to revise the state budget since 1996, which she sees as an indicator of the Borisov Cabinet’s failure.

“The government wants to squander BGN 4.5 B within one year from the fiscal reserve that the previous government left behind,” Ninova said referring to the claims of the Stanishev Cabinet that the fiscal reserve stood at BGN 8.2 B in the summer of 2009.

The Socialists further slammed the government for cutting the state subsidies for the Bulgarian municipalities by 15%. Stanishev believes that the Cabinet is discriminating against municipalities that are not governed by mayors from the ruling GERB party by reducing their funds more substantially. He saw this as politically motivated, aimed at failing the non-GERB mayors in the 2011 local elections.

The Socialists made it clear they will vote against the proposed budget revision, and will come up with an anti-crisis package of their own – reducing cigarette excise tax from EUR 76 down to EUR 64 per 1000 pieces; redirecting BGN 100 M from unemployment benefits to creating new public sector jobs; and taking money from the ministries of interior and defense in order to give it to the local administrations.

Earlier on Tuesday, Martin Dimitrov, Co-Chair of the rightist Blue Coalition, also warned about a possible second revision of the state budget, which “could necessitate the arrival of the IMF in order to carry out the reforms lacking now but in a harder situation.”

The Blue Coalition, which supports in principle the Borisov government, insists that the 2010 budget deficit be kept under 3%, and to provide for a zero deficit for 2011.

Dimitrov has warned that the reduction of the state subsidies for local authorities must be smaller because otherwise 30 of the smallest and poorest municipalities will go bankrupt, while another 100 will end up in a state of financial freeze.

The rightists suggest putting off the projects for the construction of a National Sports Arena in Sofia, and a Bulgarian Louvre; and reducing District Governors’ administrations and the employees of the Interior Ministry and the Ministry of Defense. They also recommend the mergers of a number of regional government directorates and institutions.

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