Bulgarian FinMin Takes Swedish Lesson in Fiscal Discipline

Finance | June 2, 2010, Wednesday // 18:48|  views

Swedish Finance Minster, Anders Borg, applauds the economic reform of Bulgaria's cabinet. Photo by BGNES

Bulgaria's Deputy Prime Minister and Finance Minister, Simeon Djankov, ended his trip to northern Europe with a meeting with his Swedish counterpart, Anders Borg.

Borg had praised the Bulgarian cabinet's reforms, particularity those in the tax, pensions and health sectors, as having positive influence on the country's long-term progress and its efforts to overcome the economic crisis, despite being the toughest measures to undertake.

Due to its strong fiscal discipline, Sweden has the lowest budget deficit in the European Union - 1.8% from its Gross Domestic Product (GDP) and registered a 3% growth in the first quarter of 2010.

Borg pointed out conservative fiscal policies work best in times of crisis and, despite being unpopular, they received the support of Swedish public.

The two finance experts discussed the measures to sustain the stability of the EUR and improve the economic situation in the EU.

The Stockholm visit is the conclusion of Djankov's 3-day trip to the 3 countries with the best fiscal discipline in the EU.

On Monday, the Minister was in Talin, Estonia, while on Tuesday, he held talks with the Finnish Minister of Finance, Jyrki Katainen, who praised Bulgaria for its low external debt of 15% of GDP compared to 50% for Finland.

Finland, with 2.4% budget deficit, is also one the most stable EU economies, but forecasts a 2010 deficit of 4.4%.

The goal of Djankov's trip was to exchange experience with good EU practices to plug the budget gap and revive the economy.

Last week, the new center-right government of the Citizens for European Development of Bulgaria (GERB) party approved a revised budget bill, which targets a deficit of 4.8% of GDP on a cash basis and 3.9% of GDP under EU accounting rules, far wider than initial estimates.

The move marks a notable change of course in the government's policy as over the winter and spring it insisted it will do its best to keep the deficit as low as possible, or at least under 3%, in order to meet the criteria for applying to join the euro zone waiting room, ERM II.

The GERB cabinet had only until recently seriously considered the possibility to temporarily raise Bulgaria's 20% flat-rate value added tax (VAT) by up to 4% in a bid to plug a budget gap that has thwarted the new EU member's efforts to join the euro in the near future.

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Tags: finance minister, Simeon Djankov, Boyko Borisov, VAT, GDP, recession, growth, budget deficit, fiscal reserve, Jurgen Ligi, Anders Borg, Jyrki Katainen


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