Bulgaria to Pay EUR 300 M for 'Euro-Plus-Pact', Firm against Common EU Tax Rates

Bulgaria in EU | March 26, 2011, Saturday // 02:18|  views

European Council President Herman Van Rompuy (R) and European Commission President Jose Manuel Barroso give a news conference at the end the European Union summit in Brussels. EPA/BGNES

Bulgaria's decision to join the "Euro-Plus-Pact" - a deal for closer economic coordination between Euro Area states and non-euro countries which volunteered to join - will cost it EUR 300 M.

Bulgaria will have to pay this sum in the first 12 years after it joins the euro zone, in five equal installments, according to an estimate of the Bulgarian Finance Ministry, Deputy Finance Minister Boryana Pencheva announced in Brussels Friday, as cited by BTA.

On Thursday, the EU 27 leaders, i.e. the European Council, approved the formation of the so called Euro-Plus-Pact.

The "Euro-Plus-Pact" - initially known as a euro zone competitiveness pact or just an euro pact, proposed last month by German Chancellor Angela Merkel and French President Nicolas Sarkozy.

In addition to the 17 Euro Area countries, six non-euro-using states - Denmark, Poland, Romania, Bulgaria, Latvia and Lithuania - have opted to join the Euro-Plus-Pact, with the UK, Sweden, Hungary, and the Czech Republic staying out, at least at the current stage of its formation.

The last name of the Euro-Plus-Pact was used by European Council President Herman Van Rompuy in a Tweeter message announcing the joining of the six non-euro countries.

At first, the "Pact for the Euro", another one of its names, elicited a strong negative reaction from European states both within and outside the euro zone when it was first unveiled by Merkel and Sarkozy last month. Since then it has been watered down to include a set of non-binding targets for harmonizing policy in a range of areas - from labor markets and retirement ages to debt and corporate taxes.

"Bulgaria's accession to this common pact is extremely important since it determines the future of four common European goals - boosting competitiveness, employment, growth, and fiscal sustainability," Pencheva declared.

She further made it clear Bulgaria's has opposed the introduction of common EU tax rates - after the recent proposal for the introduction of a Common Consolidated Corporate Tax Base (CCCTB), a move towards harmonized corporate tax in the EU. At present, Bulgaria has the lowest tax burden in the entire EU, and the lowest EU corporate tax rate - a flat 10% tax; this proves one of its competitive advantages in its quest to attract badly need foreign direct investment as it remains the poorest country in the 27-member bloc.

"The members' national positions are being expressing during the talks we don't accept everything, and on the working level we have declared our opposition, especially with respect to the proposed coordination of tax policies since we would to preserve Bulgaria's trend of stability. The Euro-Plus-Pact provides for a common corporate tax base, and we will continue to stand up for our position. The sustainability of public finance and structural reforms is our national priority," Bulgaria's Deputy Finance Minister said.

She did point out further that the European Council adopted a wider approach to EU coordination within the Euro-Plus-Pact.

"The adoption of the Euro-Plus-Pact guarantees prudent economic policies. The Bulgarian government has been sticking to such produce policies for a year, which is why in this situation Bulgaria is one of the most financially stable and sustainable countries," Pencheva declared.

In her words, another major instrument for guaranteeing the achievement of the Euro-Plus-Goals are national reform programs, and Bulgaria will be ready to present its reform program to the European Commission in mid April.

"Today Bulgaria has become the member of a wider and new Europe," she said.

After the Euro-Plus-Pact was unveiled, Germany has stressed that non-euro members will not be excluded from annual discussions on economic convergence that are foreseen in the pact if they elect to become a part of it.

The most virulent criticism against the Euro-Plus-Pact has been that it literally creates a two-speed Europe - a Europe with a stronger integration around the Franco-German core, and a more estranged periphery. Thus, it would break the taboo of institutionalizing regular meetings of the euro zone leaders, while currently all EU states take part in the major euro zone discussions.

International reports initially listed Bulgaria as one of the "euroless" state that will stay out of the pact together with the Brits, Swedish, Hungarians, and Czechs. Those appeared not to be completely unfounded as Bulgarian Prime Minister Boyko Borisov revealed in Brussels Thursday that key government figures were opposing Bulgaria's joining the Euro-Plus-Pact at this stage. However, an agreement in favor was reached eventually.

Thus, Thursday morning before flying off to Brussels, Borisov told the Members of the Parliament Bulgaria will support the so-called "Euro Pact."

"The political agreement for the Euro-Plus-Pact will be debated by the European Council. We will back it. The financial and economic crisis showed us we need improvement and stabilization," Borisov said.

"The Bulgarian cabinet should not stay outside this key pact. Bulgaria's joining of the Eurozone is crucial for the country because it is a matter of economic stability. Our country will avoid the establishment of a two-speed Europe. We have always worked to get closer to other EU Member States; to halt irresponsible fiscal policies," the PM told the MPs.

Borisov pointed out the currency board was a good move because it was established to tame the economic crisis in 1996-1997, but it is no longer sufficient, adding for this reason Bulgaria will join the "Euro Pact." "Our support is mainly a matter of principle," the PM stated.

Bulgaria's Finance Minister Simeon Djankov and Bulgarian National Bank Governor Ivan Iskrov were against Bulgaria's joining the pact of measures to ensure closure economic coordination of the euro zone countries, termed by European Council President "euro-pus pact", Bulgarian PM Boyko Borisov said in Brussels as he was attending the meeting of the European Council and a summit of the European People's Party, as cited by BTA.

"Everyone's opinion at the end of the day boiled down to this that if we don't join the euro pact now, Bulgaria will be learning only from the media what's happening in Europe, and then we will have nobody to be mad at that there is a two-speed Europe," Borisov stated.

He defended the idea of the euro competitiveness pact, arguing with rhetorical questions, as follows:

"If we want to be competitive to the other economies, we just have to join the pact. Are protests going to feed us? Let's assume everybody is protesting today. Where are we going to get money from tomorrow? That is why Europe is rightist today - because this has always been the engine generating innovations and productivity; this is what leads to a better life - not social concessions and protests," Borisov said.

He did also mention that during the EU Council he would stick to Bulgaria's position against common EU tax rates because the fact that Bulgaria has the lowest taxes in the EU is its way to being internationally competitive.

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Tags: euro, Nicolas Sarkozy, Angela Merkel, France, Germany, Prime Minister, Boyko Borisov, EU, Euro Area, euro zone, euro-plus-pact, Euro Pact, European Council, Herman van Rompuy, Boryana Pencheva, Common Consolidated Corporate Tax Base, CCCTB


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