Bulgarian Finance Minister's 'Fiscal Stability' Brainchild Enters Parliament

Finance | May 27, 2011, Friday // 20:17|  views

Bulgarian Finance Minister Djankov (right) with his deputies Pencheva (left) and Goranov (back) on their way to present the proposed Financial Stability Pact at the end of February. Photo by BGNES

Bulgaria's Finance Minister Simeon Djankov submitted to parliament on Friday a plan, known as the "Financial Stability Pact", which proposes constitutional amendments in a bid to ensure the stability of state finances.

The Parliament is expected to set up a special commission to discuss the legal amendments needed before the proposals are put to the vote, Djankov told reporters.

"I have been assured by quite a lot lawmakers that the constitutional changes can be approved by the fall," he said.

The three main pillars of Djankov's Financial Stability Pact to be solidified via Constitutional amendments are introducing a limit to allowed budget deficit, restricting the ability of the state to redistribute public funds as a percentage of the GDP, and introducing a qualified majority vote of two-thirds of the votes in Parliament to change Bulgaria's direct taxes.

The plan envisages capping the budget deficit at 2% of GDP product and spending at 40% of GDP.

Djankov's Financial Stability Pact is expected to enter into force as of January 1, 2013, several months before the expiration of the four-year term of the Borisov Cabinet and before the regular parliamentary elections provided that the government serves its full term. This means that the Pact, if approved, will be in force for those ruling Bulgaria after the present Cabinet of Boyko Borisov.

Djankov believes that the proposed measures will "cement" Bulgaria as having one of the strictest fiscal policies in the European Union, and will be supported by both the rightist and the center-leftist opposition.

It is highly doubtful whether Djankov will be able to get his fiscal board through. In order to amend the Constitution, the Borisov government will need to have three-fourths of the MPs, or 180 MPs, to vote in favor of the motion in three different votes. If the initiative failed to get a three-fourth majority but still musters more than two-thirds of the votes (160), it can then be passed if it gets two-thirds of the MP votes in the next voting, which does give the Bulgarian Finance Minister a reason to hope that he might be able to come up with 160 votes through a non-partisan ad hoc coalition.

It is still unclear if the Cabinet stands a decent chance to muster enough votes to get the Djankov plan through since the minority government of the ruling party GERB has 117 lawmakers.

The opposition in the face of the Bulgarian Socialist Party and the ethnic Turkish party DPS has a total of 76 MPs, which is enough to block the motion.

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