Bulgaria Almost Certainly to Enshrine 'Financial Stability' into Constitution by End-June

Finance | May 28, 2011, Saturday // 18:57|  views

Bulgarian Parliament Chair Tsacheva is certain that the Cabinet will get approval for an amendment of the Constitution by the end of June 2011. Photo by BGNES

Bulgaria's Parliament will adopt novel amendments to its Constitution known as a "Financial Stability Pact" by the end of June 2011, the institution's head Tsetska Tsacheva announced with a high degree of certainty.

The Financial Stability Pact, a brainchild of Bulgarian Finance Minister Simeon Djankov, is seen as a novel but controversial approach to guarantee state fiscal stability through the country's highest law.

The adoption of the Financial Stability Pact is a priority for Bulgaria's National Assembly for the present period before the summer break, Parliament Chair Tsacheva said speaking on TV7 Saturday, a day after Finance Minister Simeon Djankov formally tabled his project to Parliament after months of tedious negotiations with all major political parties.

The Financial Stability amendment has already been assigned to the Budget and Law Committees of the Bulgarian Parliament, and an ad hoc committee will be set up to deal with it, which will allow the MPs to vote on the project before the end of June.

Tsacheva is fairly certain that the constitutional amendment will be adopted, pointing out that only the opposition Bulgarian Socialist Party is against it with its 40 MPs; the other major opposition force, the ethnic Turkish Movement for Rights and Freedoms (DPS), with 37 MPs, appears to have come around.

"This amendment is aimed at prescribing clear-cut rules for the business and for attracting foreign direct investment by guaranteeing financial stability," Tsacheva stated.

Upon submitting the draft constitutional amendment Friday, Finance Minister Djankov said he hoped the Pact could be adopted by the fall of 2011.

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.

In order to amend the Bulgarian 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.

Ruling party GERB has 117 MPs, and can rely on the support of 18 MPs plus three renegades from the nationalist party Ataka, 14 MPs from the rightist Blue Coalition, and several independents, formerly from the conservative party RZS ("Order, Law, Justice").

If the Socialists (BSP) and DPS join forces, with a total of 77 MPs, they could deny Djankov the three-fourth majority that he needs to pass the amendment.

However, even in this scenario, the amendment stands a fair chance of being passed because 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 that is required to take place no earlier than 2 months and no later than 5 months after the first vote.

As Parliament Chair Tsacheva has indicated, however, the ethnic Turkish party DPS is now expected to support the Financial Stability Pact, which means that the draft amendment can get the support of about 200 MPs out 240.

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