Bulgaria's Finance Minister Yields Ground on Fiscal Board Vote after Meeting President

Finance | June 8, 2011, Wednesday // 17:06|  views

Bulgarian President Georgi Parvanov (left) and Finance Minister Simeon Djankov (right) are smiling during their meeting on Djankov's proposed Financial Stability Pact on Wednesday; the two have often been at odds in the past 2 years. Photo by BGNES

The parliamentary vote on the proposed changes to the Bulgarian Constitution to adopt a Financial Stability Pact is likely to put off till after the presidential and local elections in the fall of 2011, according to Finance Minister Djankov.

Djankov announced his new tentative deadline for the adoption of the fiscal board on Wednesday after meeting President Georgi Parvanov, with whom he has been at odds, to discuss the project.

Djankov's new position is a retreat from his vigorous push for his brainchild, a fiscal board designed to restrict budget deficit constitutionally, as he previously hoped to see the Pact adopted by September; other representatives of the ruling center-right party GERB such as Parliament Chair Tsetska Tsacheva had even suggested the legislation could be adopted by the end of June.

A statement after the meeting, Parvanov snubbed Djankov's proposed fiscal board.

"I will not allow the Financial Stability Pact, such an important things for all Bulgarians, to becomeĀ a pawn in the election campaigns of the political parties," said Djankov, justifying his new position.

"If we see that there is a lot of work to be done before the final draft of the Pact is ready, then it will be voted on after the elections, which is probably a normal step so that we can be sure that political passions won't affect something that we want to make part of our most important law," he explained.

The Finance Minister's team has told the President that the proposed draft of the Financial Stability Pact is a framework version, and that during parliamentary talks, many issues can be clarified in order to reach a consensus solution.

"The President's principled comment about the Pact was that instead of amending the Constitution, such changes should be made part of the State Budget Structure Act. The President has stated numerous times that he is a supporter of financial stability. We all agree that a Financial Stability Pact for Bulgaria and for Europe is something upcoming and necessary," Djankov, a former senior World Bank economist, explained about the position of Parvanov, a former leader of the Bulgarian Socialist Party, with whom he has been in conflict over various issues in past year-and-a-half.

"We had a useful and purely professional conversation. This Pact is so important for Bulgaria that many of the MPs agree with it but we must make sure that its final version will be perfect from a legal perspective," Djankov stated.

Upon submitting the draft constitutional amendment for discussion by parliamentary parties in late May 2011, 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 17 MPs plus four renegades from the nationalist party Ataka, supposedly 14 MPs from the rightist Blue Coalition (most likely only the 9 MPs from the Union of Democratic Forces (UDF), as the Democrats for Strong Bulgaria part, the other partner in the Blue Coalition, said it is against), and several independents, formerly from the conservative party RZS ("Order, Law, Justice").

The ethnic Turkish party DPS has send mixed signals, first saying it would back the Pact, then declaring it was pessimistic about it.

If the Bulgarian Socialist Party (BSP) and the ethnic Turkish party DPS (Movement for Rights and Freedoms) 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 out of 180), it can then be adopted if it gets two-thirds of the MP votes in a next voting that is required to take place no earlier than 2 months and no later than 5 months after the first vote.

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