Bulgarian Parliament Accepts State Budget Act Amendments

Finance | June 30, 2011, Thursday // 11:39|  views

The pact is the brainchild of FinMin from the centrist-right GERB government, Simeon Djankov, who has argued that it will ensure recovery and stable growth for the country. Photo by BGNES

Bulgaria's Parliament accepted Thursday the so-called State Budget Structure Act, connected to the so-called Financial Stability Pact.

The newly passed amendments include enshrining a 2% limit to the budget deficit, as well as a 40% of GDP limit for redistribution.

The pact is the brainchild of FinMin from the centrist-right GERB government, Simeon Djankov, who has argued that it will ensure recovery and stable growth for the country.

After inventing the measures in his pact, Djankov declared he wanted to include them in the country's constitution. However, after he held talks with Bulgaria's President Georgi Parvanov, the Minister has apparently decided to change his mind. Parvanov said that nstead of amending the Constitution, such changes should be made part of the State Budget Structure Act.

During Thursday's debates, Rumen Ovcharov, a key MP from the oppositional leftist Bulgarian Socialist Party, argued that the amendments lacked any reasoned substance and had nothing to do with the country's future financial stability.

According to Martin Dimitrov, co-leader of the rightist Blue Coalition, also oppositional, the amendments are "a step in the right direction", albeit "not enough".

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.

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.

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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Tags: budget deficit, taxes, Bulgaria, Financial Stability Pact, Simeon Djankov, State Budget Structure Act

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