Currency Peg Father 'Not Impressed' by Bulgarian Socialist Govt

Finance | October 20, 2013, Sunday // 12:59|  views

Professor Steve Hanke, photo BGNES

The Bulgarian government forecast of 1.9% economic growth in 2014 is unrealistic, according to US John Hopkins economist Steve Hanke.

In an interview for the Bulgarian National Radio, the professor, called in Bulgaria the "Father of the Currency Board, said the current government will not be able to successfully deal with budgetary goals and its intention to borrow, even a small loan, destroys the "Bulgarian trade mark" - the discipline of the Currency Board.

According to him, the government has a problem with discipline and experiences considerable difficulties related to the general political environment that allows corruption and misuse of EU funds.

"The political class in Bulgaria is not only dysfunctional, but almost criminal. We are talking about corruption here," said the professor and concluded: "Sofia is one of the leading capitals of corruption in the world and that's written all over the international press," he pointed out.

Hanke recalled data from the index of poverty after the economic collapse in 1997, according to which it worsens every time socialist governments come to power in Bulgaria.

"The Government of Prime Minister Ivan Kostov had good results due to the introduction of the currency board. Then the Cabinet of Simeon Saxe-Coburg also performed very well. The poverty index worsened every time when socialist governments ruled the country. And now I'm not impressed by this rule either, in every aspect, even for small technical things like the outlook for economic growth. No one has confirmed this forecast," said the economist.

According to him, the idea of the Cabinet to borrow to invest in the economy and this way push its growth is inadequate. In his words, technically this was not a problem because government debt is extremely low relative to the gross domestic product, GDP, but in this case the issue was credibility.

"This means breaking the discipline of the Currency Board. This is why I think it is bad in terms of credibility, as it does not fit the disciplinary policy Bulgaria has been implementing since 1997. For me something is changing because the subject of discipline is being removed from the system," stressed Hanke.

Asked what must be done, he replied: "The only positive that Bulgaria has is the Currency Board and the flat tax, everything else is negative."

According to him, taking the loan would not endanger the Currency Board, but it might be included in the assessment of the country's credit rating.

"I sincerely hope the Bulgarian economy 1.9% growth forecast will materialize, but I'm not convinced that this will happen," the professor concluded.

We need your support so can keep delivering news and information about Bulgaria! Thank you!

Tags: currency board, father, Bulgaria, Socialist government, economic growth, forecast, index of poverty, corruption, GDP, Ivan Kostov, Simeon-Saxe Coburg, GDP, flat tax, EU funds, misuse, professor, Steve Hanke


» Related Articles: