Shteryo Nozharov: Bulgaria is moving towards a Romanian scenario

The actions of the Ministry of Finance are chaotic and without a clear strategic plan, which could push Bulgaria towards a Romanian scenario in the event of a possible excessive deficit procedure, reports the Bulgarian National Radio based on an analysis by economist Associate Professor Shteryo Nozharov. The lecturer at the University of National and World Economy reports a desire to brighten the economy, but believes that the efforts are directed in the wrong direction and do not solve the structural problems in the budget.

Lack of long-term vision

According to the expert, the ruling party is hesitant to implement the necessary severe measures that would balance the budget on an accrual basis, as required by the European institutions.

"Substantial structural reforms must be initiated. The current ruling party is hesitant to undertake such. In an excessive deficit procedure, however, if they are not done now, Bulgaria is heading towards the Romanian scenario", Associate Professor Nozharov points out.

He adds that attempts to shed light do not address the essential problem of the shadow economy, and in the actions of the Ministry of Finance "there is no clear plan" and "it is not clear what the strategic, long-term action is".

Expenses in millions of euros

Despite the instructions published on August 24 to the primary budget appropriations administrators to limit public spending, there is no real cooling. The economist provides specific data on the severity of social measures – tax breaks for families with children amount to 153.38 million euros (the equivalent of 300 million leva), and the modernization of pensions costs another 230.08 million euros.

Additional pressure on the system is also exerted by the increase in the minimum wage, which automatically leads to an increase in the salaries of at least 500,000 people in the public sector.

"The net effect of the whole thing is 66.46 million euros with a budget deficit of 3.73 billion euros" - summarizes the scale of the problem Nozharov.

The dispute over the tax on excess profits

The idea of introducing an extraordinary tax "Excess profits", which would also cover the banking sector, also causes serious disagreements between the institutions. According to Nozharov, such a measure will not reduce the budget deficit by even one euro, since the burden will be transferred directly to end consumers, and regulators do not have the right to impose a price ceiling.

The Bulgarian National Bank (BNB) has already warned that taxing credit institutions will make loans for households more expensive and difficult to access. This position led to a sharp reaction from Deputy Prime Minister and Minister of Finance Galab Donev, who defended the tax and stated that BNB Governor Dimitar Radev allows himself suggestions and interference in the political situation.

In response to this conflict, Associate Professor Nozharov emphasizes that the opinion of the BNB Governor fully coincides with the official position of the European Central Bank (ECB), which categorically denies the practice of member states imposing extraordinary taxes to patch holes in public finances.