The electoral victory of "Progressive Bulgaria" has at least returned the height of the Bulgarian language. The nonsense, insults and physical attacks have stopped. Unfortunately, populism has permanently settled in the political forces and now parties considered to be systemic are promoting absurd ideas and putting secondary issues in the spotlight, just to gain a little more media attention and some additional likes on social networks.
"Vazrazhdane" planted the stupid fears that the repair of the "Shipka" monument will lead to its destruction and depersonalization. Today, GERB proposed that fuels be taxed with only nine percent VAT and that an additional cut in excise duty be sought as a measure to counteract inflation.
I avoid using medical terms that are used to make diagnoses, as metaphors and means of comparison. This means that for the sake of politicians and parties who are aware of what they are doing, additional negativity is thrown at the terms. Ultimately, only the sick feel ashamed of their condition, and the language of political debate is degrading. That is precisely why GERB's behavior should not be called schizophrenic. Although there is definitely a split in the party. On the one hand, leader Borisov calls on the party to return to its right-wing profile and conservatism, and his deputies want VAT and excise duties on fuels to be reduced.
The reduction in VAT on fuels will mean that the state will collect 540 million euros less in revenue on an annual basis, or almost half a percent of the gross domestic product. It's very easy to act cool when you're not the one making the budget. In the years since Vladislav Goranov took a break from active politics by leaving the National Assembly, the GERB party, which made him Minister of Finance, approved two draft budgets by Asen Vassilev and his draft for updating the budget for 2021.
Let's leave aside the opposition's usual claim that it has an idea with which it can compensate for the lost revenue from the reduced rate with something else and thus preserve the budget. The wild populism that GERB is turning to does not take into account the simple fact that poor people and families are being assisted. Assistance is not provided to everyone indiscriminately. Lowering the VAT rate is a measure that would benefit both middle-class people and owners of powerful cars that consume 15 liters or more per 100 kilometers. The budget cannot be a source of aid to maintain the standard of living of all income classes, except the poor.
A person who owns a car and gets in it every day to go to work or take their children to school cannot be called poor. Inflation will not fall as long as the state gives money to the middle class and the rich to maintain their consumption.
The state contributes to building a standard of living by implementing prudent policies that create benefits in the long term. A standard of living supported by fiscal measures means life on loan. And when GERB deputies criticize the government for not consolidating the budget quickly enough, they themselves render their argument meaningless by proposing a reduction in VAT on fuels.
Today's courage to write off VAT revenues is due to inflation, which leads to an increase in revenues from this tax naturally. However, it does not take into account the risk that consumption will soon contract. Be it under pressure from rising unemployment, which there are indications is coming, or because of rising interest rates, which will also leave less money in the wallets of people who have debts. The European Central Bank has raised its interest rates twice since the beginning of the year. The US Federal Reserve did so for the first time in years, just a few days ago.
What do we do if rising unemployment and interest rates reduce consumption next year and Bulgaria is left without the main engine of its economic growth? We find ourselves with a failed attempt to limit the budget deficit after six years of fiscal waste. In addition to an excessive deficit procedure, do we want to bring about a recovery program from the International Monetary Fund? Just two years after replacing the currency board with the euro, we could be back where we were in 1997, with a government debt-to-GDP ratio four times smaller.
Historically, the easiest way through a crisis in our recent history was achieved by the government of Sergey Stanishev with Finance Minister Plamen Oresharski. They met the global financial crisis and the raging recession with fiscal reserves amounting to 15% of the gross domestic product. They invested where the blow was really heavy - in the financial infrastructure and the preservation of credit activity. They bet on several investment projects in the spirit of Keynesianism and simulated measures for households. The tax relief on mortgage expenses for young families was difficult to implement and took effect with a year's delay. In other words, a palliative measure with a long-term effect, not a momentary solution. Stanishev's government achieved the main thing, preserving enough liquidity to meet more serious problems, if such had arisen.
Today, the budget is under pressure from the spending commitments made during the years of waste, plus the need for national additional payments for projects from the Recovery and Sustainability Plan. For the party that can be called “systemic“ to the greatest extent, after being directly present in the governance of the state for 14 of the past 17 years, it is unacceptable to ride the wave of the cheapest populism.
The only healthy and cost-oriented conclusion from all the shameless cynicism is that the police must keep their high salaries. The everyday cretinism that they have to fight, be it with the conspiracy theorists under “Shipka“ or with the “Spitskommandos“ of “smart beauty“.
The draft budget for 2027 is the first in 17 years in which a real reduction in the deficit is initiated. Those who brought the state to this point must realize how ridiculous and hypocritical it is to create more problems, both fiscal and macroeconomic, and to hide behind those who are trying to return normality.