KRIB will discuss the proposal of the Confederation of Employers and Industrialists in Bulgaria (KRIB) for a discussion on tax and social security issues

I read the CITUB response, with which they largely confirm the CITUB data and invite us to a round table on tax and social security reforms. CITUB will discuss this invitation at its next board meeting, as this is the normal approach in the social dialogue with which the CITUB should have started. And not to blow up the dialogue with its political bomb for a radical increase in taxes, usurping the territory of the democratically elected legislative and executive branch.

In the spirit of the CITUB's attempt to refute some of the CITUB's theses in a calmer tone, I still want to say:

1. To imply that the Bulgarian economy has been developing unsustainably over the last 20 years is frankly unthinkable, considering our convergence to the average level of European development and even exceeding it in Sofia. Any reflection starting with this statement is political speculation.

2. The CITUB assumes that the state will not only continue to operate in a deficit similar to this year's, but should even increase it by giving ideas on how to take more money from workers and entrepreneurs and transfer it to the central budget. The CRIB reminds that the central budget is the responsibility of the democratically elected rulers of the state and they bear political and criminal responsibility for budget management. The social partners should prioritize the sustainability of the economy and the development of entrepreneurs' opportunities and workers' rights, not the budget. Considering that deficit spending over the last half century created the current inflationary era, it should not continue to be taken for granted, but should be corrected - otherwise the Romanian scenario awaits every young market economy long before it reaches the levels of debt and taxes known to us in countries with centuries-old and even millennial accumulation of capital.

3. According to the NSI, as of the second quarter of 2025, 640,000 people work in the public sector, and 1,900,000 people in the private sector. KRIB does not make a general difference in the structure of employment in the public sector with few exceptions, as human history has proven the long-term inefficiency of economies dominated by public employment. The reasons for this are, for example, the unavoidable principal-agent problem (even a democratic society controls the public sector as an owner only once every 4 years, while private shareholders exercise control daily), the moral hazard in resource management (benefits for the manager, costs/harms for everyone), the lack of adequate price incentives and transfer of natural network knowledge in society, the lack of clear market responsibility in the event of bankruptcy (public enterprises are traditionally saved with public money or are given monopoly or dominant positions with which to guarantee their revenues) and others. The Bulgarian people, we believe, have learned these lessons the hardest way in history, considering our very recent transition from an inefficient communist economy to a market economy.

4. Just for reference, the Bulgarian state has a dominant influence in 266 public enterprises, all of which suffer from the unavoidable inefficiencies and defects cited in the previous point. An interesting note is that Bulgaria has more public enterprises than the US, UK, Japan, France and Canada combined. Bulgarian enterprises will employ around 120-130,000 people by 2023. The book value of the portfolio is BGN 32 billion. For comparison, in South Korea 147,000 people work in public enterprises worth BGN 365 billion. In Finland 72,000 people work in enterprises worth BGN 67 billion. In Greece 42,000 people work in enterprises worth BGN 149 billion.

5. As we noted, the large public sector in Bulgaria worries KRIB, but it is not our main topic of work, since the executive and legislative branches are responsible for it – that is why they run for elections. And it is for this reason that we believe that KITUB behaves as a radical political organization, focusing fanatically on the disproportionate well-being of the public sector, at the expense of everyone else. Because sustainable productivity, stimulated every minute through price signals and controlled daily through shareholder supervision, is ensured precisely by the private sector. It is at the expense of this private sector that subsidies and transfers for loss-making public enterprises are provided, or potential markets and investment opportunities are lost at the expense of secured monopolies and dominant positions.

6. It would be funny, if it were not sad, to repeat the mantra that final consumption drives economic growth. What is the CITUB telling young Bulgarians - that it is important for the economy to take out a loan and buy a car and that way our country will flourish and prosper, and not to study hard, take risks, establish and manage a business that will produce this car and sell it at a profit for yourself and your workers? Buying something with money you don't have is not a driver for anything, except a leap into the abyss. Or as Charlie Munger - Warren Buffett's partner - said before he left this world: a smart person can go bankrupt for three reasons - alcohol, beautiful women and debt, when in fact the reason is only debt, and the other two are for euphony.

The CITUB has repeatedly expressed gratitude to the unions on the topics listed by the CITUB, such as electricity compensation and the 60/40 measure. And at the moment, at every event for Bulgaria's entry into the Eurozone, KRIB expresses its gratitude for the support of the unions along this line. These are topics that are inherent and should be a priority for the social dialogue between unions and employers.

The management of the state budget is a priority for the democratically elected government of the country, and since the budget deficit is filled by the taxes of workers and entrepreneurs, the natural direction of dialogue between unions and employers is to close it by reducing expenses and brightening the economy, and not through an endless spiral of raising expenses and taxes. An endless spiral that led to a debt and inflation crisis in Romania, stagnation in leading European economies and a danger for the sustainable exercise of state power in at least one of the major European countries.

Bulgaria must learn from these mistakes, because, as Bismarck said, only a fool learns from his own mistakes – the wise man learns from others.

The CIB will discuss the CITUB's proposal for an in-depth discussion on tax and social security topics at its next management board, and I will insist that the social partners work together to close the budget deficit at the same levels of tax and social security burden and by expanding the tax base by fighting the gray economy, stimulating entrepreneurship and investment. To do this, reforms are needed such as leaving the gray list for money laundering, quick steps to form a common capital union in the EU, accelerated logistical connectivity of regions outside Sofia, ensuring predictable and low electricity prices and stimulating private investments in emerging niches such as artificial intelligence, electromobility, space technologies, energy, robotics, etc.