Former Deputy Prime Minister and Minister of Economy Nikolay Vassilev stated on the air of “Your Day“ that the country needs a radical change in fiscal policy, insisting on a budget with a surplus, serious restrictions on public spending and large-scale cuts in the state administration. He was categorical that recent years have been characterized by budget imbalances and populist decisions, regardless of who has been in power.
Speaking about tax policy and the possibility of increasing taxes, Vassilev emphasized:
“I consider myself one of the culprits – not the only one, but during the time of the NMSV, when we reduced direct taxes to the lowest in Europe, and I am proud of that. I even propose that the income tax and profit tax be reduced to 9%, so that we can raise any ideas - we will be categorically against it,“ he said.
Regarding speculation about a possible increase in VAT, he commented:
“I don't think anyone really wants to raise VAT, but if we continue with populist spending through the budget, such a measure may inevitably come to pass. If spending instead of below 40% of GDP reaches almost 50%, as happened in recent budgets, this is worrying“, stressed Vassilev and added that he supports the Fiscal Council's estimates, but not the automatic adoption of higher tax levels.
Regarding the extension of the budget and the planned 5% increase in salaries in the public sector, he was sharp in his criticism:
“In my opinion, this is illegal. The idea of the extension budget is not to play politicians and give money to whoever we like. This is populist spending. If someone says – give a raise with inflation to civil servants, someone else will demand the same for another group. This is how billions are distributed without a strategy,” he said.
Vassilev also outlined his vision for a different approach to budget formation:
“The Minister of Finance had three options – to become a reformer and submit a budget with a surplus, with spending around 30% of GDP and to break with the disastrous policies of recent years, or to submit a regular budget with a deficit between 3 and 8%; or to choose to do nothing and submit an extended budget. He chose the third – and at least this is the better option than a new financial catastrophe“, he said.
He was categorical that the state should not fixate on the 3% deficit limit as maximum success:
“Why do we see the three percent as some kind of goal? This was a requirement for the eurozone. But why don't we strive for less than 3%? When politicians say they are aiming for three percent, it's like a football team that always concedes more goals than planned," commented Vassilev.
He sharply criticized the last financial years and described them as a failure:
„The last five years have been a budget disaster. It doesn't matter which party is in power - seven caretaker and three regular governments, all are aiming for 3%, but in reality they are spending more through various accounting tricks. If we continue like this, we are heading towards a scenario like Videnov's,“ he warned.
Regarding state-owned enterprises and specifically the Bulgarian Development Bank, Vassilev took a firm position:
„The state has no business managing commercial companies. As long as there are state-owned water and sewerage companies, there will also be a waste of billions and loss of water. This also applies to the BDB - such a bank should not have existed at all. It always turns into a corrupt Frankenstein“, he said, adding that the public sector systematically generates inefficiency.
Vassilev pointed out that there are currently no stable public finances: “It has been like this since 2021. There is no difference between 10 governments – they all pursue the same policy. The budgets are a disaster and we need a complete turnaround, but it can only be done by reformers, not populists“, he emphasized.
As specific emergency measures, he formulated three priorities: “First – large cuts in the state administration and the public sector. 10,000 positions can be easily cut without anyone noticing, and a lot of money can be saved. Second – an end to electricity compensation for businesses, because there is no need to continue with this support five years after the pandemic. And third – "The state must enter a saving mode, not a wasteful one. Expenditures must be significantly lower," said Vassilev.