The protests in France and other Western countries are a manifestation of a long-standing problem in Western society and even throughout Europe, and it is called living on credit. France has been running budget deficits for 51 years. For most of these years, it has been above 3%. This was said by AIKB Executive Director Dobrin Ivanov on the air of “The Day of Live”.
He pointed out that a deficit of 5.7% is forecast for 2027 against a backdrop of economic growth of 0.8%. The majority of public spending – over 60% are payments for pensions, social benefits and health services, which deprives France of fiscal space, Ivanov added.
The French budget is burdened by the debt that finances these large budget deficits, the expert pointed out. He explained that in 1974 the deficit was about 30% of the country's gross domestic product, and now it is about 120%. That is - before it was about 30 billion euros, and now - about 3.6 trillion euros.
According to Ivanov, France is an example of a welfare state. What also weighs on the country, besides the debt, are the interest paid on it, he added.
Ivanov also believes that France will find it increasingly difficult to justify the expenses it makes for the war in Ukraine. He emphasized that either the budget deficit and debt will grow, or social spending must be cut. However, this will cause dissatisfaction, the expert believes. He also noted that taxes could be increased, but at the moment some of them are quite high. ”In high-income groups, taxes are about 60% of individuals' income”, Ivanov emphasized.
What is the economic and financial situation in Bulgaria?
Ivanov explained that Bulgaria is following the path of France, but it is still far away. According to him, the Bulgarian economy is much smaller and creditors will quickly withdraw their trust if we continue in this direction.
The expert emphasized that the problem of Bulgaria, and also of France, is the long-delayed structural reforms. He believes that our country can correct this mistake with the next budgets.
Ivanov emphasized that the AIKB's insistence was that the next budgets should be on accelerated fiscal consolidation. That is, to make structural reforms, thereby increasing the efficiency of public spending, and thus reducing the deficit and debt.
Budget 2027
Ivanov noted that what is seen as a request in Budget 2027 is “insufficient courage”. He explained that the state budget is expected to end with a 4.3% deficit on an accrual basis and 3.5% on a cash basis. In his words, this is in the direction of consolidation. The deficit is expected to be 5.2%, which is “commendable, but insufficient”, the expert noted.
Minimum wage
“The minimum wage has grown by 55% over the past three years, with economic growth of 9% and productivity growth of 4%. There are huge economic imbalances that accumulate in the amount of the MRP. When we talk about income policy and public spending, we must be balanced in these numbers. Resources will never be enough. We must take into account the capabilities of enterprises”, said Ivanov.
According to him, the formula for determining the MRP is balanced.
Excess Profit Tax
With regard to tax laws, he indicated that the AIKB is against the proposal for an excess profit tax. “An attempt is being made to solve competition problems once and for all with a change in the tax law and the seizure of part of the excess profits. And they were implemented because of the problems in competition”, explained the expert.