Author: Ivaylo Noyzi Tsvetkov
Can we say that a left-wing economic populism is ruling in our country?
Krasen Stanchev: Populism is neither left-wing nor right-wing, and it is not economic. It is a scheme for persuasion and arousing trust among ignorant voters. You simply find something that is not a problem, but you convince others that it is a vital one, and that you and your friends will solve it. Such political behavior always wins, because the thing is not a problem in principle or is solved by itself. The only difficulty is finding it. If society is ignorant, it is enough to point out an "enemy" and spread a rumor that this "enemy" is to blame for the "problem".
But more specifically to your question - in general, yes. Bulgaria is in something like an era of populism. In 2017, I compiled a guide that I further developed in 2021 - "A Guide for Voters and Candidates for Elected and Other Offices in the Era of Populism". It contains advice on how to create and spread rumors. In our country, this is not only done by politicians, but also by the prosecutor's office and its branches.
Why is it that in our country the state is something like a "nursing mother", and not a "stepmother" to the right-wing economic narrative?
Krasen Stanchev: Because the majority wants to nurse them, and a minority wants to be milked. "State" is a metaphor. It is represented by those who hold it and control its organs at a given moment. They also formulate national interests, which in themselves are always an abstraction. There are two economic circumstances here: the state a) cannot breastfeed everyone who wants it and b) does not have its own resources to do so. The resources belong to the taxpayers, i.e. almost everyone, and some of them also participate in elections. Thus, the state breastfeeds abundantly only those who steal from it.
It is interesting that in Bulgarian (and South Slavic languages) the noun "state" is feminine, in Polish and Russian it is neuter, and in German and Czech it is masculine. According to outdated cultural clichés, perhaps here it is natural to expect the state to give, and in Germany to introduce order.
"Right" and "left" are rather confusing concepts. Political attitudes are divided according to the dichotomies "power (authority) - freedom" or "state (government) - individual freedom". According to them, the orientation is more accurate.
And in our country, the state and its administration are growing because a mechanism was gradually discovered to seize it from taxpayers unnoticed, unpunished and with the approval (or lack of resistance) of the voters.
And what's next? A quasi "planned" economy with a huge army of civil servants, including in the repressive bodies?
Krasen Stanchev: The next has already happened and will be around for a long time. Unfortunately. And it should be defined, returning to the previous question, as "kleptocracy". It is soft, imperceptible and difficult to recognize even for analysts by profession. They talk about "mafia", "conquered state" and so on, but these are metaphors, of course they lack concreteness.
And the following has happened. Since 2003-2005, the future of two people has been rising, who now rule the majority in parliament. They are from the minority that wants to milk "the state". Their authority is built through power and influence on public opinion, because it does not stem from personal qualities. And it turns into authoritarianism when it cartelizes with the Prosecutor General, the Ministry of Internal Affairs and the bodies subordinate to them.
This has been evident since 2012 from the actions of the prosecutor, from the appointment of one as the manager of SANS and from the role of the Prosecutor General in inciting panic and an attack (such is the term) on Corpbank. CorpBank itself is an institution capitalized by the political bureau of various parliamentary majorities after 2001. They park the accounts of large state-owned enterprises in this bank, the enterprises take out loans, and some politicians have deposits with higher interest rates. "Financial Times" immediately noticed the "contribution" of the Prosecutor General from afar. In Bulgaria, the leaders of the political parties - too. And they accordingly did what was necessary to strengthen the position of "Prosecutor General". The process ended in 2019. Since then, the cartel between the prosecutor's office and the two authoritarian leaders cannot be dismantled. It is only modified and expanded.
There are other details, but one of the essential motives for the expansion is that one gentleman has been sanctioned under the "Magnitsky" law precisely for kleptocracy, i.e. he cannot pass on this role to anyone as an inheritance and retire. The moment he does so, it is likely that something more unpleasant will happen to them than the fate of the honorary chairman of the DPS. This also applies to the other gentleman. Therefore, they have no choice but to continue their influence. There is a plan, but it is not exactly a "planned economy", which you speak of with the necessary irony, but a centrally planned appointment of people who preserve the privilege of milking taxpayers in combination with the preventive neutralization of all politicians and candidate politicians who disagree with this privilege.
"The army of officials" is a consequence of this system. However, control over the units in this army is more important. This year, a broad parliamentary majority replaced at least 250 people in senior positions in the state - from the Constitutional Court and the Bulgarian National Bank through the National Social Security Institute, the National Health Insurance Fund and the Bulgarian National Bank to agencies and commissions for controlling whatever you can think of, and ended up with the ombudsman and the head of the National Statistical Institute. There has probably been no such change in the country since the period 1944-1947. But even then it is happening more slowly.
What lesson can we learn from today's Romanian debt and any "collapse", which is due to something very simple - not to spend money you haven't earned for political purposes? How far are we from the Romanian model if we continue like this?
Krasen Stanchev: There, the problems with government spending - deficit, debt, etc. - were laid with a change in indirect taxes 10 years ago. Since 2016, the VAT on food has been halved, "to help people". Expenditures have continued to increase, while revenues have gradually decreased.
In our country, budget problems - state debt and taxes - are a consequence of authoritarian tendencies. Since 2015, spending on state personnel has increased more than threefold to almost 11% of GDP. The competition for invisible revenue capture for taxpayers is expanding the government's presence in the economy through orders, projects, and state-owned companies. And funds under EU programs are doing a similar "job". Here is a striking case: to take the money under the recovery plan, an anti-corruption body was promised - now it is being used against the opposition. There are funds, for example, for afforestation: they can be given for logging, which in turn increases the areas for afforestation, etc.
These budget expenditures and revenues from the EU, which do not create a product, increase price inflation without the participation of the central bank. Then the government embellishes the budget. When it is seen that nothing comes out of a drawing, the interest rates on the debt will change upwards.
How can we explain to Gagno (including that generalized image in power) that only a reasonable economic policy that loves business, not state breadwinners, is the true path "to the West"? With all the conventions, of course, and with an apology for the simplification.
Krasen Stanchev: As long as this person believes in the promise that he will receive something at the expense of others in Bulgaria or the taxpayers of Germany and the Netherlands, nothing can dissuade him. Politicians promise just that.
Otherwise, Bulgaria is "in the West". That is why some of its citizens have the opportunity to milk the EU, while others accept this as a normal price for membership in NATO and the EU.
Are we entering a "debt spiral"?
Krasen Stanchev: Not yet. Next year or in 2027.
What measures, in your opinion, should be taken for more widespread financial literacy, so as not to lead to quick loans and the particular self-enchantment, according to which you take out a loan without having any idea how you will repay it?
Krasen Stanchev: Every loan is a loan from yourself in the future. This seems to be well understood and the statistics of non-performing loans are proof of this. In 2012, they were 17% of the banks' loan portfolio, now - 3-3.5%.
Quick loans are probably not well reported, but they are also small in volume and as individual obligations. However, they easily become barter in buying votes of indebted voters.
What is done legally and as a policy stimulates irresponsible financial behavior. For access to EU funds under post-Covid programs, a law on the so-called "personal bankruptcy" was promised and adopted - completely meaningless given the dynamics of bad loans and potential risks. This law and another - for loan buyers (adopted in June this year) - make formal credit more expensive and create business for lawyers and harassers. The latter were called "mutris" 30 years ago.
Should we touch taxes, as the third French Prime Minister Le Corneille has already requested?
Krasen Stanchev: They were already raised with the so-called global tax of 15% in 2022. It is not true that it is paid by "big companies". It is already financed by banks, large stores, enterprises implementing smart technologies and people owning such phones. I have written about this outrage.
The ideas of the BSP in the government are for raising taxes. This delays the budget procedure for 2026. I would not be surprised if the government proposes, and the parliament accepts, the introduction of a non-taxable minimum at the threshold of the minimum wage. This will almost certainly mean a shortfall in revenue of about 2 billion euros.
For now, they are consensually discussing raising taxes on labor, on the so-called social security contributions. This will not solve any problem of the National Social Security Institute or the health fund. The reasons for poor functioning cannot be fixed by pouring money into the same holes. The only certain consequences will be that the disposable income of everyone, including the poor, will shrink, and the number of taxpayers will decrease.
It is not difficult to reduce expenses. For example, to make civil servants cover their own contributions within the framework of the already determined remuneration, in order to increase revenues by about 1 billion euros, and to manage corporate taxes like in Estonia. Also to place minority shares of state-owned companies on the stock exchange for about 2 billion euros.
The leftists in the West - like Mélenchon in France - say that states are weak, and the market is still strong. Is that true?
Krasen Stanchev: How do you measure the "strength" of the state or the market? In France, the state, or rather state spending, is 53% of the economy. In Bulgaria - approximately 40%, but there is a hidden influence through permits, seizure of income and ineffective justice. If we measure the share of the income of the individual citizen, taxes will be about 50 percent of income. For now. Everyone can check this for themselves if they use the tax calculator www.kolkodavam.bg .
What and what will the euro make us - weaker or stronger economically? Will it become an alternative narrative to populist political nonsense?
Krasen Stanchev: Economically strong is the one who is "strong" in the head and offers others something that they are looking for and are willing to pay for. The currency, if the issuer of the money is decent, has nothing to do with strength in the economy and prosperity. If the costs of currency exchange are negligible, you can also get rich in Mongolian tugriks.
Bulgaria's main problem is political kleptocracy. There will be an attempt at new state loans. "Nonsense", as you say, is somewhat natural. There will be psychological anxiety with income in euros among poorer households, for whom half the costs in monetary terms will not be a relief.
It is no wonder that panic is being spread on this occasion. But those who are instigating it are probably already saving in euros. The fact that some people have the nickname "Euro" very clearly indicates what the payments are made in.
Lessons from the 2008 crash and the Covid pandemic - more financial discipline or more "opening"?
Krasen Stanchev: With discipline, this happened in November 2020 before the elections - the deficit limits (2% of GDP) and budget debts were removed. This made it possible to make state expenditures without planning how they would be covered. Tightening discipline is necessary, and opening the economy - reducing taxes, government costs and nationalism - are always useful.
Is the market always right? When and in what context is austerity necessary?
Krasen Stanchev: Market exchange between people, when no external force acts on them, is also related to the ability to correct mistakes - then he is right. Because every participant in a transaction pays for them. The market for votes, for cartel agreements with government institutions and for privileges is almost never right. Politicians and governments "make mistakes" at the expense of the citizens of a given country. But they can also deliberately take away and privatize benefits, socializing costs.
To conclude, tell me your favorite economic joke. Mine is that nonsense about how many economists it takes to screw in a light bulb, and the answer is "none, because the market has already screwed it in by itself".
Krasen Stanchev: "An economist is a person who will explain tomorrow why what he predicted yesterday did not happen today."