There will be no “special” exploratory mission on part of Eurostat in order to examine Bulgaria’s state finances but instead there will be a “regular” mission in September 2010, announced Finance Minister Simeon Djankov after meeting EU Economic Affairs Commissioner Olli Rehn.

Djankov met with Rehn in Brussels Monday in order to present to him in person the most recent data about the revision of Bulgaria’s 2010 state budget, the planned measures for reducing its 2010 budget deficit, and the issue of the arrears that the current Bulgarian center-right government claims to have inherited from the previous Socialist-led Cabinet, i.e. alleged “secret” contracts and annexes with private companies for about BGN 2.16 B that were unaccounted for.

The meeting comes after in March the arrears together with reduced state revenues and increased spending have caused the Bulgarian government to change its 2009 budget deficit data from 1.9% to 3.7% of the GDP, a figure later corrected to 3.9% by Eurostat. This led to certain suspicions of “data cooking” on part of the Bulgarian authorities in light of the situation in Greece and the European Commission initially announced that the EU statistical office Eurostat would head for Sofia within weeks on what could have been its first exploratory mission under its newly expanded auditory powers.

At the same time, the European Commission is considering setting Bulgaria under the excessive deficit procedure as the country’s budget deficit is exceeding the 3% threshold set by the EU Stability and Growth Pact. Under Bulgaria’s mid-year revision of its 2010 state budget adopted last week by the Parliament at first reading, the 2010 deficit is set at 4.8% of GDP on a cash basis and 3.8% of GDP under EU accounting rules.

“We spoke in much detail, the EC asked a lot of questions of about the consolidation of this year’s budget, about the sectors in which we envisage cuts in state spending. I hope that today’s meeting with Commissioner Rehn has cleared all questions about Bulgaria’s revised state budget,” Djankov declared at a news conference after Monday’s meeting.

As the 2010 State Budget Revision Act has been approved by the Bulgarian Parliament only at first reading, Djankov explained that the absolutely final data about the country’s finances will be submitted formally to the EC only after the law is adopted at second reading.

“The conversation was short but constructive,” said Commissioner Rehn’s Spokesperson, Amadeu Altafaj explaining that the European Commission expected to receive on Tuesday data about Bulgaria’s excessive budget deficit for 2010, and the planned measures for reducing it.

The information provided by Bulgaria will be analyzed by the Commission until July 7, when it is going to submit its position on the proposed measures to the Ecofin, the Council of EU Finance Ministers. The Commission is going to decide if and when to propose setting Bulgaria under the excessive deficit procedure to reduce its budget deficit below 3%.

“It is always better to clarify things as soon as possible,” Bulgarian Finance Minister said in turn.

He explicitly underscored that will be no special exploratory mission of Eurostat in Bulgaria over the country’s revised budget state budget data for 2009, and that the Eurostat was going to send a “regular” mission to Sofia in the fall of 2010 in order to explore the reasons Bulgaria’s budget deficit climbed from the previously expected 1.9% of the GDP to 3.9%, with “regular” referring to the fact that such exploratory missions will be sent to all EU member states.

According to Djankov, Eurostat might indeed combine its regular mission to Sofia with an investigation of the Bulgarian budget data under the new audit powers of the EU statistical service. Yet, he expressed his confidence about the outcome of any investigation.

“There is nothing that is so worrying for Eurostat to make them rush to Bulgaria,” he said. Alfataj also confirmed that no “special” inspections are to be carried out.

The Finance Minister also pointed out that Eurostat will examine the arrears inherited from the Stanishev government. In his words, other EU member states were also facing problems with unaccounted debts left behind by previous governments, and the EU institutions have discussed options about how to avoid this problem in the future.

Djankov said he informed the team of Commissioner Rehn in detail about the arrears which forced the current Cabinet to include BGN 660 M of additional state spending in the 2010 Revised State Budget for the sole purpose of covering part of the debt from the “secret” contracts and annexes of the previous government.

Djankov did point out that his ministry has completed the analysis of the Stanishev Cabinet arrears, and that he was ready to make public the respective data and conclusions as soon as the Prosecutor’s Office is done with its investigation of the matter.

Commissioner Rehn’s Spokesperson said the Eurostat exploratory mission to Bulgaria in September 2010 will precede another mission of the EC Directorate General for Economic and Financial Affairs in October, a month ahead of the publication of the fall economic forecast for the euro zone analyzing the budgets of the Euro Area member states, which is to come out in November.

“Keeping the current 10% flat corporate and income tax rates is fully compatible with reducing the budget deficit. We already have preliminary data showing that we can rein in the deficit within the 3% barrier of the EU Stability and Growth Pact without having to increase any taxes. There are options, and I hope we will be able to select those options that allow us to avoid raising taxes,” declared Bulgaria’s Deputy PM and Finance Minister.

He pointed out that the Bulgarian Cabinet will start working on the drafting of the 2011 state budget bill as soon as it completes the process for the adoption of the 2010 Revised State Budget Act, another matter discussed during today’s meeting with Commissioner Olli Rehn.

Djankov also pointed out that Bulgaria’s position on the international financial markets was no reason for concern. His program in Brussels continues with expert meetings on EU funds management for environment and agriculture projects.

“We are ready to answer any kinds of questions on part of the European Commission so that it is clear that we are conducting a transparent and clear budget policy which is the interest of both Bulgaria and the European Commission,” stated the Bulgarian Finance Minister.

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