Coalition Challenges Push Bulgaria Toward Potential April Elections
In Bulgaria, the political climate remains tense as parties struggle to form a stable coalition following parliamentary elections
Bulgaria’s Cabinet has approved the package of 60 anti-crisis measures negotiated with the country’s business sector and trade unions over the recent weeks.
The members of the Council for Tripartite Cooperation made up of the government, six employers’ organizations, and the two major trade unions have been negotiating for more than two weeks on how best to tackle the effects of the crisis on the state budget and the national economy.
The anti-crisis program signed formally by the business sector, the trade unions and the government on Wednesday morning is focusing mostly on austerity measures and privatization and concession deals shying away from proposed tax increases.
The Finance Ministry has estimated that its anti-crisis program needs to generate or save a total of BGN 1,5 B whereas the package of measures on which the three social partners shook their hands is expected to have a total effect of BGN 1,63 B.
Bulgaria is not going to increase the VAT but will introduce a “luxury tax” in order to generate state revenue, the government, business sector, and trade unions agreed.
Bulgaria’s state administration is expected to save BGN 450 M from the 2010 budget by reducing their staff and their additional expenditures, announced Dimitar Manolov, deputy chair of the Podkrepa Labor Confederation. It provides for a 10% cut in public sector spending including salaries in institutions which had failed to reduce their staff by 15% as was prescribed by the Finance Ministry in the fall. Another measure provides for the freeze of a planned hike in pensions of widows and people over the age of 75.
The privatization of state-owned minority shares through the Sofia Stock Exchange is expected to bring a revenue of at least BGN 200 M. The package provides for the privatization of state minority stakes in 55 companies, ranging from power utilities to arms producers.
Bulgaria expects to generate BGN 350 M from the sale of its unused Greenhouse gas quotas under the Kyoto Protocol, said Teodor Dechev, Chair of the Union for Economic Initiative.
Bulgaria’s government is also planning to sell 10% of the 1,3 million decares of state-owned land which is currently not utilized; the other 90% will be given to concessionaires. These two measures are expected to raise BGN 160 M for the state budget.
The Tripartite Cooperation Council has decided in favor of the much debated “luxury tax” focusing on its moral dimensions, i.e. making the wealthy assume a greater portion of the burden of the crisis, rather than expecting much revenue from it.
Thus, the new tax will be levied only on homes worth more than BGN 300 000, and on cars worth BGN 70 000. It will consist of paying double the current dues on such properties and vehicles.
The most contentious anti-crisis measure turned out to be the taxing of the insurance companies. The government originally planned to levy taxes on the income rather than on the profit of the insurers. According to EU directives, Bulgaria is supposed to levy taxes on the premiums of the insurance companies in 2012, and the government and the Insurers Association are starting to discuss the options of introducing the tax earlier.
The businessmen, syndicates, and ministers agreed to make the unemployment benefits 60% of the gross salary that a person received before they were laid off.
A 10% tax on sums won in lottery and gambling games is also expected to raise budget revenue.
Bulgaria’s Prime Minister Boyko Borisov has pointed out that one of the key measures was the payment of BGN 550 M of state debt to private companies within 15 days. The money will be raised through a bond issue of the Bulgarian Development Bank.
The issuing of bonds by the Bulgarian Development Bank is designed solely to raise money which can be paid immediately to private companies for public procurement procedures they have executed.
The Borisov government delayed paying some BGN 1,5 B to businesses at the end of 2009 in order not to generate high budget deficit. The repayment of the state debt has become a hot issue at the beginning of 2010.
The anti-crisis package of the Bulgarian government is expected to be voted in Parliament on Thursday.
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