Galery

1

Victoria Mindova

The peaceful protests in Bulgaria which have been continuing for six weeks already were stained with blood in the middle of this week. However, the people are adamant and refuse to respond to the provocations which could spoil the main goal which is the fall of Oresharski’s government, new democratic elections and a more transparent government.

GRReporter sought out analyst Krassen Stanchev to comment on the latest developments. He is a Doctor of Philosophy, the founder and long-time chairman of the Institute for Market Economics. He defines himself as a seller of knowledge in the field of market economy and, over the years, he has significantly contributed towards the popularization of the principles of free economy in post-communist Bulgaria.

Despite his busy schedule, Mr. Stanchev has been able to answer our questions via Skype and to present his views and forecasts on the outcome of this crisis situation.

The peaceful protest escalated on the day when the parliament was discussing the budget update. What needs should the loan of one billion leva cover? Are there alternative ways to fill the budget gaps without additional borrowing?

The escalation was provoked. The protests were peaceful for 40 days and the situation was very calm. The unrest lasted for only one night and it does not characterize the protest. It was provoked by several things.

The first was the convening of an extraordinary session on the budget, which coincided with the daily protests. The second was the behaviour of the police towards the protesters. The third factor that influenced Wednesday’s development was the availability of the means at hand such as stones, paving stones and other items. We know very well the area around the parliament building. The paving stones there cannot be removed with bare hands. However, they were at hand.

I think the desire of the people in the parliament was to direct a similar public reaction in order for it to provoke some kind of international condemnation of the ongoing protests. The first speeches of the Chairman of the National Assembly and the leader of the Socialist parliamentary group demonstrated the same.

Furthermore, there is no real reason to convene three commissions to discuss the specific issue in the parliament building when the protests are not subsiding. I know firsthand that it is not necessary to discuss such projects in the parliament building. I think that it is complete nonsense to hold such meetings in this building when protests such as the present ones are taking place outside it.

As for the issue of the external loan, I must say that the budget will be burdened within the limits of the stability pact of the European Union. Most likely, this year's deficit will reach 2%. It is almost impossible for the deficit to exceed 3%, which is the limit set by Brussels.

The issue is slightly different. The main reason for the revision of the budget is to find a response to the purely political disapproval of the work of this government by expanding government spending. The fiscal discipline in Bulgaria is not accidental. It has been imposed because of two major crises. The first was in 1990, and the second one, in 1997, was very similar, in size and behaviour, to the Greek debt crisis at present.

Bulgaria is still paying instalments on the debt formed under communism. Actually, it will be repaid next year. For this reason, Bulgaria’s budget maintained very strict fiscal discipline from 1998 to 2008 and during this period, its deficit had never fallen below the level of GDP growth. In other words, if it is expected that the economic growth will be 1%, the budget is structured so that the deficit does not exceed this limit.

What is happening this year is that the golden rule which we have so far observed will be broken. We expect that this year’s economic growth will be around 0.5%. However, the deficit will be three times higher than the growth of the economy. This is a complete change in the government philosophy. This change is very important for Bulgaria and it has provoked part of the dissatisfaction which has led to slightly more radical demands of the protesters. As to the actual budget, it is being exceeded each year.

The arguments of the government to take a new loan of one billion leva relate to the payments owed to the business. It is important to note that their size is lower than in previous years and this is because we had a temporary caretaker government this year. Traditionally this type of government in Bulgaria is more provident and rational. The people involved in a caretaker government usually do not participate in the elections, i.e. they have no additional expenditures related to the election period.

The revised budget considers the additional funding of amounts that are included in the column of "other expenses" with the promise that they will be discussed when the time comes. This is like signing a blank cheque.

How will the situation develop in the near future in your opinion?

I think that it will be very difficult to decrease the tension and in no way will a reasonable outcome be reached. There is no agreement on a new date for early elections between the parties that are in parliament and there will not be one soon. The protests will have to continue for at least another month or two before this government falls.

Government officials have recently stated that the protests in Sofia are detrimental to the country's economic stability. How would you comment on this statement?