EKIP– Expert Club for Economics and Politics A Different Opinion
Today, the Bulgarian parliament approved the government's budget update proposal in first reading. The bill envisages an increase in the deficit from the current 1.3%/GDP to 2%/GDP and raising the ceiling for issuing new debt this year from BGN 2 billion to BGN 3 billion.
It is clear to everyone that only protests could have prevented the adoption of this bill. Unfortunately, a vote was held and the result is not surprising. However, the vote was preceded by an almost two-month campaign aimed at convincing citizens of the need for this update.
However, the majority of the people who will pay for the financing of a larger deficit doubted the motives behind the proposal. This is a very good reaction and hopefully it will continue - every intention and decision of every government should be questioned, no matter how noble it may seem at first glance.
Skepticism has not stopped Finance Minister Petar Chobanov and Prime Minister Plamen Oresharski from trying to convince us that if the deficit doesn't increase, the economy will collapse. Yes, as absurd as it may sound, this argument is also present in their repertoire - how if the state doesn't spend an additional hundreds of millions of leva, Bulgaria's economy will resemble that of Detroit.
The financial luminaries Chobanov and Oresharski had not even bothered to coordinate their versions, so that they presented equally erroneous figures and facts in their public appearances. One could hear talk of an additional deficit for the year of 2 billion leva, and the other - "additional stimulation of the economy" of about 1 billion leva.
Subsequently, both revised these numbers downwards - and only about 10-15 times. There was even a revision in the short time between the public announcement of the draft update by the Ministry of Finance and its approval by the Council of Ministers.
Still, they chose some numbers - according to them, there will be a revenue shortfall of 207 million leva from the target, and expenses will be 286 million leva more than planned. Thus, the deficit is expected to increase by 493 million leva.
The arguments that the luminaries put forward in favor of their thesis for a larger than expected budget ranged between:
- we will pay off business (by business we mean the shady business in Bulgaria, the property of the state and which exists only because of corrupt government orders)
- we will use the money for our social program
- we will not use the money for our social program
- because we care about stability, but we care more about growth
The validity of each of these "mainstream" arguments is obvious. But today in parliament Chobanov managed to present the ultimate defense for the increase in the deficit and the accumulation of new debt.
According to him, since the cabinet plans to accumulate only 1 billion leva of new debt by the end of the year, this is not actually debt accumulation, because even with such new obligations, the level of consolidated state debt will remain slightly below the ceiling of 14.6 billion set in the GERB budget.
The second brilliant argument expressed by Chobanov today is that the new debt will not actually be debt, but an increase in government savings, because the funds attracted by the issuance of "non-debt" will be held in the fiscal reserve.
After all, it's no surprise that socialists want to spend more foreign money, not less. That's why they're socialists. The pressure for more spending will grow. The socialists promise it, and the various special interest groups want the benefits for themselves.
