Bulgarian government’s 8 BN euro new debt plan encounters opposition

Written by on February 12, 2015 in Bulgaria - Comments Off on Bulgarian government’s 8 BN euro new debt plan encounters opposition

The Bulgarian centre-right coalition cabinet’s plan for taking on new debt of eight billion euro is encountering reluctance and outright opposition among other parties, with a February 12 vote in Parliament’s foreign affairs committee to support the move being defeated.

The debt plan is backed by Boiko Borissov’s centre-right GERB and the Reformist Bloc, the minority partner in the coalition cabinet.

But at the foreign affairs committee meeting, two minority parties supporting the coalition cabinet – the Patriotic Front and socialist breakaway ABC – both abstained, as did the opposition Movement for Rights and Freedoms, Parliament’s third-largest party.

The opposition Bulgarian Socialist Party already has slammed the new debt plan.

Speaking at the foreign affairs committee meeting, Finance Minister Vladislav Goranov said that the maximum debt that could be covered under the programme was eight billion euro, an amount consistent with the need to finance the deficit and the maturity of government debt in the period to 2017.

The Finance Ministry on February 11 provided the cabinet with a formal statement on the budget deficit to 2017.

Goranov said that the total amount of maturing government debts by the end of 2017 was 5.9 billion euro, and the estimated maximum accumulated budget deficit amounted to 3.3 billion euro.

He rejected claims by the BSP that the borrowing would put Bulgaria into a “Greek scenario” and that the real intention was to use the money for military rearmament.

The BSP said on February 11 that the huge debt being taken on would have to be paid off by Bulgarian citizens over 20 to 30 years.

The party said that every newborn Bulgarian child would have to pay 10 000 leva in government debt, and said that the borrowing would put Bulgaria’s financial stability over the next few years at risk.

The BSP’s Roumen Gechev also queried the choice of HSBC as one of four international banks that will manage the borrowing process.

“How is it possible for the Bulgarian State to negotiate and sign agreements with a bank, against which court proceedings are being launched and because of which there are ongoing hearings in the US, the United Kingdom, Switzerland, France, Argentina and Mexico?” Gechev said.

Menda Stoyanova of GERB, chairperson of Parliament’s committee on the budget and finance, rejected the BSP claims as completely false.

Stoyanova rejected Gechev’s allegations that the government wants to double the debt. She said that the loan, the equivalent of 16 billion leva, would be for a three-year period and was following the standard procedure for ratification.

She said that about 14 billion leva was needed to refinance old debt, which had reached 23 billion leva so far.

Only four billion leva of the total sum was to be used to cover deficits in 2015, 2016 and 2017, Stoyanova said. The debt was not causing a deficit but was the way to finance it, she said.

The agreement with the banks on the bill was approved on February 12 by Parliament’s budget and finance committee, in a vote that was nine in favour, four against and with six abstentions.

Goranov told the committee that the borrowing would enable a government, to 2017, to be able to deal with the deficit, even if the country fell into serious political instability.

(Photo: M van den Dobbelsteen/sxc.hu)

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