The top priority of the government of GERB was to convince voters how awful the legacy of the previously ruling coalition was and how stable a state, GERB would leave behind. In this exercise, the first in activeness after the premier was Finance Minister Simeon Dyankov. He might have even believe himself he was the Messiah, bringing the country to the promised land of financial stability. This is the policy that is only possible one for a small open economy in a currency board. Any other policy would lead to bankruptcy, said Dyankov in one of the last sessions of the National Assembly. Again, he did not forget to list out hisr favorite charts – Bulgaria is one of the three EU countries with the lowest budget deficit and the one with the second-lowest government debt to gross domestic product. For the fact that the Bulgarians’ personal budgets were driven to bankruptcy he did not said a single worls …
All this bragging would be funny if it was not sad. Because what is happening on the streets in the last three or four weeks is living proof of how society accepts Dyankov’s stability. And the statistics are not in favour of the government in resignation, although Finance Minister may have interpret them as he wishes.
At the end of 2009, the fiscal reserve was about 8 billion levs, and the annual budget for the first time – after six consecutive years of surpluses ended with a deficit of 500 million levs, while public debt (external and internal) was 4.83 billion euro. After three and a half years under the rule of GERB party, in late February 2013, the fiscal reserve was narrowed to 4 billion levs, the total accumulated deficit reached 5.3 billion levs, while public debt has increased to 6.2 billion. The annual budgetary cost of servicing the interest on it jumped from 498.8 million levs at the end of 2009, to 526.5 million levs. This is obviously the concept of Mr. Dyankov for a prudent debt policy, not opening an additional burden to the state finances.
The first step of the ambitious student of the World Bank, Mr. Dyankov, was to tighten spending. A more distant goal – to bring Bulgaria in the waiting room for the euro area after a shock fulfillment all the Maastricht criteria. These efforts led to the first
two wrong moves
of Dyankov, which began beheading the businesses. First, he ignored the advice of economists and banks to issue bonds for 1.5 – 2 billion levs and use the money from them to pay private companies all the resources that the state and municipalities owe them. Such action would provide fresh money to companies to allow them to feel safer in a financial crisis, and, if not expand – at least keep their business. Of course, such an operation would increase the budget deficit to 2 – 2.5% of GDP, but it will not break the limit of 3% of GDP set by the European Union. Rather than pay the businesses, Dyankov made a second error – he said the state would pay, but first to those who cut (discount) their claims by a 7% year-on-year. The scheme was implemented through the Bulgarian Development Bank, but it was a real racket from the state, which in other countries would not be perceived as a sign of the government’s solvency.
So Dyankov pulled aside cash flow from companies having contracts with the state without achieving its final result – waiting for entry into the Eurozone. On top of it all, he failed to meet the revised budget for 2009 endorse buy the new Parliament, but, exceeded the projected deficit in it by 50 million levs. This foul could have been justified by the inexperience of Mr. Dyankov.
In 2010 the Finance Minister experienced a
failure in the first budget
made under his leadership. During the first three months of 2010 it was clear that the government will not be able to keep the planned deficit of 1.52 billion levs and in June it saw the need to update it to 3.68 billion levs, which in turn prompted the European Commission to open against the country an excessive deficit procedure. According to Dyankov this unprecedented update was necessary because it was only earlier that year that the government learnt about the huge outstanding obligations inherited from the government of Sergey Stanishev. If this was true, the updated budget costs would have been significantly higher. The statistics of the Ministry of Finance, however, showed no such data.
The total planned expenditure in the initial budget for 2010 was 18.66 billion lev, then it was updated to 18.92 billion levs. However, the difference is noticeable in the revenue side – in the updated version the revenue is sliced to 1.9 billion levs, and this decline was entirely due to a reduction of indirect taxes – by 1.7 billion levs. It means that the update is imposed not because of unexpected expenses, but for the wrongly planned revenue, which is entirely the fault of the minister.
Another scandal of Mr. Dyankov was a case of
government refinancing a commercial bank.
Wanting to show the public how criminal Sergey Stanishev’s government was, in early 2010 the Finance Minister began to speak that in 2008, a bank was helped by the state by 1 billion levs. His predecessor Oresharski had to remind him that Finance Minister has no right to expose classified information. In response Dyankov said he would declassify the documents. The Central Bank intervened to say it was not ready to declassify the documents.
The BANKER
