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Political crisis and chances for Bulgarian economy
submited on 18.06.2007 in category Political stability | Fiscal affairs | Monetary policy | Regulated markets | Privatisation | Macroeconomic developments
submited on 18.06.2007 in category Political stability | Fiscal affairs | Monetary policy | Regulated markets | Privatisation | Macroeconomic developments
Political crisis in the middle of 2007 was expected and to some extent necessary. Leading parties in the governing coalition experience problems, which result not only from personal conflicts.
It comes down to clarification of ideologies – respectively to the choice of development path for the Bulgarian economy. Some important aspects must be taken into consideration when analyzing latest developments in NMSS and BSP, as well as in relation to the position of DPS.
1/ A place in the political space could be taken through a position regarding taxes and public expenses. The electorate may not be completely unified in relation to the size of taxes and government expenses, or in relation to the priorities of these expenses. But this way it deprives parties of the responsibility to take their own position on this matter.
2/ Taxes in Bulgaria remain relatively high, despite reduction of tax rates. Several measures are urgent and priorities from macroeconomic perspective – reduction of tax rates on labor, including insurance payments; contraction not only of rates, but also contraction of the size of tax revenues (as % of national income) in the budget.
3/ Already two of the governing parties expressed their will in this direction. NMSS pointed out tax reduction as its political priority in the previous autumn. BSP now declares that through ideas for flat and/or low tax on personal income. The position of DPS remains unclear.
4/ The government crisis may turn out to be a good moment for settling these issues. Firstly, the government owes voters reduction of insurance contributions in the middle of this year. Secondly, there are enough resources for further reduction of contributions in Budget 2008. Thirdly, it is better relationships between different parties in the coalition to be set on a clear basis – who is uniting, with who, around what. This would make economic policy more predictable.
5/ Several important issues remain pressing: What is the strength of the current leadership in BSP to launch pro-market ideas in the party itself? What is the opportunity of NMSS to stand by declared in autumn pro-market principles and priorities with almost entirely changed managing board? To what extent DPS will take pro-market positions in its aspiration for a “liberal” coalition? These questions will have to receive answers in forthcoming days, in order for the political crisis in the country not to deepen.
It comes down to clarification of ideologies – respectively to the choice of development path for the Bulgarian economy. Some important aspects must be taken into consideration when analyzing latest developments in NMSS and BSP, as well as in relation to the position of DPS.
1/ A place in the political space could be taken through a position regarding taxes and public expenses. The electorate may not be completely unified in relation to the size of taxes and government expenses, or in relation to the priorities of these expenses. But this way it deprives parties of the responsibility to take their own position on this matter.
2/ Taxes in Bulgaria remain relatively high, despite reduction of tax rates. Several measures are urgent and priorities from macroeconomic perspective – reduction of tax rates on labor, including insurance payments; contraction not only of rates, but also contraction of the size of tax revenues (as % of national income) in the budget.
3/ Already two of the governing parties expressed their will in this direction. NMSS pointed out tax reduction as its political priority in the previous autumn. BSP now declares that through ideas for flat and/or low tax on personal income. The position of DPS remains unclear.
4/ The government crisis may turn out to be a good moment for settling these issues. Firstly, the government owes voters reduction of insurance contributions in the middle of this year. Secondly, there are enough resources for further reduction of contributions in Budget 2008. Thirdly, it is better relationships between different parties in the coalition to be set on a clear basis – who is uniting, with who, around what. This would make economic policy more predictable.
5/ Several important issues remain pressing: What is the strength of the current leadership in BSP to launch pro-market ideas in the party itself? What is the opportunity of NMSS to stand by declared in autumn pro-market principles and priorities with almost entirely changed managing board? To what extent DPS will take pro-market positions in its aspiration for a “liberal” coalition? These questions will have to receive answers in forthcoming days, in order for the political crisis in the country not to deepen.
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