Georgi Angelov, Senior Economist at the Open Society Institute: It is better to implement unpopular measures, but to avoid bankruptcy

Margarita Dimitrova

Mr. Angelov, employers and trade unions proposed a package of measures aimed at reducing the effects of the crisis. Does the situation really require unpopular decisions? How would you comment on the suggestions to the Government? 
 - I think that the situation is even worse. I have noticed that the proposals of the social partners do not largely include measures that will improve the budget which is the key problem. Some of the measures may even worsen the fiscal situation, because they require more expenditures. I think that many people do not even realize how serious the fiscal problem is. Otherwise, the measures that are targeting the economy, are reasonable and meaningful and some of them should be launched immediately. 

Do you approve of the idea of increasing the debt by issuing Eurobonds? 
 - This idea will not improve the fiscal situation. The debt issue will enter the reserve and there will be no effect on the budget. Moreover, an interest will have to be paid on this debt, which means that it will actually worsen the budget. This idea represents a bad signal because it would appear that the Government is changing its views on the debt every couple of weeks. Foreign observers will wonder what is happening in Bulgaria. Our problem is not the lack of funding, but that the budget deficit is worsening. This means that fewer expenditures should be made from the budget, and we should not seek a way of financing a growing deficit because it will eventually lead us to the Greek scenario. Otherwise, the idea of trying to sell emissions is good, because these will expire and we will not receive any money. Regarding the privatization of state minority shares and the investments of the Silver fund in Bulgaria - these are two controversial measures. It will turn out that the state is selling with one hand, and with the other - is buying. The measure will give rise to an artificial turnover on the Bulgarian Stock Exchange and this is all. Privatization is an appropriate measure, but it makes no sense the Silver Fund to start buying back, which will actually create conditions for corruption. 

In your opinion, what are the most urgent actions to be taken? 
 - First of all, we should establish how large the hole in the budget actually is and then steps must be taken to fill it. The Government should announce the severity of the situation and to consider how to reduce state expenditures. There are many ways of covering the shortfall, including a reduction of the administration through structural reforms and more efficient public sector. More funds should be attracted to the budget, without increasing the tax burden on businesses. It is very important that we start to improve the business environment, because the bureaucracy in Bulgaria is heavy. This must be changed in order to attract investments. 

I understand that you are for tougher measures, but there are always two sides which need to be satisfied. You acknowledge that it is risky to go to the edge and that compromise is necessary, don't you? 
 - Sometimes it is better to implement unpopular measures, but to avoid bankruptcy. The populist way is to continue doing nothing and go bankrupt after two months, which will make ten times more people to suffer. I hope for a balance between the various groups. I think it is not just police forces not to bear in any way its share from the crisis. Are they any better than doctors, teachers or state employees? The entire public sector is inefficient. A better option is to distribute the negative impacts among everybody than to grant exemptions to certain groups with more powerful lobbies. 

Would the resources allocated to Bulgaria by the EU funds have a mitigating effect on the situation? 
- We overcame the first difficulty – the funds were unblocked. The second step is to absorb the funds, but the third is to create a positive effect of all this. Yes, there are meaningful projects that will help the country, the idea is not just the money to be spend at once. This will be a big challenge from now on.