Social partners critical of anti-crisis measures in 2009 budget
At its session on 31 October 2008, the National Council for Tripartite Cooperation discussed the draft 2009 national Budget. Before this, the Council of the ruling coalition adopted a package of anti-crisis measures to fight the impact of the world financial crisis and this has reflected on the basic parameters of the Budget. Both employers and trade union representatives are dissatisfied with the general framework of the Budget.
The fiscal reserve will be the main buffer against any future crises – the expected reduction in direct foreign investment will be compensated for by an increase in public investment. Both trade union confederations (CITUB and CL Podkrepa) issued a joint declaration in which they warned that the government should not try to shift the burden of forthcoming crises onto the workers but should undertake adequate measures to protect workers’ incomes.
Government anti-crisis measures
The main risks facing fiscal policy are mostly in connection with the high balance of payments deficit, the fact that the inflation rate is above-average European levels, the possible delay of internal demand and growth as a result of tardy growth in the world economy and the growth in the euro zone. According to the government the 2009 Budget 2009 parameters meet these risks.
The measures and tools of the government reaction against the crisis are arranged in three packages:
- Economic activity
- the measures in this package are aimed at extending public investment by around BGN 900 million compared with 2008.
- Besides this additional investment, a programme of BGN 1,000 million is envisaged. The state has initiated the establishment of a state company for the building of business parks in order to create the conditions to attract high productive investments and to create more a favourable business environment.
- Market flexibility
- this package aims to increase the capital of the Bulgarian Bank for Development AD for crediting small and medium business. Furthermore, in order to improve the export opportunities of Bulgarian business, the government aims to increase the credit limit of the Bulgarian Agency for Export Insurance (BAEI).
- A number of measures are envisaged to maintain favourable business conditions and to attract and retain foreign investment. The measures are oriented mainly towards improving business administrative services, speeding up VAT refunds and simplifying the regulation regimes.
- Flexibility of social networks
- this package is aimed at ensuring flexibility and security in the labour market and includes measures aimed at stimulatingemployment, new job creation and development of social networks. No changes to the tax system areenvisaged, but two changes will be made to social security insurance from the beginning of 2009:
- the contribution for health insurance is increasing from 6% to 8% , while preserving the ratio of 60:40 between the employer and employee;
- the state conributes to a portion of social insurance, with an engagement of 12%, while employers pay 10% and employees 8%.
The employers have honed their positions on the sharp reduction in expenditure and restrictive policy on incomes.
According to the official statement of the Bulgarian Industrial Capital Association (BICA), the government has to be prepared for a worsening scenario and suggests increasing the restriction of the expenditure part and improving the reliability of the buffers in the case of stagnation. The position of the Bulgarian Industrial Chamber (BIC) is even more pessimistic. According to BIC, the budget has to be not only restrictive but also must correspond to the economic crisis conditions. The most recent data (from October( on the business environment in the industry are very negative. The prognoses for the next six months also are not favourable. The expectations are for job losses and increases in the unemployment level. BIC believes that state money to build business parks is an extremely risky measure during this crisis.
Trade union proposals
The trade unions consider that the government has to try to stimulate internal demand. In this regard, the proposed parameters of the state budget and anti-crisis measures do not change current tax policy and income policy, which the unions believe is the main way to increase consumer demand. The 2009 Budget has set the minimum wage at BGN 240 (Euro 123) a month, which is far behind the expected average wage of BGN 600 (Euro 307) for the next year and does not meet the European Parliament recommendation to maintain the minimum wage as 60% of the average wage. CL Podkrepa has already issued a proposal to increase the minimum wage significantly next year, to BGN 400 (Euro 204). According to the other trade union confederation, CITUB, in the conditions of crisis the stress must be on low incomes, on unemployment benefits, guaranteeing savings, investment in workers and increasing consumerdemand.
The world financial crisis and the slump of the stock exchange in Sofia have also reflected negatively on the profitability of private pension funds, in which the social insurance contributions from the second and third pillar are invested. According to Bulgarian Association of the Supplementary Pension Security Companies (BASPSC) data, in the past two months their profitability for first time since their establishment is negative. This creates tension and only for a couple days those insured were drawing out BGN 80 million from the pension funds, which placed the management of the funds in danger. According to governmental experts, financiers and social partners, there is no need to panic asthe insured period is on average about 20-30 years and the profitability will be judged in the context of a long-term plan.
Lyuben Tomev, ISTUR