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Bulgarian PM Borisov (standing) and Finance Minister Djankov during Friday's news conference during which they made staggering revelations that the country's budget deficit doubled in 2009. Photo by BGNES

Bulgaria’s 2009 budget deficit has doubled as a result of “hidden” contracts made by the Stanishev Cabinet, the Borisov government has announced.

Finance Minister Simeon Djankov stated that the state budgets for 2008 and 2009 will have to be revised and recalculated because of the contracts in question made by the previous government that the Ministers of Boyko Borisov were not made aware of when they took over in July 2009.

“We are going to revise voluntarily the budgets for 2008 and 2009, according to our best estimates at the current moment – unless there are more surprises, of course, that might be hidden somewhere else in the drawers of the various ministries. Thus, with the hidden contracts of the previous government that have recently emerged, our 2009 budget deficit almost doubles – from 1,9% to 3,7%,” Djankov declared at a joint news conference together with Prime Minister Boyko Borisov and Economy Minister Traicho Traikov.

Djankov emphasized the fact with the emergence of the “surprising” new deficit, Bulgaria no longer meets the Eurozone criteria as its budget deficit is over 3%.

Djankov and Borisov revealed that they had notified the EU institutions about the 2009 “hyper deficit”, as they call it, on Thursday afternoon.

“Unwillingly, our government has become part of the lies that our predecessors had been telling the EU institutions in Brussels. We have even lied involuntarily when we applied to the ERM II as well. We were telling the Eurozone we are ready without knowing that the previous government had laid this trap for us,” PM Borisov said.

“This doubling of the 2009 budget deficit means at least two things. First, it is very likely that now that our European partners know about these results, Bulgaria may face infringement procedures because it actually had a hyper-deficit in 2009. Every single time that the Bulgarian Socialist Party has been in power, Bulgaria has gotten into financial trouble. This happened after the Lukanov government, after the Videnov government, and now after the government of Sergey Stanishev,” Finance Minister Djankov stated.

He emphasized that the sanctions that Bulgaria might have to face on part of Brussels most likely would entail regular monitoring of the country’s finances, and respective reports every six months, which means that Bulgaria will not be able to apply to join the ERM II in 2010 as Djankov originally planned.

The Finance Minister pointed out that because of the unforeseen expenses the government will have to make under the “hidden” public procurement contracts, it will have to revise the adopted anti-crisis package of 60 measures by cutting state spending even further.

Sofia News Agency (novinite.com)

Bulgaria's center-right government has blamed their Socialist predecessors for the dashed hopes for entry into ERM II in 2010. Photo by BGNES

Bulgaria’s center-right government abandoned plans on Friday to apply to join the bloc’s exchange-rate mechanism, the so-called Eurozone waiting room, over a larger than expected 2009 deficit caused by unaccounted procurement deals, signed by the previous Socialist-led cabinet.

“It would be insolent to apply for ERM II and the eurozone given the high levels of the deficit”, Prime Minister Boyko Borisov told a news conference. “We have in fact lied to our (EU) colleagues about our readiness for the euro zone being unaware of this trap.”

Bulgaria’s Finance Minister Simeon Djankov told the same press conference that the country’s aspirations to join ERM II will not be rewarded this year.

“Bulgaria’s hidden budget deficit has ruined its dreams of joining the eurozone due to financially unaccounted procurement deals, which increased the 2009 gap to 3.7% of gross domestic product (GDP) from an initial 1.9%,” Minister Djankov said.

He announced that the budgets for 2008 and 2009 will be revised after annexes to a total of 150 contracts incurred losses to the budget worth BGN 2,15 M.

“We were expected to be a fiscal model for the other European countries together with Estonia, now I will feel only shame in Madrid ( at the meeting of the EU finance ministers next week) when I tell my colleagues what has happened,” Djankov fumed.

“Europe does not make a distinction between current and former governments. I represent Bulgaria and now it is a shame,” he added.

The finance minister stressed that the revision of the budgets from the last two years will not reflect on the budget for 2010 and the government will do its best to keep the budget deficit under 3% in line with the Maastricht criteria.

“This year, there is no risk for the fiscal stability, the currency board and the banking system thanks to our tight fiscal policy,” Djankov said.

Joining the exchange-rate mechanism was assigned top priority for this year by the new Bulgarian center-right government, which was the reason why it stuck to tight financial policy at the end of 2009 and delayed payments to businesses in a bid to keep low the budget deficit.

Minister Djankov, a World Bank economist, hoped to offset a possible reluctance to admit Bulgaria into the ERM, stemming from the global crisis, by garnishing the application with a targeted balanced 2010 budget, small 2009 deficit and laws overhauling the inefficient health-care and social-security systems.

Entry into the so-called Eurozone waiting room would have brought Bulgaria closer to the umbrella of the euro region and the protection of the European Central Bank and was conditional on whether the new government would succeed to restore Brussels trust and the budget deficit that the country has posted.

Countries must be members of ERM II for two years before they can formally join the eurozone.

Bulgaria so far believed that it could be ready for euro entry by 2013.

Sofia News Agency (novinite.com)