site.btaTrade Union President: Deflationary Crisis Can Be Worse than Hyperinflation

Trade Union President: Deflationary Crisis Can Be Worse than Hyperinflation


Sofia, February 2 (BTA) - Plamen Dimitrov, President of the
Confederation of Independent Trade Unions in Bulgaria (CITUB),
said that deepening deflation would lead to stagnation and job
cuts. Talking at a news conference after a forum on the economic
 and social dimensions of deflation on Monday, he said that
Bulgaria registered a price drop of minus 2 per cent in the last
 16 months and is second to Greece in deflation. If this
persists, Bulgaria may be hit by a worse crisis than the
hyperinflation of 1996.

Ronald Janssen of the European Trade Union Institute said that
at minus 0.6 per cent, eurozone deflation was mainly driven by
austerity measures, fiscal deficit cuts, the "war" on wages
declared by politicians and the lack of incentives for
collective bargaining. He stressed that contrary to
expectations, lower producer costs failed to boost
competitiveness, but a lasting tendency towards deepening
deflation was in evidence.

Janssen said that since interest rates cannot be negative, debts
 also have a negative impact on deflation. He stressed that
Bulgaria's private debt stood at 138 per cent of GDP.

Dimitrov recalled that the trade union issued a memorandum to
the political forces before the parliamentary elections last
October to warn them about the problem. CITUB called for
consistent measures to revive industry, curb the negative impact
 of deflation, and achieve income growth.

He said that CITUB, along with academia and employers, would try
 to prepare an antideflationary programme to propose to the
government. It will seek to boost consumption because this is
the way to fight deflation. Dimitrov warned that without such
policies Bulgaria could find itself in the situation of Japan,
which has been struggling with deflation for 20 years now.

The forum organized by CITUB and the Union of Economists in
Bulgaria was attended by independent experts in the economy,
finance, statistics and social policy, and jurists.