site.btaMedia Review: January 10

FUTURE CABINET

24 Chasa reports that GERB, the Bulgarian Socialist Party and There Is Such a People have already distributed the portfolios in the future cabinet, which will be headed by Rosen Zhelyazkov. Democratic Bulgaria remains definitively out of future coalition. Instead, the 19 MPs of Ahmed Dogan’s Alliance for Rights and Freedoms (ARF) will give their support. Thus, the cabinet will have 126 secure votes. Representatives of Dogan's parliamentary group were at the talks on Thursday afternoon. Toshko Yordanov has urged them to support the coalition from outside. He said that the agreement was already ready, and the ministerial seats allocated, but the ARF could get other posts and benefits.

"We express our readiness to participate in talks for a government if they are public and exclude Peevski and Vazrazhdane. The country needs a regular government," ARF chairman Dzevdet Chakarov said days ago. On Thursday, he was invited by GERB to support the coalition against possible participation in the government.

ARF have not yet responded to the invitation, but there is talk on the sidelines that Ahmed Dogan is very scared of new elections as Delyan Peevski could take more of the movement's voters. However, Hasan Ademov, denied on national television that their group had been invited to negotiations. BSP will have four ministerial portfolios, There Is Such a People – three, and 11 will be for GERB. According to the Epicentre news site, BSP will get the ministries of labour and social policy, regional evelopment and public works, environment and youth and sports. There Is Such a People will take the ministry of culture.

Each of the parties will have one deputy prime minister, as was agreed long ago with the participation of DB. What remains of the earlier agreement is a Coalition Council, which includes the leaders of the parties and will take the important decisions. This model worked successfully during the three-party coalition under Simeon Saxe-Coburg-Gotha.

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Speaking on Bulgarian National Television, former finance minister Simeon Djankov said that there will be a cabinet and it will probably be announced within a week or two. Djankov said that GERB has other candidates for prime minister besides Rossen Zhelyazkov, namely Denitsa Sacheva and Nikolay Vassilev. 

According to him, Democratic Bulgaria (DB) is still part of the new coalition.  According to unofficial sources from Parliament, GERB, There is Such a People and BSP have already distributed the negotiated the ministerial portfolios without DB.

"DB are still in the negotiation game," Djankov claimed. "They are the most stable factor in these negotiations," Djankov said of DB. And announced, "There will be a leadership meeting, I guess next week, but overall the negotiations are going well."

"Borissov is an experienced player and changes his mind depending on what the day is," he added.

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Speaking on bTV, former finance minister and Continue the Change co-leader Assen Vassilev suggested that Bulgaria should reinstate a fee on the transmission of Russian gas, as it will bring BGN 3 billion in revenues to the budget. "In October 2023, we started to collect the fee for the transmission of Russian gas. We cancelled it later because Hungary threatened to block Bulgaria ‘s accession of Schengen. Since we are already members, we are proposing that this fee is reinstated".

”We will table this proposal to the bill bridging government expenditures so that it can take effect as soon as possible,” Vassilev stressed. “It is good for Bulgaria to have a government. We have conditioned our support on support for our declaration and of the conditions is for an equidistant prime minister. With Rossen Zhelyazkov rumored to be prime minister, Continue the Change would not support the government, he said.

All budgets so far have followed the rule that expenditures should not account for more than 40% GDP and the 2025 budget sets expenditures at 46%. Budget expenditures need to be fixed. There are complex costs that are either unreasonable or put together in the wrong way. We want the Finance Ministry to itemize expenditures, he insisted. “We need to adopt a budget. If negotiations fail and we don't have a cabinet, then the adoption of a budget will take weeks,” Vassilev recalled.

 GOVERNMENT EXPENDITURES LEGISLATION

Sega writes that a bill bridging public finances gap has turned out to be flawed. The bill is considerably shorter than a similar bill passed at the end of 2022 and in force at the beginning of 2023, and the provisions are written rather crudely.  In the rush, the Finance has not finalized details, with mayors reporting the most problems.

Despite the shortcomings, the bill was voted through at first reading on Thursday.

Unlike the 2023 bill, the new legislation does not specify specific articles and paragraphs of the 2024 state budget that will continue to be effective in 2025. Instead, the draft states that all the amounts, bases, criteria, parameters, and spending limits set in the 2024 budget law will remain in place in 2025.

"This does not provide sufficient legal clarity on what exactly continues to operate and opens the door for interpretation," said Assen Vassilev, chairman of the parliamentary budget committee and former finance minister.

Some details have been omitted which are important. For example, there is no explicit provision that budget organizations housed in state and municipal buildings do not pay rent for them is absent from the new extension law.

There is also a difference from the 2023 act regarding the right to issue debt. The Public Finances Act only allows debt to be issued to refinance old debt in case of a budget is not-adopted. In 2025, BGN 3.7 billion of debt is due to mature. There is no provision in the new bill which allows it to be covered by the medium-term debt issuance programme on international capital markets, which has an unspent limit of nearly EUR 2 billion. This means that if debt is to be raised, it will be on the domestic markets.

There are also many uncertainties in relation to the rules under which municipalities should work in the absence of an adopted state budget. The Cabinet draft does not contain any specific provisions on municipal budgets. The Association of Municipalities has already complained that they are actually suffering the consequences of the lack of a budget. The Association said that they had received only 50% of the amount of the subsidy for delegated activities and of transfers to compensate for the increase in the minimum wage. The municipalities insisted that the extension bill should guarantee that the subsidies would be received in full. The mayors want explicit permission for salary costs and those with immediate implementation to be funded up to the actual amount, without being limited by the amount in place a year earlier.

The municipalities also insist on explicit deadline for the transfer of the subsidy for capital expenditures - by the 5th of the month, as well as no more than 15 days for the payment of advances and actual expenditures under the national investment program. The mayors also want to be able to finance the investment programme projects themselves with their own revenue, if they have any, and subsequently be reimbursed from the budget. 

ECONOMY

TrudNews.bg carries an analysis, which says there is a real danger that businesses will raise prices sharply and fire people in a scenario that echoes 2021 unless government pays businesses compensation for expensive electricity.

A tornado of sharp rises in the prices of a range of goods and services could hit us because of the high electricity prices for businesses, employer organisations and trade unions have warned. The reason is that Parliament has not yet adopted a state budget, allowing for a mechanism to compensate companies for excessively high electricity prices, as has been in place in recent years

Last year there was a cap on electricity prices for businesses of 180 BGN per MWh, with companies receiving compensation if the market price of electricity was higher. Since January 1, the price of electricity is above 250 BGN per MWh. The latest transactions on the exchange for medium and short-term contracts range from BGN 282 to BGN 305 leva per MWh, said Vasil Velev, chairman of the Bulgarian Industrial Capital Association. Without compensation, this means that companies will calculate the high electricity prices into the prices of manufactured goods and services, causing inflation, he added. Those that sell on international markets and cannot raise prices will close or limit their activities, which will lead to staff layoffs and wage cuts.

"Bulgaria will probably not be able to sell anything abroad if it is not absolutely unique or is not the most sought-after commodity in the world at the moment. We will close our markets and we are in for a shock," said Dobri Mitrev of the Bulgarian Industrial Association. "If there is no compensation mechanism, the businesses that have already produced their goods, implemented their services, will now receive invoices for electricity for December for almost double the price compared to the previous month. Imagine what the prices of goods and services in Bulgaria will be next week and what they will lead to," Mitrev added.

We insist on maintaining the current threshold for electricity prices for non-household consumers of BGN 180 per MWh, said Vasil Velev. He explained that the message that there will be compensation for electricity prices should come now, before it is too late. "In 2021 we were late in introducing a compensation mechanism and we missed inflation. Now we are in 2025, and we are saying that maybe we will now meet the price stability criterion for the euro area'." That is, we have put inflation back where it should have been and where it would have been if we had not missed it in 2021 because of the delay in introducing this mechanism," said Vasil Velev. Because in an environment of uncertainty, those who canq will inflate prices," he added. We have already seen this happen with bread - they raised prices after VAT was returned to 20%, although bread did not get cheaper when zero-rating was introduced.

Extending the compensation mechanism for the high electricity prices is foreseen in a bill bridging public finances, which was adopted on Thursday at first reading by the Parliament. But there is still a long procedure before the actual implementation of the mechanism - the bill has to be finally voted by the National Assembly and then the mechanism itself has to be launched by the Council of Ministers.

FUTURE LOBBYING ACT

24 Chasa has interviewed Deputy Justice Minister Mihaela Mechkunova in connection with a future lobbying act. According to her, it is unacceptable to suggest that the law on lobbying will restrict the freedom of citizens and NGOs. People engaged in lobbying activities will be subject to registration, and only the money spent on lobbying, not their entire funding.

In the interview Mechkunova says that a working group has been set up in the Ministry of Justice,

which has begun work on drafting a law on lobbying. This is done in implementation of a commitment made in the accession process to the Organisation for Economic Co-operation and Development (OECD) to ensure that national legislation complies with a recommendation of the council on the principles of transparency and integrity in lobbying, and also in implementation of a measure to regulate lobbying activities', which is part of the National Recovery and Resilience Plan.

The principles in the future legislation are in line with a Concept for the Regulation of Lobbying Activities in Bulgaria, which was examined by the Council of Ministers and approved by the Minister of Justice. According to the concept, the future law will regulate the bodies and persons who are the addressees of lobbying activities; the creation of a legislative footprint (which will track major external interferences from the beginning to the end of the legislative process or the adoption and issuance of acts); a transparency register; a calendar of meetings of public office holders who are the addressees of lobbying; and the adoption of ethical rules of conduct. And also, an independent body to maintain the register, monitor compliance with the law and impose penalties for breaches, the funding of activities and administrative liability.