Several days ago Eurostat questioned seriously one of the biggest achievements of the Bulgarian government - the policy of financial discipline and austerities, which results in low indebtedness. According to the national statistics, the deficit in the public finance in 2014 was under the 3% threshold agreed with the EU. However, according to latest data of Eurostat, the deficit in the state budget was twice bigger and was near 6% of the country’s gross domestic product.

According to most economic analysts, both the Bulgarian and the European statistics show true facts, but the methods of calculation are different. The National Statistical Institute has been adhering to old methods used for the calculation of the country’s deficit, whereas Brussels uses more innovative methods and analyses facts from a macroeconomic point of view. Thus, Bulgaria’s statisticians did not calculate in the state deficit the loans taken by the Deposit Insurance Fund last year, due to the bankruptcy of the Corporate Commercial Bank, whereas Brussels contends that the debts of this public institution are part of the country’s public indebtedness. Both sides are right, but the question now is what would follow after the report of Eurostat, according to which, Bulgaria has violated the requirements of Brussels and the EU may impose sanctions over this country. We say it may, because many bigger EU member states have already registered much higher deficits and the European Commission has not imposed any sanctions on them whatsoever. Bulgaria is not likely to be punished by the EU this time, because, as some European financial experts already explained, the higher deficit registered in 2014 was mainly due to temporary, rather than any structural macroeconomic problems. Moreover, Bulgaria remains one of the EU member states with the lowest ratio between public debt and gross domestic product, data of Eurostat for 2014 show.

However, despite the methodological difference between the Bulgarian and the European statistics, the country faces some problems, because its public indebtedness has been slowly increasing and the debt/GDP ratio has worsened by 27% in 2014 only. The authorities are even planning to borrow new loans in the next two years. In October, 2015 only, Bulgaria took a new state loan to the tune of EUR 185 million on the local financial market. It is to issue state bonds at the foreign markets, too, because the country has to pay some old debts. Thus, the country may enter into a debt spiral, where it borrows new loans, in order to finance old debts.

English version: Kostadin Atanasov