Bulgaria PM Vows Tight Fiscal Policy, Scolds Greece

"Our government will hold on tightly to its strict fiscal policy and this is how things will continue to be," Boyko Borisov said at the opening of the seventh national forum for innovations.

"We managed to keep taxes low, retail prices of fuels are going down and Bulgaria is highly evaluated for its credit rating," he added, even figures clearly show that Bulgaria remains the poorest country in the European Union.

According to Borisov countries, which have until recently been cited as examples of successful economic development, such as Greece, have turned failures.

"Blood is being shed in the streets of Athens these days, because when the Greeks had to implement similar to our measures, they did not do it," he said.

Bulgaria is recovering, though sluggishly, from a deep recession, in which it plunged with the onset of the global economic crisis last year. Driven by strong exports, the Bulgarian economy expanded by 2.5% in the first quarter on an annual basis, well above analysts' forecasts.

The country's gross domestic product grew by 0.4% quarter-on-quarter, following a 0.5% expansion in the previous quarter, downwardly revised from 2.1%.

The data, which marks the first considerable increase in economic growth since the country plunged into a recession, overshoots analysts' forecasts, which set the GDP growth levels at about 1.5%.

The economy expanded on an annual basis for the second straight quarter.

If the government wants to attract investments and return to growth, it should pursue doggedly its ambition to halve the budget deficit to 2.5% of GDP, experts say.

The government expects an export-led recovery to push up growth to 3.6% this year.

Unlike its neighbors Bulgarians were spared radical austerity programs, which could help the economy pick up, driven by rising exports and a debt-to-GDP ratio of just about 16%. The risk is that the cabinet, just like its predecessors, may loosen the purse strings to maintain its popularity ahead of local and presidential polls in the autumn.

Bulgaria is still considering plans to sell bonds amounting to EUR 1 B on the international market in 2011 to shore up its finances. But it will be very hard for the government to tap international markets at favorable interest rates if it fails to keep the budget deficit below the forecast level and growth undershoots the ambitious goal.

Tight fiscal policy is a crucial requirement for yet another reason. Finance Minister Simeon Djankov has vowed to make another shot at the eurozone waiting room ERM II in the second half of 2011 after the country has, hopefully, demonstrated that next year's budget deficit will fall below the European Union's ceiling of 3% of gross domestic product in line with the Maastricht criteria. For a number of reasons and for the time being this goal remains just wishful thinking.

Djankov's belt-tightening policy however is likely to continue to draw criticism of creating the illusion of a healthy economy on the back of the people, who are three times poorer than the average EU citizen.

The odds are the gap, wide open, between sceptic people and optimistic figures, rattled off by politicians, will grow even wider in 2011, experts say.

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