SOFIA: Bulgaria’s outgoing parliament refused yesterday to authorise the interim government to raise new debt and increase public spending, restricting its ability to tackle the Balkan country’s worst banking crisis since the 1990s.
President Rosen Plevneliev, who last week told lawmakers that failure to allow an increase in debt and the deficit would harm the European Union’s poorest economy, is due to appoint an interim government of technocrats tomorrow that will steer Bulgaria until an election on October 5. The parliament will also be dissolved tomorrow.
Raising new debt would have helped the government deal with Corporate Commercial Bank (Corpbank), which was hit by a run on deposits in June. The central bank has seized control of the lender and has frozen its operations, pending an audit. However, the political parties failed to reach agreement on the plans to raise the fiscal deficit to 2.7 percent of national output and to allow the raising of up to 3.4bn levs ($2.33bn) in new debt this year. Yesterday, its last session before dissolution, the parliament voted not to discuss the proposed changes, effectively rejecting the president’s appeal.
“The parliament’s failure to approve the changes effectively delays a solution for Corpbank for at least two and a half months, until a new parliament is in place,” said Petar Ganev, an economist with Institute for Market Economics.
The centre-right GERB party, which is tipped to win the October 5 poll, had initially supported the plans to increase debt but later backtracked, fearing a loss of voter support if it sided with a rival party, the junior partner in the outgoing coalition, which had backed the debt and deficit proposals.
Reuters
