Only the website “Sega“ noted that on January 15, the caretaker government of Dimitar Glavchev adopted a decree, canceling one of its last decrees for last year. It is dated December 30 and provides for the Ministry of Finance to be provided with 150 million leva, which were previously allocated to it under the pretext that they would finance the implementation of strategic projects for the European Union. However, the cancellation, which was voted on January 15, 2025, enters into force on December 31, 2024, i.e. retroactively. All experts consulted by “Voices“ are categorical that a cancellation adopted in this way is illegal.
This is what Stefan Antonov commented on for "Voices".
The consequence of this decision is that some 150 million leva will not be counted as expenses incurred in 2024 and will not be calculated when calculating the budget deficit. However, this may turn out to be a small part of the problem, because preliminary calculations at the Ministry of Finance show that it is very possible that 2024 will also end with a surplus deficit, that is, over three percent when compared to the gross domestic product. Even greater is the concern that the excessive deficit is formed when calculating it according to the European methodology, which is taken into account in the assessment of coverage of the Maastricht criteria, and not according to the national one.
If these initial concerns are confirmed, then with the notification of the completion of the 2024 Budget, which we must send to Eurostat and the EC by April, it will become clear that we are also violating the criterion for the maximum allowable budget deficit required for admission to the eurozone. Then the failure to meet the inflation criterion by 0.12 percentage points will turn out to be both a significant and an unimportant problem, because we will already have a second unfulfilled condition, and unlike inflation, it is measured only once a year – by December 31, and this will mean that even in 2027 we will most likely be in an excessive deficit procedure and the earliest date for the introduction of the euro can be postponed to January 1, 2029.
What is visible to outsiders is the following. By the end of September – that is, by the third quarter, the budget deficit on a cash basis (according to the national methodology) is 2.8 billion leva or slightly over 1% of the gross domestic product. At the same time, the deficit on an accrual basis by the end of the first quarter is 5.4 billion leva, or about 2.7% of the gross domestic product. By the end of the year – In the period from October 1 to December 31, the deficit on a cash basis increased by 3.3 billion leva, or as much as 1.6% of GDP, and thus the preliminary estimate is 6.1 billion leva, or 3% of GDP.
However, what about reporting it on an accrual basis? How will three billion and three hundred million leva of additional expenses reported according to the national methodology shrink to only 700 million, so that even on an accrual basis the deficit will be no more than three percent of GDP? Or on the contrary, it will be seen that with all accounting methods and data manipulations, the deficit according to the European methodology cannot be presented as less than at least three and a half percent of GDP.
A look at last year at this time shows that the Ministry of Finance withdrew 1.2 billion leva from the savings account of the Ministry of Regional Development and Public Works. Thus, this year's budget recorded a plus, but only according to the national methodology. According to the European methodology, this was an expense and the year started with -1.2 billion on an accrued basis. This is the time when the trickery was going on about how to continue the "assembly" - only by rotating Maria Gabriel and Nikolay Denkov or by appointing Denkov to Foreign Affairs so that he could travel abroad, by signing a reformist declaration or simply disbanding.
In these last three months of the "Denkov" cabinet, Assen Vassilev undertook massive spending, which drained the fiscal reserve even below the level of the sum of all those accounts and funds that should not be touched. It also forced the National Assembly to vote on a special resolution prohibiting it from spending on anything other than salaries.
The Ministry of Finance is also watching with concern the requests for payment of expenses that were due last year. All of these are funds that were invoiced and due by 31.12.2024, and obviously their non-payment in a year is a delinquency that is extended with each passing day that it is not serviced.
The delinquencies add additional values to the assessment of the deficit on an accrual basis. Unlike Bulgarian accounting, it does not take into account only the payments made and the money received, but also the commitments made for expenses based on issued invoices that were not paid on time.
Purely politically, and morally, it would be best if Bulgaria is going to report a surplus deficit for this to happen as early as 2024. Assen Vassilev proposed this budget and it does not include increases in police salaries and military pay, which he claims are problematic, but all increases in fixed costs before that were OK. Yes, he can claim that he did not execute the budget, but we will see the result of the direction in which he led public finances, simply because this was his budget without distortions such as the decapitalization of the Bulgarian Energy Holding. That is, without extraordinary measures. Simply his budget.
In April 2010, Simeon Dyankov had to explain to us that contracts that had been hidden in drawers until 2010 had inflated the budget deficit. At that time, it was about the failure of the request to let us only in the waiting room. Now we have a threefold larger economy, almost threefold larger budget, and it remains to be seen what damage Vassilev has caused.
Convergence reports
In the event that the accounts for 2024 also come out within the acceptable range, the government will have to prepare a draft budget for 2025 by mid-February. Then, on February 17 and 18, when they meet with the finance ministers of the Eurogroup, they will have to prepare a convincing story about why and how they intend to control the budget deficit to only three percent of GDP in 2025 and 2026. And then we will have to send official accounts for the implementation of last year's budget and wait for Eurostat to confirm or correct it, and at the earliest at the end of April, the EC and the ECB can be expected to check our readiness to adopt the euro and prepare the so-called convergence reports. This seems certain, after Boyko Borisov on Friday demanded the preparation of such reports regardless of the state of public finances and regardless of what the sentiment polls in the ECB and Brussels show.
Of course, if the concerns of the Ministry of Finance prove to be justified, everything will be unnecessary.