The name of the actual buyer of the State-owned cigarette-maker monopoly Bulgartabac is going to be revealed very soon, Economy and Energy Minister, Traicho Traikov, promised.

Speaking Saturday from the Black Sea city of Varna, Traikov, however, stressed that the most important issue was who the investor is, not the buyer. He added that there is no guarantee about the ID of the latter, “unless it is one of the strategic ones.”

The Minister explained the possibility the tobacco monopoly can be resold stands, but whoever acquires it, will have the same commitments, reiterating social ones, related to the jobs of people at the company, were among the best protected.

In an earlier TV interview, also on Saturday, the Minister said the contract guarantees jobs at the Holding, and the company’s continuing pay of taxes and fees to the State. He pointed out workers there have excellent job conditions, and their labor contracts are among the most generous in the country.

When asked who is going to be the guarantor that Bulgartabac will comply with the contract, Traikov stated the control belongs fully to the Privatization and Post-privatization Control Agency.

The only member of the Agency’s Supervisory Board, Rusi Statkov, to vote against the deal, declared earlier that Bulgartabac must not be sold since the contract is against national interests. The Minister stressed again the deal was a good one taking into account the current situation.

After five-hour debates on Friday, the Supervisory Council of the Privatization and Post-privatization Control Agency approved the sale of Bulgartabac to o BT Invest, a firm wholly owned by Russia‘s government bank VTB.

The Supervisory Board of the Privatization and Post-privatization Control Agency is a political body, elected by the Parliament. It consist of three representatives of the ruling Citizens for European Development of Bulgaria, GERB, party, one each from the opposition left-wing from the quota of the opposition left-wing Bulgarian Socialist Party, BSP, the opposition ethnic Turkish Movement for Rights and Freedoms, DPS, the right-wing Democrats for Strong Bulgaria, DSB, and the far-right, nationalist Ataka.

The price offered by BT Invest, the sole bidder standing, after several major players withdrew, is EUR 100.1 M with investments of BGN 7 M in the next two years and the commitment to purchase 5 000 metric tons of Bulgarian tobacco a year (about 14% of the crop). The draft contract also includes a clause banning a resell in the next 5 years.

Meanwhile, the same day, the labor union of the Bulgartabac workers organized a protest rally in front of the Privatization Agency’s building in Sofia. They oppose the sale of the cigarette maker to the only remaining bidder in the public procurement procedure and insist that the Governing Board rejects the offer.

In a declaration to Prime Minister, Boyko Borisov, the Union demands halting the deal and the resignation of the Privatization Agency’s CEO, Emil Karanikolov. About 500 people took part in the rally.

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The Bulgarian government of the center-right party GERB plans to raise the retirement pensions only of widows, according to the latest announcement of Finance Minister Simeon Djakov.

According to Djankov, the state budget cannot afford to raise all pensions, as Prime Minister Boyko Borisov and Labor Minister Totyu Mladenov had indicated earlier.

Instead, the government is mulling upping only the so called widows’ allowances. Currently, retired widows receive 20% of the pension of the late spouses. After changes to the Social Security Code, the widows’ allowances will be increased to 26-27% of the diseased spouse’s pension, Djankov said on Wednesday.

The increase will cost the state budget about BGN 130-140 M per year but it will have to be approved first by the government, the Council for Tripartite Cooperation (i.e. the government, business, and trade unions), and the Parliament.

Djankov was unable to forecast when the raise of the widows’ pensions might become effective but said this is unlikely to happen as of July 1, 2011.

The Finance Minister has confirmed that the Borisov Cabinet is firmly going for an increase of the minimum monthly wage from BGN 240 to BGN 270.

Bulgaria‘s Finance Minister Simeon Djankov plans to dedicate all of his efforts to the passing of Constitution amendment guaranteeing stable state finances, known as the “Financial Stability Pact.”

The measures termed “Financial Stability Pact” were first announced by Djankov on February 8 at a lecture at the New Bulgarian University in Sofia following the US tradition in which crucial policy speeches are delivered at academic institutions.

On Tuesday, Djankov and his two deputies Vladislav Goranov and Boryana Pencheva provided further details about the provisions of the Financial Stability Pact.

Djankov himself declared that he will focus on the Pact in the next few months, and will not be dealing with his original top priority – Bulgaria‘s bid to join the ERM II and the euro zone – until the Financial Stability Pact is not adopted.

The three main pillars of Djankov‘s Financial Stability Pact to be solidified via Constitutional amendments are introducing a limit to allowed budget deficit, restricting the ability of the state to redistribute public funds as a percentage of the GDP, and introducing a qualified majority vote of two-thirds of the votes in Parliament to change Bulgaria‘s direct taxes.

The Finance Minister thus gave up on his controversial and much criticized idea that provided for making changes to tax rates only after a referendum.

Djankov first mentioned his plan for Financial Stability Pact during the Parliament debate on the government‘s confidence vote several weeks ago. The idea for legally-binding restrictions of state finances was earlier put forth by the rightist Blue Coalition, which occasionally supports the measures of the ruling center-right party GERB and the Borisov Cabinet but is also often highly critical of them.

Djankov‘s Financial Stability Pact is expected to enter into force as of January 1, 2013, several months before the expiration of the four-year term of the Borisov Cabinet and before the regular parliamentary elections provided that the government serves its full term. This means that the Pact, if approved, will be in force for those ruling Bulgaria after the present Cabinet of Boyko Borisov.

The Financial Stability Pact and the so called “fiscal board” that it stipulates will help Bulgaria to join the euro zone, the Finance Minister pointed out, while explaining that he will not be pressing for accession to the euro zone waiting room, ERM II, for the time being.

He has not commented on whether the proposed Constitutional amendments change Bulgaria‘s state structure since they will prevent the citizens from selecting among political forces with differing financial visions.

Bulgaria is already restricted with respect to its state finances by the Stability and Growth Pact of the EU, which requires that the budget deficit be below 3% of the GDP. Djankov has pointed to the example of Germany, which in 2009 adopted a constitutional amendment restricting the budget deficit to enter into force in 2014. The Bulgarian fiscal board, however, will be much more comprehensive.

Its first measure provides for banning the government from redistributing more than 37% of the GDP, without factoring in Bulgaria‘s contribution to the common EU budget, and all state expenditures on EU funding such as national co-funding of programs and projects.

The Finance Minister pointed out that the in past 15 years, Bulgaria‘s governments have redistributed sums equaling between 36% and 41% of the GDP, while the current government‘s spending were between 35% and 36% of the GDP.

The second measure refers to the budget balance, with the maximum allowed budget deficit being 3% of the GDP. However, the Finance Ministry has crafted a detailed set of rules which account for periods of economic growth or downturn.

Thus, in the event of positive economic growth, if the public debt is between 20% and 40% of the GDP, 40% being the maximum allowed, the Council of Ministers will be entitled to propose improving the budget balance by at 37% of the projected GDP growth. If the state debt is below 20% of the GDP, the proposed improvement of the balance can be below 37% of the projected GDP growth.

In the event of an economic downturn, the government will be allowed to propose worsening the budget balance by up to 37% of the projected GDP decline if this does not go beyond a deficit of 3% of the GDP, and if the funding of the deficit with public debt will not lead to its going over 40% of the GDP.

The government plan also provides for a special mechanism in case of emergency situations such as natural disasters that can affect substantially the national economy. The emergency mechanism is also designed to keep the budget deficit below 3%.

The third measure states that changes of the direct taxes can be adopted only by a qualified majority vote, with 2/3 or 160 out of a total of 240 MPs required to vote in favor.

Djankov believes that the proposed measures will “cement” Bulgaria as having one of the strictest fiscal policies in the European Union, and will be supported by both the rightist and the center-leftist opposition. The draft Financial Stability Pact was presented to the chairs of all parliamentary groups.

It is highly doubtful whether Djankov will be able to get his fiscal board through. In order to amend the Constitution, the Borisov government will need to have three-fourths of the MPs, or 180 MPs, to vote in favor of the motion in three different votes. It is still unclear if the Cabinet stands a decent chance of muster enough votes to get the Djankov plan through since the ruling party GERB and its allies from the nationalist party Ataka have a total of 137 votes.

The opposition in the face of the Bulgarian Socialist Party and the ethnic Turkish party DPS has a total of 76 MPs, which is enough to block the motion.

“The Financial Stability Pact is the most important topic for the state finances and if this idea is successful in Bulgaria, it can be adopted by other states as well,” he has stated while also saying that every “soberly thinking” Member of Parliament should support the proposed measures.

Djankov further declared his hopes to “export” the Financial Stability Pact idea to other EU countries once the measures are adopted and proved to be feasible in Bulgaria. Djankov, a former senior World Bank economist, is a globally renowned economic scientist.

“The path toward the eurozone will be easier, because we will be able to show that the fiscal discipline is not only now, but that it will be maintained over time,” Simeon Djankov told Bloomberg agency in Brussels last week. “It is an independently good policy to have, but it certainly will help us in the drive for the euro.”

Bulgaria‘s center-right government had revived at the end of last year its plans to apply to join the bloc’s exchange-rate mechanism, the so-called euro zone waiting room, after it was forced to drop the euro bid in April over a larger than expected 2009 deficit. Countries must be members of ERM II for two years before they can formally join the euro zone. The Bulgarian lev is already linked to the euro in a currency board that keeps the Bulgarian currency at 1.9558 to the euro.

Latest data has showed that Bulgaria registered a budget deficit of 3.9% in 2010 instead of the forecast 4.8%. Bulgaria‘s deficit under the consolidated fiscal framework on cash basis was BGN 2.8 B in 2010, or 3.9%. The accrual deficit, which is measured according to EU accounting rules, was 3.6%. According to Bulgaria‘s revised 2010 State Budget Act approved in June, the expected 2010 budget deficit was 4.8%, or BGN 3.691 B.

Bulgaria has the lowest personal and corporate income tax in the EU at 10%, which was introduced at the beginning of 2008, replacing the previous system, which combined several different tax rates – between 20 and 24%, depending on income.

Bulgaria also has the lowest social security rates, which coupled with a 10% flat rate, makes it very attractive for physical entities, employers and potential investors.

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Bulgaria‘s government plans to begin next week a public debate on proposed constitutional amendments designed to bolster and guarantee the country’s financial stability, the finance minister has said.

“With these measures we want to show the Bulagrian citizens, the Europeans and the world that Bulgaria will be the country with the most stable financial and tax policy in Europe,” Minister Simeon Djankov said on Thursday in the town of Haskovo during a meeting with the local business.

The measures termed “Financial Stability Pact” were announced by Djankov earlier this month at a lecture at the New Bulgarian University in Sofia following the US tradition in which crucial policy speeches are delivered at academic institutions.

The three main pillars of the pact include capping the deficit at less than 3% of gross domestic product, limiting government expenditures to 37% of GDP and that requiring corporate and income tax changes be approved by two-thirds of Parliament. The rules, if adopted, would come into effect in 2013.

Three-quarters of the deputies, or 180 lawmakers, must back the proposal in three separate votes on different days, but Djankov is confident that he will secure the needed majority.

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