Social Security Hike “Threatens Stability” of Bulgaria’s Economy

On Tuesday the government announced that social security payments would be raised by three per cent in 2011, a move that they said would add an additional BGN 700 million (EUR 350 million) to the state budget. Bulgaria, the poorest member of the EU, is still struggling to fight recession, despite the fact that the country's exports are growing and the unemployment rate has been slowly decreasing over the past several months. Bulgaria's budget deficit will be nearly three per cent this year and the economy will expand by a meagre 0.4 per cent of GDP, according to the latest predictions of the International Monetary Fund.

Although trade unions strongly support the increase in social payments, local observers warn that the move could threaten the stability of the Bulgarian economy.
Martin Dimitrov, co-chair of the right-wing Blue Coalition in Bulgaria's parliament, thinks that the move will have a “disastrous effect” on the economy, stimulating the grey economy and the growth of unemployment in the country. Georgi Angelov, senior economist at the Open Society Institute, agrees that the announced increase will further burden the economy. “It will definitely have a negative effect on the stagnating economy and the labour market,” he told Balkan Insight.  According to Angelov the planned increase in individual contributions, combined with the possibility of a further spike in the social security burden and tax rates, could scare away future foreign investors.

News source: Balkan Insight link: article