Cuts Watch brief
Last updated: 23 November 2011
Author: David Hall
Download PDF version of this brief here: http://www.psiru.org/sites/default/files/Bulgaria-cwbrief-Nov2011.pdf
Bulgaria wanted to join the Euro in 2010, but the EU said it needed to demonstrate more ‘fiscal prudence’ and reduce the rate of inflation. So the Bulgarian government set a new target year of 2013, and wanted to impress the EU “by garnishing the application with a targeted balanced 2010 budget, and the smallest 2009 deficit in the EU”. In 2008 it introduced a ‘flat tax’ of 10% for incomers and company profits – the lowest tax rate in the EU; and in December 2009 it cut VAT rate from 20% to 17%. It announced special drives against tax evasion by musicians and footballers.
In 2009 the newly elected rightwing government decided not to seek an IMF loan, although GDP fell by 6.5%, but adopted its own ‘austerity’ budget for 2010, including:
- No change to the flatrate 10% tax on incomes and profits, or taxes on alcohol
- An increase of 43% in tax on cigarettes, and a new 15% gambling tax
- Social security payments cut by 2% from January 2010
- A freeze on the minimum wage and pensions
- cuts in funding for education, science and universities
- healthcare and social security reforms (see below)
- Privatisation of 29 companies to raise 80 billion lev (€40 billion),
During 2010 unemployment rose by 31% (EAPN), and the forecast government deficits for 2010 and 2011 had to be revised upwards, due to lower tax revenues and higher social security payments a- the effects of continued recession. The privatisation programme delivered very little: the government managed to sell only 9 companies, for a total of 2.9 billion lev. The budget for 2011 introduced further austerity to try and meet the EU target: social security contributions were raised by 1.8% points, in a meeting boycotted by trade unions, and the Christmas bonuses of government staff were cancelled in 2011.
The effects of the cuts have led to demonstrations and protests by unions, students, teachers, police, musicians, filmmakers, librarians and many other groups. A coalition was formed to ensure that different groups did not simply fight each other for limited spending, but instead demanded that 5% of GDP should be spent on healthcare, instead of the planned 3.8%; 5% on education, instead of the envisioned 3.3%, 1% of GDP for science, and 1% for culture.
As in other countries in central Europe, there is a great battle over healthcare ‘reforms’, which include cuts, closures, patient charges and privatisations. The government plans since 2009 have included:
- Reduced rights: 380 000 Bulgarians lost their rights to free healthcare
- cuts in healthcare spending: the state budget for hospitals was cut by 24% in 2009 alone, and the overall budget for 2010 was cut by 16%. Total healthcare spending fell to 4.2% of GDP, far lower than other European countries.
- closing 21 large hospitals, and closing or reducing 130 other centres – out of a total of 350 hospitals.
- Privatisation of hospitals and services: the health minister stated in 2010 that “Privatisation is the way to go. There must be privatisation of both hospitals and the services provided by hospitals”.
- imposing ‘co-payments’ of 20% by patients for hospital treatment – but there would no longer be a requirement to be referred by a GP.
There has been massive opposition from the public, doctors and nurses, and health providers. Two health ministers were forced to resign during 2010 because of this public opposition, and accusations of misuse of national Health fund. By the end of 2010 the government had been forced to restore many of the budget cuts.
In addition to freezing the level of pensions in 2011, the government is increasing the retirement age and the years of service required
- Retirement age: in November 2011 the government announced that the retirement age would be raised with immediate effect, in 2012, from 63 to 64 for men, and from 60 to 61 for women. (The previous ‘reform’ plans included an increase in retirement age, but not until 2021, followed by further gradual increases until it reached 65 for men in 2024 and 63 for women in 2026).
- Years of service: in 2010 the government decided to increase the years of service required from 37 to 40 for men, and from 34 to 37 for women. This would be phased in by adding an extra four months each year from 2012 to 2020.
Novinite www.novinite.com : various reports, including The Bulgaria 2010 Review: Health ; The Bulgaria 2010 Review: Education ; The Bulgaria 2010 Review: Society ; Bulgaria Ups Retirement Age in 2012 in U-Turn Change ; Bulgarian Cabinet Passes Latest Retirement Reform Plan
Reuters Feb 4, 2010 Bulgaria looks to privatise hospitals after reform