Bulgaria risks losing tens of thousands of private-sector jobs and breaching EU fiscal rules if the government goes ahead with plans to raise social security contributions, former finance minister Simeon Dyankov warned on Saturday.
Dyankov, who chairs Bulgaria’s Fiscal Council, told bTV that the country could face a “serious public finance crisis” by 2027, predicting that the European Commission would likely place Bulgaria under an excessive deficit procedure.
He said that while the current government may initially shift blame to former Finance Minister Asen Vassilev, accountability would eventually fall on other political figures, including former prime minister Ivan Kostov, as the fiscal situation worsens.
Coalition tensions
Dyankov criticised the government’s management of the budget, describing the process as “chaotic.” He said the ruling coalition’s internal divisions were creating confusion over the real size of the deficit.
“Left-wing parties like BSP are pushing late tax changes, TISP is trying to impose fiscal discipline behind the scenes, and GERB together with DPS-New Beginning are trying to present a socially oriented budget,” Dyankov said. “In this environment, the chances of keeping the deficit at 3% are minimal.”
Private sector at risk
A key concern, he said, is the government’s plan to raise social security contributions, which would hit private-sector workers hardest while leaving the public sector largely untouched.
“Some 600,000 public employees do not pay these contributions,” Dyankov said, adding that a one-percentage-point increase could cost about 30,000 private-sector jobs, while a two-point hike could eliminate up to 60,000.
He warned that only large firms would be able to absorb the higher costs, while small and medium-sized enterprises might resort to layoffs or informal payments to employees to stay afloat.
Fiscal responsibility
Dyankov said the government now bears full responsibility for Bulgaria’s fiscal trajectory. “The deficit began increasing during Vassilev’s tenure, but the current coalition has complete control over the decisions that will determine Bulgaria’s financial stability,” he said.