ECONOMY

Bulgaria sees advantage in prospect of lowest EU labor costs

BELGRADE – Bulgaria’s centrist government has laid foundations for years of strong growth with its mix of labor, judicial and social security reforms, Finance Minister Milen Velchev told Reuters on Monday. The ruling NMS party, led by former king Simeon Saxe-Coburg, lags the socialist opposition in polls ahead of June elections and hopes the promise of economic success aided by EU cash can boost its chances. «There will be more structural reforms, the judiciary system reform is already in the pipeline and the labor reform will get more push,» Finance Minister Milen Velchev said in an interview. «Soon Bulgaria will be in the unique situation of being the lowest labor cost country in the EU,» he said, speaking on the sidelines of the annual meeting of the European Bank for Reconstruction and Development (EBRD) in the Serbian capital. The centrists have pledged to spur annual economic growth to 8 percent by 2009 and attract 6.3 billion euros in foreign investment. Velchev said part of the reform plan was to cut social security contributions by 3-5 percentage points. The Balkan state is on track to join the European Union in 2007 and has won international praise for bold market reforms. But the public is disappointed about the slow improvement of living standards, which remain the lowest among EU members and candidates with per capita income at 30 percent of the EU average. Wages and poverty are key campaign issues and the NMS has promised to boost average monthly pay to 250 euros over the next four years from around 150 euros today. «This is just a simple calculation of what average inflation and growth we expect,» he said. The latest polls showed NMS support improved to 15.6 percent, from 14.4 percent in April, but still lagged the socialists with a steady 22 percent backing. Analysts do not rule out, however, that the former monarch will stay in power after the polls, either as a partner to the socialists or at the head of a coalition with the currently fragmented right-of-center opposition. Velchev predicted the Bulgarian economy would grow by 5.5 percent this year and gradually gain momentum later on. But he warned uncertainty about the future government has made any predictions difficult. «I hope that the fiscal policy does not deteriorate… We intend to gradually decrease spending… But the compromises are being made and make it difficult to happen,» he said. He said inflation would come at 4 percent at the end of the year.