Банкеръ Weekly

Briefs

NO NEW REPAIR OF THE CONSTITUTION

The parties from the ruling coalition are arguing about the municipalities' financial independence again. Logically, it happens on the eve of adopting the fourth amendment to the Constitution. Brussels insists that the main law of the country be amended by next autumn in a way to guarantee the independence of the judicial power in Bulgaria. And this is a good chance for art. 60 and art. 84 to be amended at last. The changes will allow Bulgarian municipalities to determine the amount of local levies by themselves - something that mayors have been trying to achieve for more than a decade.
At present
the yellow party insists most actively
on the long-awaited decentralisation. The National Movement Simeon II (NMSII) put forward its own bill on these constitutional amendments. The party plans to set a lower and an upper limit to the taxes within which municipalities will manoeuvre when making decisions. Thus, the parametres will be very clear and in practice there will be no drastic differences in taxation in the various regions of the country. Besides, includingly by law, central authorities will keep controlling the financial discipline on a local level.
In fact, these texts were exactly the ones already rejected by the three-partite coalition among the Bulgarian Socialist Party (BSP), NMSII and the Movement for Rights and Freedom (MRF). In December, the rulers neglected the right opposition's proposal that decentralisation of municipalities lie in the basis of the third amendment to the Constitution. It has formally been accepted so far that the socialist party was a tacit enemy of the municipalities' financial sovereignty. During the past months the socialists moderated their position on the problem. Stanishev's party announced that the moment was suitable to give the municipalities independence on condition that a mechanism is prepared first to specify which municipalities will be able to provide for themselves and which will need support from the budget. This can be achieved by year-end, BSP members say.
However, the MRF started resenting the independence of municipalities in the past weeks. The members of Ahmed Dogan's party explain that decentralisation will favour the large municipalities but will injure the small ones. Rumours also appeared that no concrete calculations have been made about the influence of this measure on the local budgets. Mayors think that prosperity is about to come since the money that goes to the state will enter their cash-boxes, but things are different, Yordan Tsonev warned last week.
Fiscal decentralisation is a beautiful thing, but to us it means enormous expenditures of the treasury, the financial minister Plamen Oresharski commented. Transfers from the central budget to local cash-boxes in 2005 alone exceed BGN200MN. In the end of January 2006 the minister proposed that along with the constitutional amendments a chance was also provided for
declaring small and financially weak towns bankrupt
According to governmental financiers, the state should be allowed to impose a financial board and declare bankruptcy of municipalities with big debts. In turn, small municipalities will be able to merge with larger and economically stable neighbours. Some municipalities are a kind of subscribers for state subsidies. It's an illusion that all the 264 municipalities will fulfil their financial activities perfectly and without debts, Mr. Oresharski said back then.
Financial ministry experts proposed that municipalities be declared insolvent not in accordance with the Commercial Act, but through the adoption of a kind of a social program of commitments for financial discipline. Methods of this kind are being applied in a number of European countries and introducing them in Bulgaria depends on the political will of the ruling coalition.
Representatives of the local authorities insist that the new texts in the main law become valid by the end of 2006, before the 2007 republican budget act is adopted. However, municipal officials dislike the idea of declaring municipalities bankrupt - especially considering that mayors of those constantly accumulating debts face the threat to lose their posts or have their rights limited.
Of the 264 municipalities in Bulgaria, just 35 have no financial problems now and 70 of them suffer from chronic insufficiency of money, the National Union of Municipalities in Bulgaria reports. Those with the gravest financial difficulties are the ones that receive the bulk of the additional budget financing. Therefore, the poorer the financial indicators, the bigger support from the central budget.
Fiscal decentralisation will rather balance the poor and rich municipalities division, the union chairwoman Ginka Chavdarova claims. In principle, the state will interfere with subsidies if only local revenues from taxes and fees appear insufficient.
Regardless of the political skirmishes, at a meeting held two weeks ago
the Government voted a strategy for decentralisation
for the period 2006-2015 and the program for its implementation until 2009. It has been prepared by the Ministry of Regional Development and stipulates accelerated transfer of rights and resources from state authorities to municipalities for strengthening the local self-government. The document also includes ideas about expanding the competence of the regional governor and the territorial units of the central executive power for coordination of the sector policies on a regional level.
In this sense one can say that willingness is available, includingly on a governmental level, to make the fiscal decentralisation miracle happen in Bulgaria at last, too.

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