Latest / Gunther Fehlinger Podcast / Bulgaria Joins the Eurozone in 36 Hours — Prof. Krassen Stanchev Explains What Changes

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Bulgaria Joins the Eurozone in 36 Hours — Prof. Krassen Stanchev Explains What Changes · Gunther Fehlinger Podcast

0:02
Welcome to the Gunter Failing a podcast.
0:04
This is the show which is growing and we are growing like
0:08
the eurozone is growing and that's good.
0:10
We have now 125,000 followers on X and we are at 15,000 plus at
0:16
YouTube. And of course, this show
0:19
develops with the guests, and this is a big honor to have a
0:22
very important guest at a very important moment again, because
0:26
today we welcome Professor Carson Stancher from Bulgaria
0:30
and we are going to celebrate Bulgaria's membership in the
0:34
Eurozone. This is amazing and I'm very
0:37
happy to welcome you, Professor. It's about 36 hours to go.
0:43
It's the moment to be and this show is timely as always.
0:47
Professor Grassen Stanchev is a good friend of this show.
0:50
You have already made, I think, a free hour interview about
0:55
Bulgaria's economic transition in two years ago or three years
1:00
ago. And everybody who is interested,
1:02
please go to that show because today we will discuss this And
1:06
one amazing achievement. Bulgaria, the full member of the
1:09
West in the Eurozone. And Professor Carson is ex MP.
1:14
He was one of the leading persons in the 90s to bring
1:18
Albania and Bulgaria into the into the democracy.
1:23
You were a member of the Bulgarian Constitutional
1:26
Assembly, a member of the Montpellierine Society, the
1:30
network of constitutional economics.
1:32
I see a big list actually of achievements, and also the
1:36
Academia Balcanica, the honorary board member of the Bulgarian
1:40
Chamber of Commerce and the professor at Sofia University.
1:44
You teach public choice, macroeconomics and regulatory
1:48
economics and a distinguished professor at the Tbilisi Free
1:52
University, former executive director and our board member of
1:56
the Institute of Market Economies.
1:58
And if I call you the father of the euro, that's maybe too much.
2:02
But I'm very happy that you are here because you had a crucial
2:05
achievements towards the last 30 years of economic transition of
2:09
Bulgaria. And I'm very happy that you take
2:12
time to celebrate the euro and its own membership of Bulgaria.
2:16
Professor, the floor is yours. Introduce yourself and let's
2:19
celebrate the Eurozone together. It is probably the longest
2:24
period of joining the euro. Bulgaria is a champion in long
2:28
periods, but actually the the The story started in in March,
2:35
July 1997 when the Bulgarian Central bank lost its
2:43
independence from from monetary policies and discretion of the
2:50
government. Actually it become independent
2:54
from the government. And then the Bulgarian left the
2:57
local currency was back to the Denmark at the exchange rate 1
3:02
to 1. And when Germany entered the
3:07
Eurozone, you know, since then Bulgaria is backed, Bulgarian
3:13
left is back to the, to the euro and central bank is independent
3:19
with some of course, you know, problematic periods.
3:23
You know, probably 11 years ago there was such a period.
3:28
I can explain if somebody is interested.
3:30
But actually there is no, there is no question that Bulgaria is
3:36
not qualified to be a member of the eurozone because of the
3:42
fixing the exchange rate in in 9728 years ago, so it was.
3:47
A very courageous decision and I think you were also involved in
3:50
that decision and please describe why it was done and
3:54
what happened exactly in the 90s in Bulgaria.
3:57
The debate on fixing the exchange rate or making the
4:00
monetary policy of the central bank independent from Bulgarian
4:04
politicians started very early. Actually, the first idea was
4:10
expressed by a group of advisors from the American Chamber of
4:16
Commerce as early as 1990 as one of the options for monetary
4:21
policy independence of the Bulgarian National Bank.
4:24
Then the debate was renewed. Then Bulgaria defaulted on its
4:30
foreign debt. Bulgaria, by the way, is a
4:34
champion also on defaulting in the 20th century.
4:38
In the 20th century, Bulgaria defaulted on its government debt
4:42
about 6 times. And this is.
4:45
But this was in the early part during your development of the
4:48
nation, because Bulgaria became independent only, I think, in 19
4:52
O eight or nineteen O 5 was it. Yes, yes, but there were two
4:58
defaults before the communist years and three defaults during
5:03
the communist years and one default after the communist
5:06
years. But now you are safely inside
5:10
the European Union and the full member of the West.
5:13
It was tremendous success now with joining Schengen, joining
5:17
the eurozone. You really have a good period
5:19
now. Since Bulgaria joined the the
5:24
Eurozone, I actually let me explain why.
5:29
Why the the the currency was back to the D mark.
5:35
It is very simple. The central bank was independent
5:39
from international interference but very much dependent from
5:43
Bulgarian politicians and in 95 Bulgarian politicians initiated
5:48
policies which resulted in 97 as the highest inflation in the
5:52
world and the 17th highest inflation of the 20th century in
5:59
the world. So the the the inflation rate
6:04
for January 97 was was about 3000% for a month.
6:10
This is a monthly inflation, so. This was like the second
6:13
breakdown after the transition. 199097 was a kind of a
6:18
breakdown. Severe.
6:19
Much more severe than than than the first one.
6:24
And it was caused by the desire of the socialist government to
6:29
reintroduce central planning in 95.
6:32
And in two years Bulgaria ended up with the highest inflation in
6:35
the world. So as you see now, Venezuela,
6:39
you know, Bulgaria was Venezuela in 97.
6:43
So the the the poverty rate jumped from like 9% of the
6:49
population, the extreme poverty rate from 9% of the population
6:55
in 95 end of 95 to 40% of the population in the beginning of
7:01
97. So the average pension was $5
7:06
about 10 D marks in in January 97 and the average salary in the
7:13
industry was about $20.00 of 40D marks in January 97.
7:20
So there was no choice, although many of the economists in
7:24
Bulgaria predicted this, this thing, this, this option, this
7:28
policy option to secure the the, the independence of the central
7:33
bank. But the politicians were against
7:35
and they had the hard lesson to be learned in 97.
7:41
So that's why you know, democratic and pro market, pro
7:45
European and pro NATO coalition government of 97 basically fixed
7:52
the exchange rate, started the accession to the NATO first in
7:58
2004 and then to the to to the European Union, which happened
8:04
in 2007. But because it was.
8:06
The Union of Democratic Forces, it was the victory of the Union
8:10
for Democratic Forces with I remember Sofiansky and Stojanov.
8:15
These were their personalities driving the change.
8:17
Yeah, and then Prime Minister Kostov.
8:19
These are the free leaders. Wonderful really.
8:22
They had the courage in the most dramatic moments to propose
8:25
NATO, EU and the Europe back. And there was a full consensus
8:30
in the society and in the parliament then for these two
8:36
policy futures of Bulgaria. I was myself in Sofia at the
8:40
visit of EDS at that moment and I remember meeting all the
8:44
leaders, the Prime Minister, president and also the mayor of
8:48
Sofia. And they were selling this kind
8:51
of tremendous things that they will go to NATO, they will go to
8:54
the EU and they will back the euro and they will do the
8:58
complete property restitution, full property restitution.
9:02
What? About all this actually happened
9:05
and the result was, I mean for this 28 years was that Bulgaria
9:11
used to have the best fiscal record with the lowest deficit
9:20
of many years with surpluses. Of this 28 years, surpluses were
9:28
roughly 10 years, and for the rest of with the exception of
9:34
two years, the the the budget deficit was on average at the
9:41
level of 1.1% of GDP. It is a tremendous economic
9:47
miracle, actually, what Bulgaria has achieved in the last 30
9:50
years. Yeah, if somebody wants to read,
9:55
you know the history, it's very well written in the Berto's most
10:01
if think Sustainable Governance indicators report for 2022.
10:08
And then Bulgaria. Bulgaria's tax system looks as
10:12
good as as as as as Switzerland or or or Estonia.
10:19
Describe the tax system of Bulgaria, because I think you
10:22
had some kind of influence on shaping it.
10:26
Yeah, we let the campaign for about 11 years, you know, to
10:29
introduce equal tax or flat tax Macedonians.
10:35
Yes, Macedonians, 10%. Yeah, 10% call call it equal
10:44
tax, you know, we call it flat tax, you know, but I think
10:48
Macedonians are more correct in naming that that system.
10:54
So, but we've we've with this system in terms of fiscal
11:01
policy. Bertelsmann, Steve Tonk
11:03
indicators for 2002 give the they give the the the history
11:09
of, of vulgarian fiscal performance and of course
11:15
economic performance. And it's one one of the best
11:18
among the OECD countries, although Bulgaria is still a
11:25
candidate for membership in the OECD.
11:27
But because we are at the end of 2025, I was told by some sources
11:32
in the Austrian government, at 26 you will be full member of
11:35
OECD. It's quite likely, and I believe
11:40
you know, Bulgaria will resist, you know, some of the tax ideas
11:44
of the OECD, No. Yeah, the the OECD will not
11:48
force you to increase the taxes, I hope.
11:52
I hope to at least at least we we are, we are in a constant
11:58
debate since the introduction of the of the of the flat tax.
12:03
It was 10%. I can explain why it is 10% but
12:07
since the introduction. Because I'm always promoting the
12:11
Bulgarian economics for everybody in the world, because
12:14
it's the best economic system and possible for a transition
12:18
economy. What you do and 10% taxation is
12:21
one of the miracles and one of the fundaments of this Bulgarian
12:24
economic the the. The system is, is, is really, I
12:29
mean, we basically applied to one of the principles of Milton
12:35
Friedman, who basically said that the best tax reform is the
12:39
reduction of the taxes. Yes.
12:44
So, so, but after, after that, whatever crisis I described of
12:51
the 90s, you know, Bulgarian needs an engine to grow and to
12:56
attract investment and that sort of stuff.
12:58
Because with the hype inflation, you know, the, the, the domestic
13:02
savings were basically depleted from 52% of GDP in 95 to 6% at
13:10
the beginning, 6% of GDP in, in 97.
13:14
So the only way you know, to, to, to reform the system was to
13:18
simplify the taxes and allow, you know, for better rule of law
13:24
and especially protected property rights equalizing
13:27
everyone, you know, foreigners, Bulgarians, all the Bulgarians.
13:32
So, and we calculated in 98, we calculated what is the actual
13:36
tax being paid by Bulgarian companies and Bulgarian,
13:43
Bulgarian citizens on their income.
13:46
And it happened that the actual tax paid is 12 and 12.9% of what
13:53
is requested by law. So we didn't believe our
13:58
calculations because, you know, mathematics is mathematics,
14:02
reality is reality. And we decided to test the
14:05
calculations, calling tax advisors.
14:09
And I called one of one company advising how to optimize taxes.
14:14
And I said, you know, we will. We, we, we have here 10,000 to
14:19
hide what's your, what's your fee?
14:23
And they said, oh, that's 1000. So then we called another
14:28
company and we said, you know, here's 100,000 to hide, you
14:31
know, what's your fear? And they said this is 10,000.
14:35
So we tested this three times, you know, so and if the actual,
14:42
according to the econometric data, if the actual tax paid was
14:48
less than 13%, it was relatively easy, you know, to convince even
14:53
the socialist government then or coalition where socialists were
15:00
taking part. So to convince them that they
15:04
will get higher revenue if they implemented 10% tax on on profit
15:14
and 10% tax on income, which actually happened in 2007 and
15:19
2008 and the result? And you have a very good tax
15:23
system, probably the best in the world, 20 years.
15:26
Of success. So that the interesting thing is
15:29
that there is no minimum threshold on the which people
15:36
don't pay taxes. You earn €100 so you pay
15:41
€1010.00 tax, you earn 10,000, you know euro and you pay €1000
15:49
tax. So this basically pushes, pushes
15:54
the competition, you know for high income.
15:56
So and you know, to have a high income, you should produce and
16:01
invent something which others are willing to pay.
16:05
And you are really like a miracle economy the last 20
16:08
years. It's really the best system.
16:10
It's not that good. It's not that good in the recent
16:13
years, and we will come to that. I believe in the recent years
16:17
the, the, the fiscal discipline was destroyed, not so much
16:22
because of the COVID, but because of the frequent
16:27
elections after, after 2021, Bulgaria had about 7 elections,
16:35
presidential plus presidential elections plus municipal
16:40
elections. And in three months from now, we
16:42
will have 8 elections for for four years.
16:47
That's some kind of negative. Record and the and the political
16:50
competition leads, you know, to losing the, the, the, the, the,
16:55
the stable background provided by the by the fiscal discipline.
17:00
Actually in the last two months they were protests in Sofia and
17:04
they were protests against, you know how to say senseless fiscal
17:12
policy of the government and things.
17:15
In a sense they were tax, tax evolves, tax, tax protests, so.
17:22
What did the government propose? Oh, they propose increasing the
17:28
taxes on labour, the so-called Social Security and at the same
17:33
time, you know, to, to keep some sort of a kleptocratic structure
17:38
of the government. They proposed very high salaries
17:42
to government employees and public sector enterprises, plus
17:48
very high salaries to the police and, and the prosecutors.
17:55
So they increase for the last five years, they increase the
18:00
government salaries. Population is declining, you
18:05
know so so but the the number of public employees is going up.
18:10
So for the last five years they increased the salaries of of the
18:15
public servants by almost 200%. 200% for the public celebration.
18:22
111 one 193% no, that's. Extremely.
18:29
I remember the Hungarian socialists did the same mistakes
18:32
some 2 decades ago and that led to the total collapse.
18:35
Yeah, that you cannot do. Yes, that's it.
18:38
That was in 2004 and 2005. I know the Hungarian situation
18:43
very well because in the electoral campaign in Bulgaria
18:48
in 2005, we used the example of Hungary in order to defend
18:54
fiscal discipline. And then we used that argument
18:58
in order to introduce introduce a flat tax.
19:02
No, that was such a beneficial move.
19:04
So the people are upset because of the high increases in the
19:07
public salaries. Yes.
19:10
So they they basically treated this as as as as a plunder.
19:18
That's of course, very, very negative and also they have
19:21
increased the Social Security tax.
19:23
Will it now be implemented or will it be part of the election
19:25
campaign? No, no, because the protests
19:29
forced the government to resign. What we will have for 2006, we
19:36
will have the budget for 2005. So, which is basically the same
19:41
rules of the game. So you will continue the budget
19:44
of 2025? Yes.
19:47
But of course, we will have again a debate on on taxes,
19:52
fiscal policy and that sort of stuff.
19:54
But I hope you will keep the flat tax of 10% because it's the
19:58
one of the fundamental of your economic success.
20:02
Yes, people are relatively happy and they understand this very
20:06
well. So if you look at at wealth
20:13
indicators, the personal wealth after the introduction of of of
20:18
the flat tax in the first years has grown by 20% because of the
20:26
growing, because of the growing income after tax.
20:32
So and it was 20% for the companies and it was 20%,
20:36
twenty, 7% for the individuals. While in the same time the
20:42
revenue, the budget revenue increased and remains stable for
20:46
all these years. Very good.
20:48
When there will be? Absolutely.
20:51
When the OECD is pressuring you to increase the taxes, you
20:55
should complain to the German Chancellor because Mr. Metz is a
20:58
big fan of the flat tax. He was always.
21:01
Yeah, maybe he's not saying. It in public, lots of there are
21:04
lots of reasonable politicians in the European Union, you know,
21:10
who are in favour of simpler and easier to pay taxes.
21:15
Basically in line with 1755 principle of Adam Smith that
21:21
what you need for for for prosperity, for opulence is
21:27
peace. Is it taxes and tolerable
21:29
administration of justice? Exactly, and also I think in
21:33
America we have now good tax system, lower taxes.
21:36
At least Trump has made the tax reform of 21%, so I'm sure that
21:40
he will not support the OSED imposing any 15% stake.
21:46
OECD cannot impose, so the debate of unification of tax
21:52
rates in the European Union is very old.
21:56
I remember I was part of the debate since 1996.
22:02
We were even having a series of lectures on the tax unification
22:08
or gains tax unification, actually tax competition in in
22:16
the European Union at the Muffet College in Oxford, you know, in
22:22
1996. So since then there is a debate.
22:25
But if you look at the at the Treaty of the Functioning of the
22:29
European Union, it does not mention direct taxes at all.
22:35
I mean, there is one mentioning of direct taxes which basically
22:38
says that these taxes should be fair and nobody knows what fair
22:43
means. But on indirect taxes, there,
22:47
there are 41 provisions of the treaty which basically focus on
22:55
the freedom of movement of capital and and people and goods
23:01
in within the European Union. And for that reason, you know,
23:06
the treaty is dealing with the indirect taxes, not with, with
23:13
with the direct taxes. Direct taxes remain managed by
23:19
competitive and confederative principles of of the European
23:23
Union. So I hope you will see at the
23:26
10. Percent This this tax
23:29
confederation of the European Union.
23:31
So hopefully the Bulgarian role model of 10% flat tax will be
23:35
coming for all European countries and that would be a
23:38
really very advantage when. You mentioned Chancellor when
23:42
you mentioned Chancellor Merz similar debate we had in in
23:51
Italy before the last elections. So the the ruling coalition
23:59
behind Maloney, they are flat tax inclined to to to to think
24:05
about the problem is that they cannot decide what threshold to
24:11
fix it. You know, so that 1520 or 25,
24:15
you know so. What do you recommend for Italy?
24:19
For Italy, I believe, you know, it should be like in Bulgaria,
24:23
10%. Yeah, for one very simple
24:26
reason. Italian tax system is very
24:31
complex. So another thing which is very
24:36
peculiar for Italy, the biggest community, biggest group of
24:40
taxpayers are cooperatives and the corporate is they pay the
24:45
1010% tax. Basically, you know, if you
24:48
take, you know, all these complicated processes of paying
24:53
taxes. So if the biggest taxpayer is
24:57
paying 10%, so then the the then, then the system should be
25:02
fixed at 10%. Similar debate is going on in in
25:08
Sweden. I know it by personal
25:11
experience. I was invited to by the Swedish
25:14
Taxpayers Association to review the tax flat tax reforms in
25:21
Europe, including ex communist countries, and to deliver a
25:26
report to different committees of the rigs back in Stockholm.
25:32
So, and they they are inclined, the ruling coalition in in
25:37
Sweden is inclined to, to, to, to, to discuss and then probably
25:44
introduce a flat tax on personal income, not so much corporate,
25:49
but on personal income. That would be fantastic and the
25:53
big change. That would be fantastic, but
25:54
they have a high budget deficit this year and they are basically
26:01
delaying, you know. Maybe Sweden will join the
26:04
Eurozone as well after the example of Bulgaria.
26:08
I don't know. I don't know so, but yes, it
26:12
will be beneficial for Sweden, I'm absolutely sure.
26:16
I'm actually always, in my whole work as development consultant,
26:19
I always refer to the Bulgarian economic miracle and the
26:23
Bulgarian economic model for the world.
26:26
And especially when I worked in Ukraine, in the government, I
26:29
was always saying do it like Bulgaria, this is the way to do
26:33
it. And then they all looked at me,
26:34
oh, Bulgaria is such a poor country, why should we do it
26:37
like Bulgaria? It's not.
26:39
Working Bulgaria before, even before the last war of Russia
26:46
against Ukraine was three times richer in all the indicators.
26:52
Nigeria. Because because one of the
26:55
reasons for the war was that Ukraine was gradually moving
27:02
itself, you know, towards simpler tax system and simpler
27:06
business system, less regulations, more trade, more
27:10
openness and that sort of stuff. Having a functional democracy.
27:16
Not perfect, of course, but it was a very bad example for the
27:22
Russians so and the Russians could have like the success of,
27:29
of Ukraine and then dismantle the, the, the, the rule of the,
27:34
the rule of Kremlin. So what can Ukraine learn from
27:38
Bulgaria? We had this debate one month
27:44
before the war. I was in Kiev then.
27:47
I think we've met them. Exactly.
27:49
I remember it was very nice that you contacted me and we are
27:52
looking forward and I think the Bulgarian model was before the
27:55
war, I was promoting it. But even today it's much more
27:59
urgent to follow the Bulgarian model for Ukraine with the euro
28:02
back. They actually, Ukraine actually
28:05
formed the tax system. Paying taxes in Ukraine is
28:11
almost a voluntary act, especially income tax.
28:15
And people do pay. People do pay, and they pay
28:19
basically what is required by law.
28:22
So they're trying, you know, to reform some of the tax
28:29
regulations on smaller companies and that sort of stuff.
28:33
Currently, a large group of Ukrainian economies are
28:38
basically debating this with Varkov Narada in Kiev and with
28:42
the government. And I believe, you know, they
28:44
will manage to convince the government to keep the system as
28:49
it is at least. 10%. No 18, No, they have 18% flat
28:57
tax plus 1.5% military tax, defense tax.
29:04
And it's too. High.
29:05
It's much better to have Bulgaria and 10%.
29:08
Of course, you know, but at the moment of the before the
29:13
beginning of the war, the only tax they they were paying fully
29:18
was the military 1.5% tax. You know, on the rest of of that
29:23
those 18%, you know, they were different loopholes and people
29:27
were trying, you know, somehow to avoid and because of that
29:32
attempt to avoid paying 80 percent, 18% tax.
29:37
The the the next reform should be to reduce which will open
29:42
after the war, which will open a huge highway, you know, for
29:46
reconstruction and and prosperity.
29:51
What about the currency of Ukraine?
29:53
Because they have a complicated record with constant evaluation
29:57
in Ukraine. And you had a different model
29:59
because in 97 you introduced the so-called currency board or PEC
30:04
and you stabilized the left towards the euro and that was
30:09
the basis for your fundamental of this enormous success of the
30:12
last 30 years. Is it possible to have a similar
30:15
model for Ukraine? Since 2018 the the the policies
30:21
of Ukrainian central bank are basically reasonable, but with
30:28
the war they didn't have much of A choice, but basically
30:32
devaluating, devaluating and devaluating.
30:35
At the moment the defence expenditures of Ukraine are
30:40
roughly 46% of GDP. So it's huge.
30:46
You know, it's a country which is in a war, so it is possible
30:51
to do. I mean, I remember some of the
30:56
speculations of for Mises in during the the first War One, he
31:03
was basically thinking that you don't need the government to
31:07
finance the entire war effort. It should be done, you know, by
31:12
private sources without sourcing, with accumulation of
31:16
debt to be to pay the amendments and and the war course after and
31:20
that sort of stuff. And I believe Ukraine at the
31:23
moment is is following this model, not because they are so
31:29
much misession in terms of their thinking of economic policies,
31:34
but simply because they don't have a choice.
31:37
Let's see also the future could be a currency board towards the
31:41
euro and I have educated already for the introduction of the euro
31:45
the similar lacking Kosovo. We were proposing this.
31:47
We were proposing meaning we the person who was instrumental in
31:53
setting the currency board here, Warren Colts, who has a life
32:00
lifetime achievement award in central banking and who fixed
32:05
the Bulgarian central bank and the Bosnian central bank and the
32:09
Afghan central bank and the Kazakhstan central bank.
32:13
So we were proposing this in March 2014 before the annexation
32:19
of Crimea in Kiev. But the annexation of Crimea
32:25
basically frees the the the the reform efforts in in this
32:30
respects as well. It would have been a wonderful
32:34
thing to introduce the Europe in Ukraine.
32:37
But now let's come to Bulgaria back because no, maybe 1 moment,
32:40
just because. Also I think you know very well
32:43
the level of support for Bulgaria, for Ukraine.
32:47
Are you basically supplying things for Ukraine?
32:50
Do you send weapons? Do you send material?
32:53
What's exactly the situation? Every 3rd cannon used in in
32:59
Ukraine by the Ukrainian army. Every 3rd cannon for the guns
33:04
you know. Really every 3rd cannon comes
33:06
from Bulgaria? Yes, you are like the arsenal of
33:10
freedom for the Ukrainians. Yes, and this is this is private
33:15
sector, this is not so much the government.
33:18
The government was very slow, reluctant and and then decisive
33:24
on like many of the European governments.
33:28
But Bulgaria is notorious, you know, for slow government on
33:32
this respect as well. But your private sector is
33:35
having a strong defence industry and you produce also artillery,
33:39
shales, I think, for Ukraine. Yes, yes.
33:43
Very good. Thanks a lot for what you're
33:44
doing. I didn't know that you do so
33:46
much for Ukraine. This is the estimate of of of
33:51
the Ukrainians of the President Zielanski.
33:54
Perfect Bulgaria again here a role model for the world.
33:57
Let's you have prepared some history of the Bulgarian
34:01
currency. Can you show this table?
34:03
Oh yeah, So the key is independence.
34:08
Yeah, very good in the entire history.
34:10
Bulgaria has one of the oldest central banks in in Europe.
34:17
Bulgarian left was created 141 years ago.
34:21
So, but for the entire history it was independent of a, the,
34:26
the, the, the Central Bank of Bulgaria was independent and
34:31
following a very strict conservative monetary policy
34:35
only until the Balkan wars of 19121913.
34:41
Since then, you know, the Bulgarian Central Bank was never
34:45
independent. So be this from Bulgarian
34:49
government, be this from international government.
34:53
The first default happened in during the First World War in in
34:57
1915 on foreign debt. And then the central bank was
35:04
was managed by, by OK, by the creditors, by by Paribas, by a
35:14
French governor. So and the the Bulgarian left
35:18
was back to the French franc, which was a golden standard
35:21
then. So and then again left was
35:26
relatively independent in the 30s, but in the 3334 again left
35:34
was a part of the Reichsmart payment system or clearing
35:38
system. So and then from 44, you know,
35:43
internal entered this Soviet rebel currency union.
35:50
So, and here I have this is the last Communist 50 left.
35:57
It was printed in January 1991 and it was printed in Moscow.
36:05
If one takes the rubble of that ear and compares with the left,
36:11
the design is absolutely the same.
36:15
Then after fixing the exchange rate, then between 95 and 97
36:22
Bulgarian central bank was independent from international
36:25
currencies, but very much dependent from the government,
36:28
which led to the hype inflation. After the hype inflation, this
36:32
50 left were already 50,000 left, and it is 99 the the the
36:38
banknote of 99. In the middle of 99 we did some
36:45
sort of a monetary reform very similar to the reform we are
36:49
doing now. And what will happen 36 hours
36:53
from now? The zeros were deleted.
36:56
Now what we will do and this is the boggian left back to the D
37:00
mark till 50,000 left were equal to 50 Deutsche mark.
37:05
So what will happen to this 50 left banknote 36 hours from now?
37:13
They this 50 will be just divided by two.
37:19
That's it, Nothing special. Congratulations.
37:23
What a history. So of course the the public
37:29
tensions especially sharp this year because they're about two
37:39
parties, 2, three parties in out of eight in the parliament who
37:45
are basically talking against the euro, trying to frighten the
37:51
public is that. Russian, Russian pro Russian
37:55
parties. Pro Russian parties, yes, pro
37:57
Russian parties, they don't have a majority, but they're all the
38:02
time in the media and that sort of stuff.
38:04
And it's very easy to create fears.
38:07
At the same time, looking at the personal tax declarations of the
38:13
members of Parliament, you know, because they, they, they're
38:17
required by law to submit those, all of them, you know, have
38:21
savings in Europe, None of them. Exactly.
38:25
Very credible. Even the pro Russians use the
38:27
euro. Yeah, there are a couple of a
38:30
couple of members of Parliament, you know, from that particular
38:33
faction who are not very clever even with their own money.
38:39
So they keep savings in, I mean in the last five years they keep
38:44
keep their savings in British pounds and the British pounds,
38:48
you know, devaluated about about 50%, you know, for this.
38:56
They're paid in roubles and then they keep it in British pounds.
39:01
Yeah, so you cannot. Help this guy and and this this
39:05
year in May actually on 9th of May on the on on the on the
39:11
Paksa Europeana day, you know the the president of Bulgaria
39:15
appeared on the TV and said, you know, Bulgaria should delay the
39:20
entry to to the European euro zone here the.
39:24
President. Yeah, the president and said,
39:28
you know, he's. Very pro Russian made.
39:30
Yeah, should, should delay because it's very dangerous.
39:33
People will be getting poorer. Really.
39:37
Yeah, which is? Kind of communist, kind of
39:40
legacy. Is completely opposite to what
39:45
he was speaking. You know when before this
39:49
particular date, so two months before or two years before, one
39:54
year before he was basically speaking in support of Bulgaria
39:59
to join the the Eurozone and suddenly.
40:02
He called him before. Yeah, and, and now, you know,
40:06
they they're trying, of course Bulgaria is, is is really by all
40:13
the economic criteria to join the, the eurozone.
40:19
Even Bulgaria was invited to join the euro zone on the same
40:25
date as Croatia on 10th of July 2020.
40:30
And Bulgaria then looked much more promising in terms of
40:34
mastery criteria, budget deficit, interest rates and so
40:40
on and so forth. Government that much better than
40:46
than Croatia. So, but because of such
40:50
political, such political moods and because of of of of missing
41:02
rule of law, Bulgaria was basically required to fix the
41:07
rule of law system and then join the join the eurozone.
41:14
And this the latter did not happen fully and it remains to
41:19
be done. As a Austrian professor, I also
41:23
have to apologise for our two years campaign against Bulgaria
41:26
joining the Schengen zone. I'm deeply sorry.
41:29
That was really very outrageous and I'm so happy that you are
41:33
now a full member of Schengen as well.
41:36
So there were different, there were two countries opposing
41:40
Bulgaria joining the the Schengen zone, Austria, Austria
41:48
had a not very happy experience, you know, with Bulgarians, you
41:52
know who were. I'm sorry.
41:54
Who were bringing, you know, not quite transparent by origin
42:01
money to Austria, especially in the late communist years.
42:05
And Netherlands. They had a special reason, you
42:11
know, to be suspicious, because there was a Mafiosi killing in
42:17
Amsterdam in 2006, I think. And then the Prime Minister of,
42:24
of Holland, I don't know, I forgot the name, send the letter
42:28
to, to, to, to, to Bulgarian Ministry.
42:33
They, they captured the killer and send the letter to start an
42:39
investigation to the Bulgarian Ministry of Interior.
42:43
And then the secretary of the Ministry of Interior was, was
42:49
the future Prime Minister. So and he basically did not
42:55
responded to that letter. It was an official request to
43:00
support the investigation of a killing on the streets of
43:05
Amsterdam. And because the Prime Minister,
43:09
I mean, this is Boko Borisov, you know, was, was with that
43:17
sort of a background, you know, Netherlands with, with some
43:23
whatever bad memories, you know, was, was, was reluctant.
43:29
But the same group of, of the same group of pro Russian
43:33
politicians, they were against Bulgaria, Bulgaria's membership
43:39
in the Schengen zone. So they were predicting that
43:43
Bulgaria will be invaded by by foreigners, by immigrants from
43:49
the Middle East, from Afghanistan and that sort of
43:51
stuff. So.
43:54
They they were professor how was the first year in Schengen?
43:56
How was it for the Bulgarians? Oh, very good.
44:00
I mean, no problem, people are happy.
44:03
So more Bulgarians having trouble, more foreigners come,
44:08
you know, so it's it was very good.
44:11
Probably the effect of the of the Schengen is roughly one 1%
44:17
of GDP. That's a lot.
44:20
These are these are the tourism. And you can go now to Greece
44:24
without border checks. Oh yes, I I just came from
44:28
there. It's a wonderful feeling.
44:31
Or, given your complicated history with your sovereign
44:33
neighbor, but also with Romania, a lot of complicated history to
44:37
digest. But now you can also go to
44:40
Romania without border checks. Yes, yes, of course.
44:43
Now basically somebody calculated, calculated the costs
44:55
of of visas and the costs of waiting, you know, and when the
45:00
visa were for the European Union were abolished.
45:07
So the period between 99 and the abolition of the visa which is
45:11
2007. So Bulgaria spent 139 billion on
45:19
visa on visas, not calculating the cues at the embassy.
45:25
So. Unbelievable.
45:27
It's really a big success. Congratulation for Schengen.
45:30
What do you expect now with the Eurozone transition?
45:33
What will be the economic benefit for the, for the people
45:37
and for the businesses, for the SMEs and for the whole economic
45:40
system of Bulgaria in 2026? I do not expect any sort of
45:48
significant changes in prices or inflation and that sort of stuff
45:52
for one very simple reason. This populist government, when
45:59
they adopted the law this year in May on how to introduce the
46:03
euro, they promise that they will control all the prices.
46:08
So, and between the debate on the law in May and the
46:14
enforcement of the law in September, all the, all, all the
46:19
retailers, you know, they increase the prices, you know,
46:22
because they expected to control.
46:24
So the, so the inflation is already consumed.
46:29
So it was a very stupid policy, you know, so.
46:32
That's what they do from time to time to government.
46:35
Nevertheless, yeah, what do you expect?
46:37
Will Bulgaria be able to overtake economically in GDP per
46:41
capital, Greece and Romania in the coming years?
46:47
With Romania, we are basically at par at the moment.
46:51
What Romania is is doing at the moment, they're reducing the
46:55
taxes and they are introducing since middle of the next year,
46:59
they're introducing basically a 0% tax on reinvested profits.
47:05
Where? Which country?
47:07
Romania. Oh, very good.
47:09
Very good. Rubble, Romania.
47:10
Yeah, so. They are competing as well.
47:13
Yeah, I, I, I will send you. I will send you a, a, a note.
47:17
I mean, I, I was doing the translation of for one of for
47:22
one of the Bulgarian economic media.
47:26
So, but I, I have the, the, the, the, the outline of the reform.
47:29
I will send you a link. So that will be 0 on reinvested
47:33
profits. Yes.
47:35
OK, that's good. Yeah, that's very good.
47:37
News that's that's Estonian system actually.
47:40
Tell me, professor, you know why are the Romanians not able to
47:43
join the Eurozone? What's wrong there?
47:47
Because they have a similar policy to the Belgian
47:50
government. They were increasing, you know,
47:51
the salaries in the public sector in order to attract more
47:56
people in the government and have some sort of a political
48:00
backing, you know, for electoral campaigns and that sort of
48:03
stuff. And another thing they did in
48:05
2015, they reduce the indirect taxes actually VAT of food and
48:13
food stuff from from 20 to 9%. So then because of that between
48:19
2016 until last year they were gradually facing, you know a
48:28
decline of the VAT revenue in the budget.
48:31
So, but they had to keep the expenses, the spent the the
48:35
spending. So and they they ended up with
48:38
huge deficits and they cannot handle that deficit and enter
48:43
the Eurozone. But it would be wonderful if
48:46
they join the eurozone because every new member in the eurozone
48:49
is like. A poke.
48:51
In the eye of Putin. Judging from the previous
48:54
experience which I am familiar with, and comparing this with
49:00
the experience of Bulgaria, I believe, you know, Romania will
49:03
need two to three years in order to fix the deficit problem.
49:09
And then it will be ready, you know, for the Eurozone as well.
49:13
The, the, the, the, the community of the central
49:16
bankers, the community of the bankers and many Romanians are
49:19
in favour of, of joining the Eurozone.
49:24
But at the same time they very well understand at the moment
49:27
that they are not ready. They cannot, They cannot, they
49:30
cannot be accepted. In the relation with Greece, do
49:34
you think Bulgaria can overtake Greece, which is still a more
49:37
industrialized country and was always part of the free world?
49:40
Can it be overtaken by Bulgaria's now economic miracle?
49:45
By by some indicators, Bulgaria is getting closer at the same
49:51
time. How to say Greek, Greek
49:59
government at the moment is, is focused on simplifying taxes and
50:05
that sort of stuff so they can, they can return to high growth.
50:11
Their problem however, is more on the labour market.
50:15
They have very high youth unemployment and and this
50:21
basically stops the they, they have very protective system of
50:26
the so-called social benefits, so.
50:31
So you think that the Bulgarian model would be good also for
50:34
Greece? Greece is logistically very
50:41
difficult country, you know, so these are about 1000 big
50:46
islands. So you need to, to, to keep the
50:50
communication between them, you need to keep a relatively a high
50:56
level of public employment, especially typical central
51:02
government bureaucracy because and they have very high, very
51:07
high defense expenditures because of the, because of the
51:13
geographic structure of the country.
51:15
It's the first time in history Bulgaria and Greece have now the
51:18
same currency and the same defence system like NATO.
51:23
You are the same political union, economic union like the
51:26
EU and you have of course, a contentious history between
51:29
Bulgaria and Greece. Do you think this will unify
51:32
your markets and you will be having much better relations?
51:38
Yes, I think, yes, I think it happened already during the
51:42
government debt crisis in Greece like 14 years ago.
51:48
Then there was a flight capital from Greece to Bulgaria,
51:54
actually about two to 3% of GDP of 2011 that there was a flight
52:02
capital about. They're about 4000 Greek
52:06
enterprises. They're about 60,000 bank
52:11
accounts kept by, by Greeks. Greek ownership was of the
52:20
banking system in Bulgaria was, was about 24% of the banking
52:25
system and 25% of the credit. But Bulgaria did not suffer, you
52:31
know, from the Greek crisis because of the simple reason
52:34
that it was Bulgaria or Bulgarians who are owning money,
52:39
you know, to Greek banks. So the Greek banks, you know,
52:41
were very much interested that Bulgaria is doing OK.
52:46
And you're doing OK still, Professor, the reputation of
52:49
Bulgaria in the US that you are very poor country, that you're
52:53
the poorest country in the European Union and is the true
52:57
what you see is the kind of a discrimination against Bulgaria
53:01
and what you see the situation of the in relation please.
53:05
Given some of the backgrounds I already I already mentioned, so
53:10
Bulgaria is the poor country because there wasn't
53:13
reintroduction of the central planning in 9597.
53:17
And when you get you know, from from the average per capita
53:24
income like in Poland in 96 to to reduction of the of this
53:31
indicator by 50%. So how you catch up, you know,
53:35
so Poland won't be staying home the same place, you know, so it
53:40
requires time. So, but when Bulgaria started
53:44
negotiation with the European Union in 99 for membership, the
53:49
average GDP per capita was about 25% of the average EUGDP per
53:56
capita. Now it is 75%.
54:00
So it's three times even by this indicator.
54:04
When I was in Sofia the last time, I saw a lot of Maseratis,
54:07
Ferraris, Porsche and a lot of expensive real estate.
54:11
So it's a kind of a Boomtown from the visible impression.
54:17
Many, of many of, of, of those luxury items came, you know,
54:23
from privileged contracts with the government, so including,
54:29
you know, using some of the European subsidies and that sort
54:31
of stuff. And that also needs to be
54:34
cleaned up. What what we are witnessing as
54:37
an effect, you know, of, of, of the introduction of the euro is
54:42
that there were private savings. So those cash which was kept in
54:52
the pockets in at home and that sort of stuff has been
54:55
immediately, you know, converted into real estate.
54:59
And that's why the prices of the real estate went up this year.
55:04
And the, the, the, the, the currency in the banks, the, the
55:10
volume of the currency in the banks increase for this year by
55:16
11%. So.
55:19
People are basically impact on the the economy gets less, gets
55:25
more formalized by the. Yes.
55:29
You know your banking system is now also part of the ECB banking
55:32
system supervision and regulation.
55:34
Do you expect the kind of anti corruption effect by joining the
55:38
Eurozone? I mean, not for the locally
55:45
owned banks, but luckily, you know, the percentage as a share
55:49
of the banking sector is relatively low.
55:54
It is about 10%. So I believe, you know, with the
55:58
entering of the euro, this 10% will decrease.
56:02
So, and it's very important, you know, so if you take Croatia,
56:06
the local ownership in, in, in, in, in the banking system is 3%.
56:11
If you take Kosovo or Albania, the local ownership is less than
56:15
2%. Why?
56:17
Because big European saving institutions and global saving
56:23
institutions, they have an interest of being present in
56:27
countries like those I mentioned, for the simple reason
56:31
that they grow faster. In the international investment
56:37
community, Bulgaria still had a dubious reputation in the last
56:40
20 years and it was more or less a close shop in some aspect and
56:45
there was the idea that there is a strong oligarch influence and
56:49
so that was why many didn't come.
56:51
Do you expect that the eurozone will have a positive influence
56:55
on opening the Bulgarian economy to European investment?
56:58
Requirement for Bulgaria to join the Eurozone.
57:02
This is unique. Nobody had such a requirement is
57:06
to fix the rule of law and deal away with corruption because
57:10
it's very important, you know, for the payment system.
57:14
This is on the way. So one of the reasons
57:18
especially, you know, lead economies of the country were
57:21
insisting because at the beginning of this year, again
57:25
there was a government crisis. Then we had elections and that
57:28
sort of stuff. The basic mood of the top
57:33
representatives in the parliament and the government
57:35
was not to ask for convergence report by the ECB and European
57:44
Commission and delayed the entry into the eurozone.
57:49
So we started collecting signatures in January last year
57:55
for for one day we select, we collected what, 5000 signatures
58:01
from reputable individuals, you know, economies, professors,
58:07
cultural leaders, TV personalities and that sort of
58:11
stuff. And we force the government to
58:14
apply for a membership. So one of the reasons, one of
58:21
the reasons, one of the reasons we were so united and we get
58:25
such a support from the public was very simple.
58:30
People believe, and they still believe, that if Bulgaria is a
58:35
member of the eurozone, the politicians will not be able to
58:41
manipulate the central bank. Yes.
58:44
So and the Central bank, which is a very stable institution
58:49
despite the political instability and that sort of
58:51
stuff, what they did at the beginning of this year, I think
58:56
in February or March, they included the reserves of the
59:02
central bank which were at the level of 100 to 12% of the
59:08
currency in circulation. They included those reserves in
59:12
the balance sheet of the central bank.
59:14
Now the government cannot touch it.
59:16
So which is very good. And I believe if if the ECB
59:21
follows this example, you know of the Bulgarian National Bank,
59:25
it will be very good, I read. In the.
59:28
Which is very simple, you, you, you comply with Article 119 and
59:37
109, thirtieth of of the treaty and you provide for full
59:42
independence of the central bank.
59:45
Although there is some sort of ambiguity in Article 130, which
59:50
basically asks the central bank in all to to follow the policies
59:54
of of the European Union, of course, on the condition that it
59:59
does not affect price stability and that sort of stuff.
1:00:02
But if the ECB behaves like Bulgarian National Bank, it
1:00:08
would mean that the ECB is not financing government and the ECB
1:00:13
is not financing banks private. Banks.
1:00:17
The euro is a powerful tool for anti corruption and the
1:00:20
oligarchisation of Eastern European economies and Bulgaria
1:00:24
is a prime example. I think yes.
1:00:28
Professor, there was a entertaining report that
1:00:31
Bulgaria has suddenly much more millionaires and it was a widely
1:00:35
read all over European media that because of the introduction
1:00:38
of the euro, a lot of people suddenly started to use the
1:00:42
monetary system, brought the money to the banks and suddenly
1:00:46
you have much more millionaires in Bulgaria.
1:00:51
No, but that's, that's not necessarily means oligarchs and
1:00:55
that sort of stuff. So, so the, the, the, the
1:01:01
problem with oligarchy in Eastern Europe is very
1:01:05
interesting. You know, typically in countries
1:01:08
like Bulgaria, Ukraine, to some extent Romania, but not to that
1:01:13
extent. You know, every new government
1:01:15
was trying to create it's own group of oligarchs.
1:01:18
So that's why there is no oligarchy.
1:01:22
So basically, their best friends will be the new oligarchs the
1:01:25
moment they take power. Yeah, that was the truth, I
1:01:29
think, of most Eastern European countries.
1:01:31
Yeah. But inside the eurozone, of
1:01:33
course, there's less control of the government on the.
1:01:35
Monetary suppliers, I mean, this, this situation with the
1:01:39
oligarchy is, is still very beneficial compared to the
1:01:43
Russian oligarchy, because oligarchs in Russian, they're on
1:01:47
vertical dependence, you know, from Kremlin.
1:01:50
So here we have your competing, competing oligarchs.
1:01:55
They always have. Since Putin is in power for 25
1:01:57
years, he has always the same oligarchs until he doesn't like
1:02:01
them and he jails them or puts them out of the window or
1:02:03
whatever he does with his oligarchs.
1:02:05
Yeah, Nevertheless, Professor, let's talk about Macedonia,
1:02:08
because Macedonia is your beautiful neighboring country in
1:02:12
history. Bulgaria wanted to have
1:02:13
Macedonia and use you really were fighting for freedom of
1:02:18
Macedonia. Now Macedonia is ahead of the
1:02:21
joining the European Union possible in the next 5 or 10
1:02:24
years. But unfortunately in Bulgarian
1:02:27
politics you have imposed many, many conditions.
1:02:31
What's your view on Macedonia? I I believe that after the
1:02:34
elections in March or April this year, we will have much more
1:02:41
deliberate government, deliberate democracy, and I do
1:02:46
not expect any sort of a problem created by Bulgarian authorities
1:02:52
to Macedonia to join the the European Union.
1:02:56
Because we have now Montenegro, which is very, very good,
1:03:00
Austria supporting Montenegro for 2028.
1:03:03
The president of Montenegro and the Prime Minister will come for
1:03:06
the New Year's celebration here to Vienna.
1:03:09
And so that's a safe bet. Albania as well is going to look
1:03:13
quite good for 2029 to be in the EU.
1:03:16
And the wonderful thing would be that the third NATO ally of the
1:03:20
southern Balkans, Macedonia, N Macedonia, would also smooth
1:03:24
into. When we felt we meaning, you
1:03:28
know, a group of about 100 university professors, writers,
1:03:34
movie makers, when we felt, you know, some sort of a negative
1:03:38
sentiment by Bulgarian nationalists who are not
1:03:42
nationalists, they're pro Russian.
1:03:45
So I, I suspect there is a Russian influence in, in that
1:03:50
group regarding Macedonia. So we felt that this group is
1:03:55
gaining public popularity, I wouldn't say support, but some
1:04:00
popularity. We created the Bulgarian,
1:04:05
Bulgarian Macedonian club and we are constantly in the media and
1:04:11
we are trying, you know, to influence the opinion of both
1:04:14
countries to, to, to resolve these issues at the moment.
1:04:20
What do you think would be a defective Macedonia joins the
1:04:23
European Union in let's say 2029 and you are both you know you
1:04:28
are like in a in a economic zone, a dream of God's adage
1:04:33
have come through and the whole. Of Mother Tony and the you and I
1:04:36
will translate to A1 short article of myself and and and
1:04:43
send it to to France in in Austria to translate it even in
1:04:49
into German. Put it to Twitter.
1:04:51
And to the media title of the article is How important is
1:04:55
Macedonia for Bulgarian prosperity?
1:04:58
And it happened that if you look at the statistics, especially
1:05:03
export, because export creates income.
1:05:07
So Macedonia since 2004 until today is more important for
1:05:16
generation of prosperity of Bulgaria than Russia.
1:05:21
Russia is a cost, so you only pay Russians you know so.
1:05:25
So Romania, Macedonia has a greater share in Bulgaria GDP
1:05:33
than than Russia. It's equal to the export of
1:05:40
Bulgaria to Hungary and Czech Republic combined.
1:05:47
That's amazing. And you're completely supporting
1:05:49
N Macedonia joining you. Of course.
1:05:52
Very good, very good. It is also that Bulgaria has a
1:05:56
lot of regional disparity in in prosperity.
1:06:00
So you mean Sofia is very strong and rich region, but many of the
1:06:03
regions in the South and in the east are much poorer than the
1:06:07
central of Sofia. And so it would be wonderful if
1:06:11
the whole region is in the European Union for also have a
1:06:14
more equitable growth in the whole of Bulgaria.
1:06:19
That means also, you know, resolving some of the border
1:06:23
crossing issues with Serbia and that sort of stuff.
1:06:26
So part of the part of the Northwest Bulgaria, which are
1:06:31
not the poorest, but one of the poorest regions of the European
1:06:34
Union, they are more inclined of making business and trade with
1:06:42
Serbia. But the border crossings are
1:06:45
closed. So, but they're closed, you
1:06:50
know, so just because of some stupid policy of Bougain central
1:06:54
government. OK, that needs also the European
1:06:57
Union that must do much more cross-border infrastructure
1:07:01
initiatives to have more. They're also existing.
1:07:05
Also you need just to open them. So some there is no.
1:07:10
Visa regime, nothing, you know. So it's relatively easy, you
1:07:13
know, to do trade and cooperate. The other remarkable thing which
1:07:18
we need to discuss, Professor, is the energy transition of
1:07:22
Bulgaria away from Russia, because you had a really
1:07:26
amazing, very strong negative influence of Russia with this
1:07:31
refinery, I think it's called in, in the at the Black Sea at
1:07:37
Burgas Local. And you had a lot of Russian
1:07:40
influence in the energy sector. But in the last 3 1/2 years of
1:07:44
the Russian war of aggression against Ukraine, you have
1:07:47
basically chased out most of the Russian influence in the energy
1:07:50
sector. No, no, no supply of natural gas
1:07:56
by by Gazprom. That's a huge.
1:08:00
Change. Yeah, I mean, it was Bulgarian
1:08:03
dependence on Russian natural gas was 98%. 98 Yeah, and now
1:08:09
it's 0. Now it's 0.
1:08:12
It's an amazing change. And nothing happened.
1:08:14
You know, all the political parties I've mentioned, you
1:08:17
know, they were sort of weeping at before camera.
1:08:21
You know, here's the crisis, Bulgaric collapses, you know,
1:08:24
there is no Russian gas and that sort of stuff.
1:08:26
Putin is, he's a great guy and that sort of stuff.
1:08:30
You know, with refinery, with the refinery, the problem is not
1:08:36
of that kind. 1st, it's a, it's a very modern refinery.
1:08:44
It's one of the major taxpayers. So the the indirect taxes and
1:08:51
taxes on workers and management of the refinery equal to 1% of
1:08:58
GDP only one company. 1% of GDP. Yeah.
1:09:05
The the output of that, the production of that refinery, you
1:09:11
know is 3 times larger than the the consumption of Bulgaria of
1:09:19
diesel and and gasoline. And part of that output goes
1:09:24
through crane actually 60% of the IT was until last year.
1:09:30
I'm not sure what is the, the, the, what is now about 60% of
1:09:36
the gasoline, sorry of the diesel exported was going, you
1:09:43
know, to Georgia, Armenia and Ukraine and Ukraine because it's
1:09:47
bigger, you know, he had about about 50% of the export, you
1:09:54
know, of, of, of diesel, which is very important, you know,
1:09:59
for, for the army, of course. So the situation was really
1:10:04
difficult. That does not necessarily mean
1:10:08
that putting friends were not making money, you know, out of
1:10:12
selling, you know, diesel to and gasoline to Ukrainian army.
1:10:17
So but this issue is now being resolved.
1:10:20
Thanks for the sanctions. Thanks for the sanctions.
1:10:24
This was the American sanctions on.
1:10:27
On yeah, American and British. And what will be the future of
1:10:30
this refinery? Will it be sold to the Swiss Gun
1:10:34
war, Gun war? Or will it be nationalized?
1:10:36
Or what's exactly? The state, don't they?
1:10:38
We, I mean, sorry, I, I rarely speak in, in, in, in plural, but
1:10:47
we made a huge analysis and protests about gun war and the
1:10:52
entire media was basically informing the public, You know,
1:10:56
what is this about? And eventually, you know, when
1:11:01
Trump said, you know, that the company basically friends of
1:11:07
Putin, you know, everybody understood that, you know, so.
1:11:11
So this transaction was not going to happen.
1:11:13
And now will it be nationalized or will it be sold to another
1:11:16
company or what's exactly? I mean, because these are the
1:11:22
sanctioning authority which decides to deal or not to deal
1:11:30
with a given a refinery in this case, you know, Bulgarian
1:11:35
refinery in Burgas, you know, So it will this it will be decided
1:11:40
not by the Bulgarian government, which is very good with the new
1:11:44
budget. This was one of the one of the
1:11:46
reasons to go and protest again the the the the draft budget for
1:11:50
2006. Sorry, 26 was that they
1:11:56
allocated about 2% of GDP to, to, to buy a stake, additional
1:12:04
stake in, in the refinery because Bulgarian government has
1:12:07
22% of the assets of the shares of the refinery.
1:12:12
And they, they wanted to buy, I mean, those who are in charge of
1:12:16
the country were in charge of the country.
1:12:18
They wanted to buy the refinery. It was a stupid decision because
1:12:22
they are not the ones to decide so to say if they buy it.
1:12:26
But it remains on the sanctions, you know, So what?
1:12:29
You do you. Know they can.
1:12:31
They are the government. They can nationalize it.
1:12:33
Yeah. It's not exactly that they have
1:12:34
to buy it from Russia. There is, I mean, I'm afraid we,
1:12:40
we have to, to, to finalize. I must go to a funeral.
1:12:45
My condolences, Professor. Yeah, it's.
1:12:48
Actually, a very close friend who was one of the human rights
1:12:54
activists and one of the instrumental opinion leaders
1:12:59
with whom we succeeded of bringing down the communist
1:13:03
system. What's his name?
1:13:06
His name is Dayan Kiranov. To bless his memory and thanks
1:13:10
for his services for Democratic Bulgaria.
1:13:12
He was helping and I was helping him, you know, supporting the
1:13:17
opposition in Russia, in Serbia, under Milosevic, in Belarus.
1:13:24
He was more involved than me, but he was really a great
1:13:27
person. You Bulgarians have a great
1:13:30
addition also to support Democratic Change in the Western
1:13:34
Balkans and in Ukraine. I want to thank you for this and
1:13:37
give me your own history. Let's maybe sum up like this.
1:13:41
You know, Bulgaria in the 19th century was one of the most
1:13:44
crucial and most important country.
1:13:47
It was very much the Crucible of European history.
1:13:51
And now how do you feel, professor, when now at this kind
1:13:55
of 150 years of dramatic Bulgarian history, you are going
1:14:00
in 2-3 days you will be full member of the West and being in
1:14:04
all institutions and joining the Eurozone.
1:14:06
How do you feel, Professor? I feel very well and I, I know
1:14:10
that history very well. And I know that the Ottoman
1:14:14
Empire, Balkans, you know, they were at some years, you know,
1:14:18
especially and the second-half of the 19th century, they were
1:14:23
freer than many of the, of the European countries.
1:14:27
So. And in fact, you know what we
1:14:30
have, if all the, the, our, our countries, you know, join the
1:14:35
European Union and NATO, so and the euro zone, we will have the
1:14:40
same prosperity prospect, you know, for, for all of our
1:14:46
countries. That's a wonderful closing
1:14:49
remark, Professor. I wish you all the best and
1:14:51
thank you very much for your contribution in the last 35
1:14:54
years for freedom of Bulgaria, for economic freedom in Europe
1:14:58
and the Bulgarian miracle, the model which I say please for
1:15:02
Ukraine and for the Western pagans.
1:15:04
This is the way to do. And everybody who is listening
1:15:07
follow this Bulgarian success model, Euro, PEC, NATO
1:15:11
membership, Euro membership and of course stability and
1:15:16
prosperity via 10% this. Is plus plus rule of law.
1:15:21
The rule of law and of course you know, good cadastra system,
1:15:24
the return of the stolen properties from the past and.
1:15:28
In Germany it it it, I mean the translation of the treaty into
1:15:32
Bulgarian is that to enter the the eurozone, Bulgaria should
1:15:39
have a wreck start. So the German translation of the
1:15:44
treaty is that. Yes.
1:15:53
The rule of the law, that must be the fundamental of the state.
1:15:57
It's in Vienna at the Hofburg. We have written it and this is
1:16:02
the tradition and I want to close now.
1:16:04
Thanks you a lot, Professor. Wonderful.
1:16:06
All the best and great celebration on the 1st of
1:16:08
January 2026. Congratulations to the Eurozone.
1:16:12
Thank you for your mind. Thank you very much.
1:16:15
Bye. Bye.
1:16:16
Thank you. I will close now.