Proposals by Bulgaria’s Finance Ministry to further tighten the purse strings on income policy as the crisis tears ahead sparked the first controversy within the new Government headed by Prime Minister Boiko Borissov.

Social Minister Totyu Mladenov opposed the idea of the Finance Ministry to freeze the minimum wage and social pension over 2010-2013.

On August 24 2009, employers’ organisations threw their weight behind the plans of Deputy Prime Minister and Finance Minister Simeon Djankov, while unions backed the social minister.

The government is due to vote on August 26 the final version of the short-term fiscal framework for the period 2010-2013.

The document calls for leaving income in the public sector intact from its 2009 level in 2010 and scaling up money for public salaries in proportion to the gross domestic product (GDP) over the coming years.

Following this year’s 19.7 per cent increase, the 2010 pensions will be put on ice.

The new Cabinet pledged not to revoke the pension hike decision made by the former government of Socialist leader Sergei Stanishev despite the yawning deficit it inherited. But unemployment benefits will be curtailed by slightly more than 10 per cent to a range of 110-220 leva versus 120-256 leva at present.

The Ministry of Labour and Social Policy does not support the Government’s income policy, Mladenov said.

Keeping the minimum wage at 240 leva after 2010 is unjustified and will trigger a proliferation of the shadow economy as many employers will resort to paying social contributions on the minimum wage, he said.

Source: Dnevnik.bg