I agree about FDR's legacy....so many government programs created which are still in existence today. I have no doubt they were created during a time of great need, albeit, many many years ago. However, many of these programs should not exist in their current form today, as they are hurting rather then helping. Also, as we can see, a government solution is not always the best or most effective. It's such a fine line, when is government involvement necessary and when it's better to have less. Overall, I generally like less government involvement in many facets of life. But, as [...]

Read the full comment we've seen too, we can't always leave business to their own devices. Bulgaria will have to find the right balance in the coming years.

P.S. I don't think you are picking on the U.S. (today-haha).

There is no doubt that higher education is of high quality in the US as is health care frankly, but my point is that all those grants make it worse in a long run. They distort the price of education because they are just a bunch of "education money" looking for a home and that ensures that universities eventually start charging so much, that one has to either get a grant or a loan - the prices are so distorted that its very hard for 98% of all Americans to pay for education, health care or real estate, out of [...]

Read the full comment pocket. That is wrong.
It's a difficult problem.
You know what's the definition of a fair market price right? "Whatever the buyer is willing, or capable of paying". I think the US government has been kicking the "fair price" out of the park for years now...
In real estate you have the so called FHAs and other programs which serve to corner the lower price range and then the funky mortgages bumped up the moderate price homes.
I am not picking on the States, just giving it as an example with which I am familiar.
On the whole, I think FDR's legacy may very well be the worse thing for the US...

There is no doubt that the government is very involved in funding education in the U.S., at all levels, including universities, and from a wide variety of sources. I attended the University of Wisconsin Madison, which is a land-grant university. This means that in exchange for having key educational programs, such as agriculture, the federal government allows the state to use the land to raise money and build a university. Also, for example, I was also able to attend the University thanks to a government guaranteed student loan which was independent of my parent's income (thank goodness, as I was [...]

Read the full comment paying for my own education). These loans had to be repaid and the interest rate was fixed. This of course, is different than a grant, in that a grant doesn't have to be repaid (the government offers all kinds of grants to students as well). I believe that my alma mater has found the right balance of both public and private funding which has created a very financially sound university. I actually got a great education for a reasonable price (many years ago). However, our primary education schools, depending on location, are another matter entirely.

Regarding government involvement in health care, our Congress recently passed a health care bill which has been neither read nor understood by anyone voting on it. Where will the money come from? The government already cannot properly manage programs such as, Medicare and Medicaid.

Government cannot provide endless funds for all kinds of things. For example, I have to live within my means. I cannot buy a brand new big house and then wonder later who will pay for it. The same principle should be applied to government spending, but as we've seen in the U.S., this has sadly not been the case. How many industries did our government bail out in the last couple of years? How ridiculous has this become that a business can be so poorly run that the government has to be involved. Or, that people were given mortgages who then were totally unable to repay them?

Looking around, I think Bulgaria has a lot of great examples of how not to (mis)manage their economy.

Not to beat this to death, but this is the problem the US has with education and health care as well - governmet grants.
In one form or another the US government pays for about 60% of all medical charges. Probably more so in education. The rate of increase of both of those is astronomical and completely unrelated to the economic climate - meaning it's very successfuly divorced from any market reality.
Now if the univercities and the hospitals were government owned, then that's no problem - well the quality will rock bottom but there the [...]

Read the full comment prices could be controled.
However with private institutions supported by government grants you have the 4 euros extra for the loaf of bread from the start right there ... It only gets worse, as gradually you have the situation where the consumer is NOT the costumer.
The instinctual human reaction to out of control prices, is to call on the government for help. Well, so the problem is compounded and the medicine is on its way to kill the patient...

Btw I don't think you grasp the problem with government involvement.
Them owning share in AIG is not what I was refering to.
Look at it this way:
it's been years since I personally bought bread, so for the sake of argument say it costs a Euro.
If the goverment desides to give every person 10 euros a day for bread before long a loaf of bread will be 11 euros.
If they give that grant to only half of the population, it is reasonable to expect the price to [...]

Read the full comment level off around 5 euros.
If I am not one of the lucky ones, I'll have to thank the government for the extra 4 euros I pay for bread every day!
Sure this is a crude oversimplification ( terribly written from a phone as well) but you get the point of price distortion.

That's exactly right. If the government insists on spending money we don't have, then rehabilitation projects of all kinds, cleaning up, energy efficiency, there are many obvious needs around. Helping fix the housing already there would be nice.
Adding to the excess housing, that the market isn't asking for, could only end in tears;)
Raptor,
what do you mean by "opportunity to own a home"?
You don't mean "a right to own a home" right?
There is no such a right. Besides BG has among the highest home ownership % [...]

Read the full comment in the world due to low birth rate and outward immigration.
Pretty much every renter in Sofia has one or more empty places back in the small town they come from. The effect of housing grants will be increased urbanization which is already a problem for us.
On personal note, but realated to the subject:
I have 2 appartments in the center that I am not even renting out right now. Rents are too low, and I made the mistake of making them too nice inside. I just don't
want them ruined for a few hundred
miserable Euros a month.
Since there's no mortgage and low property tax, I am just ignoring their exsistence at this point.

Dear Raptor
there are muliple options, which of course are not so easy but on a long run more efficient and effective. I think it is faily easy for BG because it can learn sooo much from other EU countries, because all of them have been there where it is now...

e.g. for in the real estate sector:
fixing the legal foundation for ownership in apartement houses, providing the ground that decisions can be made on majority level.
In combiantion with a rehabilitation law and initative ther is a extraordinay [...]

Read the full comment potential for existing aprtement buildings. all of them need thermal reahbilitation. side effect is the support of energy saving technologies and industry. banks can easily jump on by supporting (very much) less risky loans, etc

it worked already, even in SEE countries.

you just have to be a little creative and innovative...

Are you suggesting that people or families don't have equal opportunity to own their own home!

I have meet many BG families who want to do exactly this! If they can have some sort of assistance from the Government to do this then good.

The US government also has a share in AIG and others! They will off load these at the right time for a large profit and then put some of the funds back into home grants again.

Australia has used home grants since 2000 and [...]

Read the full comment yet the local banks did not require a bailout nor does the Australian Government own these banks viz homes. In fact during the GFC major bank's were yielding yearly some 3 billion + BGL profit each.

And what is your great idea Valeri..!!

"And how do you suppose BG will stimulate long term growth, the grey sector!"
The problem is that they are not even attempting to stimulate the gray sector. What is "gray" economy? Drugs? Guns? Slaves? No - it's untaxed income. Economic activities that do not involve the NRA. That part of our economy has done quite well in the crises, thank you very much! No need to stimulate that, although they'd love a bite from it, when the storm subsides... Government grants for housing in a country with tons of vacant homes and in the middle of demographic [...]

Read the full comment crises, meaning few young people having kids and looking for homes.. great idea!

Raptor:

"The key is that the grants need to be properly managed and unfortunately in Bulgaria this may not be case."

Don't know where you've been lately, but the US and the UK just threw the whole world's economy into crises, precisely because of this kind of thinking, so I wonder why is it that you keep harping on the way BG manages our finances. In fact what we are discussing here is ways for BG to negate the effects of US mismanagement, and this is hardly an opportunity to take a [...]

Read the full comment cheap jabs at BGs handling of finances.

Home grants do not simply "increase" the prices, they distort the market, and that right there is the beginning of the new bubble. I am always amazed how few understand the core of what transpired, and are too ready to ascribe their own ideological beliefs to it.

It wasn't unregulated market that caused the problem, but rather the fact that you have one of the players, the government, in the role of the referee. That can only work for a limited time, like socialism, actually....

You can either be a player or a referee - never both. Through grants and guarantees, the US government owns over half of the private homes in the US (unthinkable in BG in the hight of the Commie years), meaning they hold the mortgages, through those two companies - Fannie Mae and Freddie Mac, which is in fact owning the homes. That's like placing the majority holder in a business, in the role of regulator. Only a fool would do that, yet, we have folks advising us to follow that example.

Would you guys get together for coffee and exchange vaporous suggestions among yourselves.

And how do you suppose BG will stimulate long term growth, the grey sector!

The idea is when a person buys a home with a grant they also consider buying other items, tv's, fridges, furniture and so forth. It is designed to STIMULATE the economy. Many developed Countries such as the USA and Australia in fact increased the grants during the GFC just to do this. And now they have reduced the grants once the economic situation improves.

Yes indeed it has the effect of increasing prices of property but economic growth [...]

Read the full comment will always tend do this, it is the nature of the beast;so your point is moot.

And BG has a huge number of un-occupied apartments. Put this down to bad management between all sectors of the real estate sector. The Government failed to properly manage this sector and let developers build in areas which were clearly not sustainable. The GFC only speed up the inevitable of the BG property market. We all know this wreck-less growth was predominantly fueled by FDI; those looking for quick returns and profits.

One of the question on this forum, where is the next growth or stimulus for growth going to come from to support the Minister's assertion..? My suggestion with Home grants is that the economic growth could be more managed and not simply fueled by speculation or greed. For example, individual grants are made available to regions which can support sound property development. The key is that the grants need to be properly managed and unfortunately in Bulgaria this may not be case.

I make you 100% Valeri!

When it comes to Bulgarian construction companies working on infrastructure projects expat has a point! Residential and commercial property construction projects have little in common with infrastructure projects, especially when one considers that infrastructure is never built before constructing apartments or hotels (or office blocks for that matter!).
However, all is not lost. The government needs to consider (and urgently) re-training programmes for the unemployed construction labour and construction companies who are clearly struggling and whose management are not driving a fleet of Merc 65S and Merc Jeeps. Come [...]

Read the full comment on Bulgaria lets get this sorted!

Allen sounds a bit unhinged;)
Sounds like a bad experience. I hate losing money too, but wouldn't dream of spewing all that on account of my personal bad choices.

I don't know what the misister of finance was smoking, but foreign investment in Bulgaria ain't coming that easy. Bulgaria is the most corrupy economy in europe, has the lowest productivity, the people are least conversant in western languages, the crime is high and the cost of doingf business in the country has trippled since 2007. Hello!!! The contry has no industry and has given foreign investors zero incentives to come and invest. Bulgaria's economy is fully dependent of inlfows of funds from the EU, expats, and some tourism. But tourism sucks in Bulgaria and as the western funds dried, [...]

Read the full comment the privatization ended, it is not going to be fun in Sofia. DO NT INVEST A PENNY IN BULGARIA!!! This is the biggest losing proposition among all I know. Put your money in honest and hard working economies. Bulgaria is not such yet and I doubt it will be soon.

I fully agree with Valeri. What is the point to secure the real estate industry and not others. And she is right it would create another bubble. In BG the real estate industry will take some time to digest the last one, and hopeful some lessons will be learnd. also from other EU countries, eg. like Spain. They have stated to demolish a lot of unuseful bulings on the cost. This also where unutilized construction companies can be engaged.

PS: As mentioned erlier I dont think that is a very bright idea that building companies should [...]

Read the full comment get to work on infrastructure like roads. This is total different business, needs total different skills and experties... this is something which really needed to get understood in BG

To clarify myself:

"Fannie Mae was established in 1938 [8] as a mechanism to make mortgages more available to low-income families. It was added to the Federal Home Mortgage association, a government agency in the wake of the Great Depression in 1938, as part of Franklin Delano Roosevelt's New Deal in order to facilitate liquidity within the mortgage market. In 1968, the government converted Fannie Mae into a private shareholder-owned corporation in order to remove its activity from the annual balance sheet of the federal budget.[9] Consequently, Fannie Mae ceased to be the guarantor of government-issued [...]

Read the full comment mortgages, and that responsibility was transferred to the new Government National Mortgage Association (Ginnie Mae). In 1970, the government created the Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, to compete with Fannie Mae and, thus, facilitate a more robust and efficient secondary mortgage market. Since the creation of the GSEs, there has been debate surrounding their role in the mortgage market, their relationship with the government, and whether or not they are indeed necessary. This debate gained relevance due to the collapse of the U.S. housing market and subprime mortgage crisis that began in 2007. "

Wiki.

Another thing.
Government home grants is what caused the problem in first place, in the US.
Very bad idea.
Every time a government gets involved in the market, it tends to distort prices.
Loan guarantees are just as bad. Taking the risk out of lending/borrowing is begging for recklessness and bubbles.
Funny how we all learnt different things from the financial crises...

Yeah Raptor, but there's a case to be made that the Gray Economy lessened the impact of the crises in first place.

Stop building apts on the coast and invest in the roads and footpaths, also cleaning the place up some parts are like a tip .

Well, I believe the Bulgarian Minister because (thank goodness) the country is not in the EuroZone, so there are far more autonomous fiscal measures available to it (such as devaluing/revaluing the Leva is it needs to) than there are to Greece.

Greece is in a right pickle economically (partly due to its membership of the EuroZone with an economy unsuited to it) , and it will be interesting to see how far this problem spreads across Greece's borders...not a lot, one hopes.

One way to boost the construction sector and overall economy would be to introduce "government home grants" to person buying a home or apartment. Also to offer rebates for energy efficient product such solar or solar PV systems etc.

BG economic recovery has to be fueled by ongoing governmental initiatives as above or large public spending. Unfortunately due to BG massive grey economy, public spending does not always result in good distribution of income to ensure that the Governments spending contribution is not wasted.





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Read the full comment

interesting view of the finance minister. He made a point.

I am just wondering where the recovering is coming from. Relaying on FDI as in the past, is not a good strategy, because the Hype of SEE is proven to be over and International Companies need time to recover before they start investing in SEE again. Which now is proven that the growth is not indefinately. So I beleave FDI will not very soon be as extensive as in past few years !

Secondly there is a tough competition between SEE region. [...]

Read the full comment Other countries have devaluated their currencies, which gives them a much better starting position than BG.

I am curious see what the future will bring...

"Bulgaria is expected to show the first signs of recovery from the global economic downturn towards the beginning of Spring in 2009,.."
some journalists have not landed well in the new year. I assume it is ment 2010 :-)))