Economic growth can not be bought with debt

Economic growth can not be bought with debt, but must be made with hard work, said today The President of Bulgaria Rosen Plevneliev in a speech to students at Sofia University. This is one of the first de facto pro-austerity stands in EU, after the crash of these ideas on French and Greece elections. Bulgaria is one of the poorest EU members, but has a stable economy and very low public debt. That's why the country has no serious financial problems, although it is a neighbor to the most troubled country - Greece.

Mr Plevneliev, Together with the European Commissioner for international cooperation, humanitarian assistance and disaster response Kristalina Georgieva, opened the public discussion on the future of the European project, held on the occasion of 9 May - Europe Day.

According to the head of state, limiting government spending must be accompanied by measures of economic growth and reduce unemployment, increase labor productivity and competitiveness. The president noted that there are no easy solutions to the crisis, but each reform to improve the business environment to support small and medium business and any action to reduce youth unemployment will surely lead to success. "The decision is not the Europe of two or three speeds, but a Europe of solidarity and responsibility," said Rosen Plevneliev.

The crisis can be overcome only with determination and courage, added the president. The question is how to turn Europe into a leading political, economic, scientific and technological global power. Only united in its diversity, the EU can be a global actor, along with major global players, the president emphasized to the students.

Bulgaria should improve the environment for doing business and increase investment in innovation and knowledge, but can give a lesson to other countries in the EU financial stability and low debt, added to the media Rosen Plevneliev. At the moment Bulgarian public debt is 16% on GDP and even 10% interest rates will not make the country bankrupt. It borrows relatively rare with an average interest of 5-6%.

In 1997 Bulgaria almost bankrupted and a short hyperinflation occurred. Frightened of this bad experience Bulgarians established a currency board with a fixed rate of 1 lev = 1 Deutsche Mark. Now the rate is against fixed - 1 Euro = 1,95583 levs. After a mass privatization, accelerated debt repayment and growth in GDP, the debt to GDP ratio fell from over 100% to less than 20%. Bulgaria also had its real estate bubble, but its banks have no serious problems due to very high bank reserves and very high capital adequacy - on average 17%.

May 9th 2012

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