Velev revealed a terrible offshoot in the budget of Assen Vassilev, suspects the Greek scenario

Pensions are raised with loans, debt is rising. We are moving quickly towards the Greek scenario. This was stated by Vasil Velev, head of the Association of Industrial Capital in Bulgaria / BICA /, in an interview with “STANDARDHe also pointed out that they want the resignation of the cabinet due to unfulfilled promises and incompetent management. Here is what Velev said:

– Mr. Velev, the parties promise to accept the budget in its social part. How would you comment on the update from a business perspective?

– I do not know how the update can be adopted only in the social part without an amendment to the law on the state budget. As the transfers in the Health Insurance Fund / NHIF / and in the State Social Insurance / SSS / are from the state budget. This nearly 1.5 billion, which will increase the cost of pensions, must come from somewhere.

BICA did not support all three bills to amend the budgets – the state, the Social Security and the NHIF. Because they lack the most important thing. It was announced that their goal is to finance anti-crisis measures. Half a year ago, when the update of July 1, 2022 was set, the goal was to make analyzes, prepare reforms and ensure their implementation with the budget update. Now there are no reforms, the goal of the update has been changed – anti-crisis measures. But there are none. Because the crisis comes from high inflation. And there are no anti-inflation measures in these projects.

The main reason for high inflation is the price of electricity. For the first half of 2021, the average price of electricity on the free market is BGN 112 per megawatt-hour. In July, the price began to escalate, with employers protesting in October. Extremely high prices for 633,000 free market consumers have begun to be offset. And so – from July to May inclusive, the average price of electricity after compensation is BGN 245 – ie. more than double jump. If there were no compensations, the increase would be 3.5 times.

But compensation always happened at the last minute, month after month, with a lot of scandals. This brought uncertainty to the business and pushed prices up. Because if no compensation is given, it may turn out that one company has been operating at a loss and cannot pay its bills. If high prices are introduced without compensation in the cost, many companies will not be able to sell their products, especially those that export, because there are international prices in international markets. All this has led to the fact that we have 2 times higher inflation than the European average. For the whole year, the forecast of the European Commission is that inflation in Bulgaria will be twice as high as in the euro area.

– In your opinion, the reason for this is the late compensation? Because high electricity prices are all over Europe.

– Late and insufficient compensation. As of September, Romania, Spain and other countries have laws that permanently regulate this issue, not month after month. The companies are compensated and our competitors in other countries have better final prices. They also have security and predictability. We are already in the middle of June and we still do not have clarity about July and in the coming months whether there will be compensations and under what scheme. There is no order for this in the budget. The estimated price of the EWRC for a one-year period – from July 1, 2022 to June 31, 2023, is BGN 431 on average per megawatt-hour.

For May the annual inflation is 15.6%, as last year the electricity for the first half of the year was BGN 112, and this year – BGN 245 after compensations. From July 1, the price will be BGN 431 – twice more. How much will inflation be if there is no compensation?

This main reason for anti-crisis measures and budget updates is not addressed in the budget itself. That is why we do not support it. If there is no such measure, it is better not to do anything. Because no matter how much pensions increase, inflation will outpace them.

And the planned increase in pensions is with loans. The increase is set to be made with the advance under the Recovery and Sustainability Plan / PVU /. This advance must be returned and used for what it was given for – for investments. Next year, the cost of pensions is 3.750 billion more. Plus the return of the billion we borrowed from PVU. They are 4.750 billion. We are rapidly moving towards the Greek scenario – we take loans and pay fixed costs with them, such as pensions and others that are not investment – will not bring income. Until they stop giving us loans. This is another reason not to support the budget.

All other measures in its value are many times smaller than the increase in pensions and are not focused. VAT is reduced for everyone, gasoline is reduced by 25 cents for everyone. Public resources are wasted and inflation is fueled by unfocused spills of borrowed money. There is no planned program to compensate for the price of electricity for enterprises, no reforms are planned, no focused measures, there is a risk of excessive deficit and debt.

– You raised the issue of the lack of compensation in the budget and the government replied that they will be in the Energy Act.

“But they’re not there either.” There are no numbers in the bill submitted by MPs. It has not been said that the Electricity System Security Fund / EUSF / will compensate under the scheme BGN 200 below and 80% above this price. It is left to the benevolence of the Minister of Energy as much as he breaks from his heart. Having said that, after taking into account future investments and repairs, he can propose to the Council of Ministers to contribute to the EUSF the remaining amount. But there may be nothing left.

And the electricity for the household is compensated by the price decision of the EWRC. The annual consumption of households is 12 terawatt hours. The price, determined as a market forecast, is BGN 431. The price at which NEK will sell to the public utility companies is BGN 82. If we subtract from 431 these 82, there are 349. And this, multiplied by 12 terawatt hours, becomes 4.188 billion – these are subsidies set by the EWRC for the electricity of household consumers. They come from the draining of Kozloduy NPP and NEK and from the EUSF.

But even after this subsidization of household nuclear power plants there is a surplus. The plant produces 16 terawatt hours, of which 5 are for household use. The rest is 11 terawatt hours. Multiplying them by BGN 431 minus 61 – the price of Kozloduy, at which the plant has a profit, remains BGN 370. Multiplied by 11 terawatts for the free market – they become 4.070 billion unscheduled, unexpected profit at the NPP!

And what funds are needed to compensate consumers in the free energy market? 431 minus 200 / floor /, BGN 231 remains, calculating 80%, which we want to compensate, 184 remain. When we multiply it by 21 terawatts / consumption on the free market /, it becomes 3.880 billion. compensates for the free market according to the formula used in May and June, is less than the extraordinary profit of the NPP alone, after the 5 terraces were allocated for households and he received a subsidy of 4,200 million.

The bills come out, the money is there. But there is no order in the budget update or in the energy law.

The place of this text is in the budget. Because the energy law will continue to operate. And we are talking about the second half of 2022. It should be noted in the update that the EUSF compensates consumers on the free market under the scheme of BGN 200 below and 80% above this price. In order to be predictable, prices should calm down and even go down. If there is no such text, prices will continue to escalate, with the potential to double. As now inflation is 15.6%, it can pass 30%.

– There were forecasts that in the spring electricity prices will calm down and go down. Why didn’t this happen?

– This was the forecast before the war in Ukraine. Now it is the reason prices are rising. In early March, the EC allowed even more exceptions to the rules so that consumers could be compensated. In fact, May and June are the lowest electricity prices historically. But now they are triple compared to last year.

– But what is the connection of the war in Ukraine with the production of electricity in our country and its prices?

– We export over 20% of the energy produced because we have more than we consume. We make good money from this. But our market is not isolated and since supply is greater than demand, the price will fall. It is connected and prices are high in Europe because of natural gas, which is expensive and insufficient. In Europe, a significant part of electricity is produced on the basis of natural gas. And that keeps prices high.

In this situation, we are in a very favorable position because we have production, capacity and local raw materials that have not become more expensive. We benefit very well from this situation. And part of these profits must reduce the price for local producers. It’s easy, it’s simple.

“Isn’t that absurd?” Some earn so much because of the favorable situation, and at the same time people suffer because of the prices that are constantly rising.

“It’s absurd, yes.” And it’s because of incompetent management. Since July 2021, we have not stopped saying this. We are protesting for June 29. On Friday at 10 o’clock we have a meeting of the headquarters to prepare for the protest.

– Do you not expect any proposals to be submitted between the first and second readings of the budget?

– We expect, we insist, we have proposed texts. They are not there yet. None of those in power stood up in public to say: Yes, such corrections will be made in our careless initial project.

– There was an inquiry from the business and about gas. Did the Prime Minister’s answer satisfy you that Azerbaijani gas will flow in our country in July?

– Azeri gas is one third of consumption. And the other two thirds? 40% of the Old Continent’s consumption is Russian gas. Unlike Italy, Germany, France and other countries, we have given up this largest supplier, which has the lowest cost of production and in good competition can give the best price.

We gave up the tame to find cheaper American liquefied natural gas. In fact, we found it more expensive, and for a while.

There is absolute uncertainty at the moment – we have neither a medium-term nor a long-term contract. Except for the Azerbaijani, which is about 1/3 of consumption. So this is the second unfulfilled promise.

In addition, the government has promised to pay for the nonsense, but will still pay with our money, compensating for the difference between April and May prices and returning the money to businesses. And it’s not done.

The government has promised to prepare conditions for long-term bilateral agreements for the electricity-intensive industry. As is done in the EU. Quantity must be set aside and companies that meet the criteria for electricity-intensive must pay a certain price directly. For Germany, the Netherlands, France and other countries, this price is an average of 70 euros per megawatt, in France it is even 46 euros. This is the third unfulfilled promise of the government.

Let’s add the lack of indexations in public procurement in construction – there at the entrance prices of metals, bitumen have risen from 80 to 100%. There is no way the price will remain the same. Construction stops. We also add the unpaid construction works of one year.

– Will the protest on June 29 be political or purely economic?

– We will demand the resignation of the government. If it can’t do the job, another one must come to do it. We stated this in April in a letter to AORB. The protest is not political, but because the work is not being done. There is money, others do it, we are in a better position. And instead of having a competitive advantage, we have the opposite.

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