Steve Hanke: Corruption Is Bulgaria’s Achilles Heel
Finance – January 5, 2013, Saturday
Johns Hopkins economist Steve Hanke is known as the “father” of the currency board in Bulgaria.
If Bulgaria manages to tackle corruption successfully, the country will become number one on the Balkans, Johns Hopkins economist Steve Hanke, who designed the currency board in Bulgaria in the 1990s, says.
“Something must be done against corruption. If this changes, Bulgaria will definitely have the leading role on the Balkans. Investors are always surprised when they see how good the economic and bank indicators of the country are. The problem is that they refuse to even look at them because of the corruption and the judicial system,” Hanke said in an interview for the Bulgarian National Radio, BNR, Saturday.
The economist further stressed he believed the best part of Bulgarian “history” must be told, with presenting the positives, and not just the negative. He reiterated corruption was the country’s “Achilles’ heel” in preventing economic growth.
Regarding the newly imposed tax on bank deposits, which became effective in Bulgaria on January 1, the Professor voiced strong disagreement with such “political decision.”
“I have been opposing this since the day it was announced. At times of crisis the bank system should not be interfered with. This is a case of pro-cyclic regulation. Times are bad and should not be additionally worsened with imposing new taxes in the middle of the crisis. Other than that, the regulation of Bulgarian banks by the Central Bank, BNB, is a very good one,” said he.
Hanke stated that Bulgaria was one of the very few countries to successfully deal with bank capitalization i.e. in the time of economic boom the country tightened control over banks, and in the time of crisis, this control was eased.
The economist noted his opinion that Brussels and the West in general should have learned a lesson from bank regulation and the successful practices of countries such as Bulgaria and Estonia.
The Corruption and faults in Judiciary system in Bulgaria are not just back-warding phenomena for Bulgaria at time of crisis. They constitute the ‘peak of the iceberg” of a deeper processes that in fact lead Bulgaria to the bad social results – the current years politics.
Steve Hanke himself provided consultancy for the Currency board, that in fact saved the Bulgarian financial/bank system of the deregulation trend that in fact ruined other countries bank systems and outraged financial crisis.
However politics of shortening social costs, economy regimes, budget cuts are symbols of an attempt to further deregulation in other sectors of economy and thus providing satisfactory ground to shadow economy and criminal practices. As the case with high corruption level and judiciary faults in Bulgaria are.
So – corruption and Judiciary system inadequacy in Bulgaria are answers to the sound bank system development. The first two are main area where crisis could express itself and it is more than evident. The mere fact that the EU authorities recommendations for improving the Bulgarian judiciary system are simply neglected shows that this system is guardian of the deregulation and corruption practices – hence functioning just the opposite to its natural role.