Nature national instruments
What is the character of the legal instruments adopted at national level to implement Euro-crisis law (constitutional amendment, organic laws, ordinary legislation, etc)?
The legal instruments adopted in Bulgaria with the view to implement the Euro-crisis law had the character of ordinary laws (LPSB, LPF, etc.) and, to a limited extent, secondary normative acts (the annual Decisions of the Council of Ministers on the budgetary procedure). Due to a possible confusion as to what constitutes an ‘ordinary law’ for different legal systems, the author considers that an explanation on the types of legal instruments used in Bulgaria is necessary.
Within the Bulgarian legal system there are no ‘organic laws’, as there are in Spain and Portugal, for example. The only kind of norms that occupy a position which is between the Constitution and the ordinary laws are international norms. However, the CRB does make, exceptionally, a distinction between two specific laws and the rest of the ordinary laws. Their specialty is expressed in the different procedure that applies for them. One of these two is the annual LSB. Its distinguishing procedural feature lies in the right of initiative. Under Article 87 CRB, it is stated that the legislative initiative lies within the Council of Ministers as well as any member of the National Assembly. However, the same provision limits the right for such initiative only to the Council of Ministers with respect to the LSB. No other procedural differences apply. The other law with specific procedural requirements is the constitutional amendment (see the answer of the next Question). With respect to the international norms (treaties) two other special cases can be identified. These concern the required majority for the ratification of a specific type of international agreements. The first deals with a ratification of an international agreement allowing foreigners and/or foreign legal persons to acquire property rights over pieces of land. The second is the ratification of a treaty conferring powers to the EU.
The Law on Normative Acts (LNA) elaborates further on the types of normative acts that can exist in the Bulgarian legal system. It puts at equal footing the Law and the Code without further distinguishing between other types of laws, such as organic. The LNA then continues to identify various types of secondary (to the Law and the Code) normative acts. Accordingly, all Laws and Codes in the Bulgarian legal system are of equal legal force. The theoretical divisions of the different types of laws (such as formal or material, general or special, organic or ordinary, etc.) is, however, sometimes present in the vocabulary of the BCC, albeit without introducing a hierarchy between them. The BCC refers to two types of non-ordinary laws that are present in the theory – organic (органични) and, for lack of a better translation, constitutive (устройствени). To the best of this author’s knowledge the general constitutional law discourse in other languages refers to organic laws as comprising both of these two types of laws. The specifics of the latter are that such laws regulate the activity of the State organs. One example of such constitutive law is the LPF, which regulates the activity of the State organs in the process of drafting their and the State budgets. This mixture between the use of academic language and official documents, however, may create confusion. For example, the CP of Bulgaria for 2013-2016 refers to LPF as a constitutive (устройствен) law and the Commission in its assessment of the NRP and CP of Bulgaria for 2012 refers to the LPSB (the pre-LPF law) as Organic. Considering the explanations above, this qualification of the law being Organic does not mean that the law is of higher standing with relation to other laws or that it cannot be amended by a simple majority or that it is entrenched in any other specific way.
Have there been any constitutional amendments in response to the Euro-crisis or related to Euro-crisis law? Or have any amendments been proposed?
The CRB was neither amended in response to the Euro crisis nor in relation to Euro-crisis law. However, an amendment of the CRB was proposed in 2011 but it ultimately failed. Before looking at what happened with the proposed amendment, it is useful to provide a short overview of the process of amending the CRB.
The rules for amending the CRB or adopting a new Constitution are set out in Chapter IX of the CRB. The regime for amending the CRB can be divided in two – the general and the special regime. The general (default) regime is that the National Assembly has the power to amend any and all constitutional provisions with the exception of the provisions that can be amended only by the Grand National Assembly (GNA). The special (exceptional) regime requires new elections for the GNA which is to adopt the amendments for which it was elected (its mandate). This mandate can, most exceptionally, include the adoption of a new Constitution. Accordingly, the GNA is to be convened only in specific situations when the changes in the constitutional order are of particular significance for the State and the society, which are listed in Article 158 CRB. These situations are (1) adopting a new Constitution; (2) resolving on territorial changes; (3) on changes in the form of state structure or form of government; (4) on any amendment of the direct applicability of the CRB, supremacy of international law, on the irrevocability of fundamental rights, some of which cannot be limited even following a proclamation of war, martial law or a state of emergency; and (5) on any amendments to the rules on constitutional amendment. The adoption of an amendment/new Constitution by the GNA requires two thirds majority (out of 400 members) on three ballots in three different days.
Since the amendment that is the subject of this answer did not fall within the GNA competences, the discussion will focus only on the specifics of the amendment procedure by the National Assembly. The initiative for introducing a draft law for the amendment of the CRB belongs to the President or at least ¼ (that is, 60) of the national representatives. Such a draft law must be debated at the National Assembly “not earlier than one month and not later than three months from the date on which it is introduced”. As with any law, this draft law is also accompanied by explanations for it. When it is submitted to the National Assembly, the draft law is not allocated by the President of the National Assembly to one of the standing Committees. Instead a special ad hoc constitutional Committee is created with a Decision of the National Assembly, which acts as a leading Committee. The National Assembly, while not constitutionally obliged, adopts a Decision with rules of procedure for the Committee, which are drafted by the Committee itself. These rules are, naturally, to a great extent restating the relevant constitutional provisions.
The draft law requires three different readings in three different days and the required majority is ¾ (that is, 180) of the national representatives. If ¾ majority is not gathered but more than ⅔ (that is, 160) is, the draft law can be reintroduced. This must happen not earlier than two months and not later than five months after the ¾ majority was not gathered. In such a reintroduction a ⅔ majority will be considered enough for adoption. This rule of scaling-down majority applies to all three readings. At the first reading the draft law is discussed and voted upon in general and in its totality. The national representatives then have fourteen days (as per Article 80(4) of the Organisational Rules of the National Assembly) to submit written proposals with respect to the adopted at the first reading draft law. These proposals must not go beyond the scope or against the principles of the proposed constitutional amendment. The constitutional Committee then prepares a report including the draft law, the submitted proposals and the Committee’s opinion on them. At the second reading the draft law is discussed and voted upon provision by provision. Following the second reading proposals for amendments of the provisions cannot be made and the Committee may make only editorial changes. At the third reading the draft law is voted upon en bloque. Finally, the adopted amendment is signed and promulgated by the President of the National Assembly within seven days of its adoption. As such, the President of the Republic is exceptionally excluded from the final stage of the adoption of the constitutional amendment. Having provided an overview of the constitutional framework for amending the CRB, it is now pertinent to examine what happened with the proposed amendment in 2011.
The first official record of the idea for constitutional amendment with respect to the public finances can be found in the verbatim record of the meeting of the Council of Ministers of 16 February 2011. There, the Minster of the Finances – Simeon Djankov, in a briefing of the results of the ECOFIN meeting that took place the day before, outlined his idea for a Bulgarian Pact for Financial Stability. In his outline, the Minister stated that this idea included a constitutional amendment which was modelled after the German one. The Minister stated that the envisioned measures will be even stricter than the German ones in order to show that Bulgaria and its current Government have the strictest financial discipline in the EU. The three main elements of the Pact were: (1) limit of 3% for the budgetary deficit; (2) the State’s redistribution role to be maximum 37%; and (3) a requirement of ⅔ majority at the National Assembly for any future increase of taxes. The Prime Minister, in the concluding remarks of the meeting expressed his strong support for the initiative of the Finance Minister.
Eventually, the actual draft law for amending the CRB contained four changes. It was proposed that a new paragraph was included in (1) Article 4 CRB which would read “The Republic of Bulgaria conducts predictable, consistent and balanced fiscal policy”; and (2) Article 81 CRB which would read “Laws providing for new types of taxes on the incomes or the profits or amending the tax rates of the existing taxes on the incomes or the profits shall be adopted with ⅔ majority of all national representatives”. With respect to Article 87(2) CRB, which concerns the right of initiative of the Council of Ministers with respect to the LSB, two amendments were proposed. First, the drafting of the LSB, by the Council of Ministers, must be done “in compliance with the allowable quantities of the budgetary balance that are determined by law”. Second, a new subparagraph was to be added which would read “Laws amending the part of the Law under paragraph 2 dealing with the allowable quantities of the budgetary balance shall be adopted with a ⅔ majority of all national representatives”. The miscellaneous provision envisioned that the constitutional amendment enters into force on 1 January 2012. The explanations to the draft law further elaborate on the proposed amendments.
With respect to the amendment of Article 4 CRB, the explanations referred to the role of the fiscal policy throughout the years since the changes in 1991. It was noted that the fiscal policy was often abused for achieving political ends without long-term planning and in disregard of the capabilities of the budget. Then, with the economic crisis of 1996 the necessity for conducting sound fiscal policy became obvious. The fiscal policy that was consequently formed throughout the beginning of the new century allowed for a significant development in terms of long-term macroeconomic stability and economic growth. The global economic crisis that consequently took place led to insecurity and stalled the economic growth. According to the explanations, there were good prospects for the Bulgarian economy to recover from the crisis and grow by using sound fiscal policy, on which both the Government and the opposition must responsibly unite.
With respect to the amendment of Article 81 CRB, the leitmotif of the explanations was the necessity for predictable and balanced taxation conditions. Such taxation conditions were seen as necessary in order to reduce the insecurity of investors and, consequently, to attract more domestic as well as foreign investments. According to the explanations, the policy with respect to taxation – the progressive decrease of the corporate tax since 1993, as well as the introduction of the flat tax rate for natural persons – has benefitted the economy greatly through an increased level of investments and a decrease in the grey economy.
With respect to the amendment of Article 87 CRB, the explanations stated that they would assist in the endeavour to maintain balanced budget in the long-term. This was going to happen through the introduction in a law of a 2% GDP cap on the budget deficit. This 2% cap will be part of the allowable quantities of the budgetary balance. While this cap is to be changed with a ⅔ majority of all national representatives, the explanations do not state the majority needed for introducing it, implying a simple majority. The 1% difference (from the 3% required at the EU level) is explained as a buffer for securing the compliance with the SGP and avoiding political manipulations.
Finally, with respect to the date of entry into force, no explanation was given but it can be found elsewhere. In the constitutional Committee meeting on 3 June 2011 (see infra), Lyutvi Mestan (DPS), stated that the initial idea (before the draft was proposed) for the constitutional amendment was that it enters into force in the beginning of 2013 (while the mandate of the GERB Government was, normally, to expire in mid-2013). Therefore, he said that as a matter of principle from his party a concern was expressed during the initial consultations that it would not be right for such important constitutional amendments to be addressed to the next Government and National Assembly. Instead, the right course of action was for the Government proposing such amendments to be the first to apply them. Mr Mestan guessed that this concern weighed-in on the change in the proposed date for entry into force.
The proposal for the amendment of the CRB was officially submitted to the National Assembly on 26 May 2011 by 130 national representatives, the vast majority of which were from GERB. However, as it appears from the debates in the National Assembly and the verbatim records of the Council of Ministers’ meeting discussed above, the unofficial initiator of the proposal was the Finance Minister. The National Assembly adopted a Decision on 1 June 2011 for the formation of the ad hoc Committee for discussing the draft law. According to point 3 of the Decision, the division of the members of the Committee by parties was: 9 for GERB, 3 for Coalition for Bulgaria, 3 for DPS, 2 for ATAKA, 1 for the Blue Coalition and 1 for an independent national representative. On 3 June the Committee convened and agreed on a draft Decision on the rules of procedure, which was adopted by the National Assembly on 8 June. While these Decisions were just formalities, the verbatim records of the National Assembly and the Committee show that the controversies started early on.
On 1 June 2011, in the context of adopting the Decision for the formation of the ad hoc constitutional Committee, several comments were made with respect to the substance of the proposed constitutional amendment. The members of Coalition for Bulgaria that joined the debates were outspoken in their criticisms. The discussion will focus on two of them. First, Luben Kornezov started by saying that there is no Pact for Financial Stability and that with the proposed draft law there is destabilisation of the constitutionalism and of the CRB. He added that the CRB is not a cookbook, allowing for experiments and that the proposed Committee is redundant and that it will not give birth to anything. Second, Georgi Pirinski made two critiques. According to him, the proposed constitutional amendments did not fall within the scope of issues that are to be regulated by a Constitution. Instead, they were issues of financial and tax law as well as issues of budgetary procedure. The other critique was that due to certain alleged vagueness and ambiguities the draft Decision was unsuitable ab initio and should not be adopted. Another comment on the constitutional amendment came from Stanislav Stanilov (ATAKA). While saying in the beginning of his statement that ATAKA will not a prioiri discuss whether the Constitution needs an amendment or not, he did allude to such a position. He said that it was a point for another discussion whether the so-called Pact for Stability can be endured by the spirit of the CRB, which precludes excessive concretisation.
On 3 June 2011 when the Committee convened for the first time to discuss its rule of procedure a crucial point was discussed – the envisioned time-line of the procedure. Lyutvi Mestan (DPS) asked the President of the Committee, Iskra Fidosova (GERB; also one of the national representatives introducing the amendment) when is the amendment procedure planned to be finalised. Iskra Fidosova answered that it is planned that, considering the periods laid down in the Constitution, by the end of the session in the end of July (before the summer recess) the whole procedure could be completed with all three readings. The idea was that the Committee would convene exactly, or as close as possible to, one month after the date of the introduction of the proposed amendment (26 May). This meant for the Committee to meet on 27 June the earliest. In response, Mr Mestan clarified that this is a timeline applicable only in the case of gathering ¾ majority and he implicitly asked for the plan in the case that such majority is not gathered and the scaling-down majority rule is applied. Iskra Fidosova answered that it is hoped that this does not happen but if does, the procedure would continue after the summer recess, in September or later, during the elections. He responded that, considering the greater probability of applying the scaling-down majority rule, the second and third reading would go right in the midst of the elections campaign. In that regard, Mr Mestan expressed concerns over the appropriateness of the highly politicised environment during elections for debating constitutional amendments. He suggested that the proposal would have a greater chance of success if it was not put for discussion during the elections when it could become a victim of political controversies. Ms Fidosova expressed her hope that it will not get to this and that the procedure could be completed by the end of July.
On 8 June 2011, during the discussions on the adoption of the Decision for the Committee’s rules of procedure, Luben Kornezov (Coalition for Bulgaria) was the only one to make a statement, again, criticising the substance of the proposed constitutional amendment. He said that while Coalition for Bulgaria says ‘yes’ to the financial stability, the stability of the financial and tax laws and keeping the tax rates low, it says ‘no’ to keeping the Constitution hostage to the populism during the elections period. He stressed his opinion, without further elaboration, that the proposed amendment is harmful for the financial stability.
While the one month period prescribed by the Constitution was running, on 15 June 2011, in the context of the debates on the amendment of the LPSB, some comments were also made with respect to the constitutional amendment. Pavel Shopov (ATAKA) stated that the proposed LPSB amendment seems to be a consequence of the shaky political support for the constitutional amendment, that is – to impose limitations with a simple majority instead of a qualified one. He also stated that GERB was relying on DPS for support on the constitutional amendments but this support does not seem to be unconditional and will be a political trade-off. Mr Shopov reiterated that the proposed constitutional amendments seem to be losing ground and it will probably not get to adopting them.
Dimitar Gorov and Mihail Mikov (Coalition for Bulgaria) also made similar comments with respect to the proposed constitutional amendment. Both of them expressed the opinion that the LPSB amendments were being proposed due to the diminishing political support for the constitutional amendments. Qnaki Stoilov (Coalition for Bulgaria), in his less critical comments on the discussed LPSB amendments, stated that the subject matter of fiscal and budgetary discipline must not be elevated to the constitutional level. It must not reach the CRB because, according to him, this would impose undue limitation on the National Assembly and the society in reacting to changing circumstances.
On 28 June 2011 the constitutional Committee convened for the first reading of the draft law for the amendment of the CRB. The Report of the meeting contains a short restatement of the explanations to the draft law for the constitutional amendments as well as a summary of the statements made by some of the Committee members and the external participants. However, after considering the verbatim record of the meeting it becomes clear that some important points were not mentioned in the Report. Therefore, building on the Report, an expanded summary of the statements is provided here.
The meeting started with a presentation of the proposed constitutional amendments, by one of the national representatives that introduced the proposal, which restated the explanations to the draft law. Then the Finance Minister made a short statement in which he stressed on a few points. First, he said that the idea for this Pact for Financial Stability is not completely new and has been present in the general public discourse for some years but has gathered importance with the crisis. Second, he said that at the EU level it had often been discussed that such a Pact was needed EU-wide and proposals in that regard had surfaced. Such an EU-wide Pact was needed to prevent situations such as the ones in Ireland, Greece, Portugal, etc. Third, the Bulgarian Pact, part of which was the proposed constitutional amendment, was going to bring greater economic development, according to the Minister. In his view the Pact is an opportunity to make Bulgaria a richer State.
Qnaki Stoilov (Coalition for Bulgaria), as in his previous comments relating to the constitutional amendments, was very critical and based his critiques on several points. First, he considered that the ability of Bulgaria to implement a “catching-up” economic policy was considerably limited by the proposed amendments. Second, Mr Stoilov said that the proposed amendments would not only fail to lift the Bulgarians out of poverty and solve the social inequality but would actually worsen the situation. Third, Mr Stoilov criticised the treatment of fiscal and budgetary rules as a value in and of themselves. They were only instruments for the achievement of certain social goals. According to him, budgetary and fiscal rules cannot be compared to the fundamental values inscribed in the Constitution – freedom, peace, humanism, equality, justice and tolerance. He even said that, if the proposal was to be eventually adopted, the preamble of the CRB was also to be changed from Bulgaria being a social State to a State with liberal economic policy. Fourth, Mr Stoilov also saw the proposed amendments as contradicting the principle of democracy. According to him, the raison d’être of Constitutions and the democratic election of national representatives is to appoint representatives that will determine the taxes and the allocation of the State resources. He saw this as the main reason for the birth of the contemporary democracy. Mr Stoilov saw this fundamental principle of the democratic governance repealed by the proposed qualified majority rules. In his view, the national representatives that are supported by the majority of the population for a certain period of time would be precluded from conducting independent financial policy. Accordingly, Mr Stoilov called for these proposals to be rejected because they contradicted the principles of democratic governance.
Fifth, Mr Stoilov stated that, while some States are introducing such fiscal and budgetary rules, even in their Constitutions, others are considering to distinguish between, on the one hand, expenses for investment purposes with the aim to solve basic social problems and, on the other hand, expenses that are lost in the upkeep of the State and other things that are not of concern for the society at large. Sixth, Mr Stoilov considered that wider public discussion, which would include even the political parties that will participate in the upcoming elections even though they are not represented in the National Assembly, was to be made. In his view, only after obtaining such wider support the proposed amendments would have the necessary legitimacy. Finally, Mr Stoilov said that it was not clearly explained how was the tax base to be calculated. According to him, the proposed amendment dealt with the tax rates and not the tax bases. Such discrepancy could lead to different results and was seen as counterproductive even for the goals of the ones proposing the amendments.
The next to take the word was Ognian Stoichkov (ATAKA) who also criticised the draft law under discussion. According to him, it did not only propose to elevate certain norms (referring to the taxation provisions) to the constitutional level but also to put a qualified majority on it. This was seen as favouring certain norms over others. Mr Stoichkov stated that he could not accept that the taxation issues deserve to be favoured in such a way. In his view other norms were much more deserving, such as the educational ones or the ones setting out the State monopoly over the railway services etc. However, the drafters of the CRB provided for a qualified majority for a very few fundamental questions and this choice should be respected and not disrupted as proposed in the draft law. Another point Mr Stoichkov made was that the current flat tax rate was itself problematic due to its social implications. In that regard, he said that he could not support a flat tax rate which was once adopted with a simple majority of the present and voting (which according to him was 77 votes) to be entrenched in such a way to require 160 votes to be changed. Mr Stoichkov found this illogical and held that it should only happen after gathering wider public consensus. According to Mr Stoichkov, the only thing that was to be commended was the provision stating the Bulgaria shall conduct consistent and balanced fiscal policy. However, he noted that this was only a good intention with questionable legal significance. Finally, Mr Stoichkov stated that the scope of proposed taxation provision was not clear and that its compatibility with the established case law of the BCC was questionable. However, he did not elaborate in further detail on this point.
Aliosman Imamov (DPS) was the first to express support for the idea behind the proposed amendments – to have the long-term durability of the fiscal stability guaranteed. However, Mr Imamov started by making a procedural proposal. He said that discussing such important issues is not well placed right before elections. Therefore, Mr Imamov proposed that the Committee halts its work on the draft law, together with the discussions on it until after the elections. After making this proposal, Mr Imamov made several substantive comments on the proposed constitutional amendment.
First, Mr Imamov pointed out to certain discrepancies between the budgetary rules proposed in the constitutional amendment and in the amendment of the LPSB and he expressed an expectation that they are clarified. Second, he echoed the concern expressed by Mr Stoilov with regard to the tax base and tax rate discrepancy. Third, Mr Imamov also noted the absence of a provision introducing an exception for force majeure situations. He stated that such text was present in the earlier versions of the draft law. Then Mr Imamov concluded by noting the absence of detailed analysis and evidence supporting the proposed amendments with respect to (1) the “freezing points” of 2% and 40%; (2) the impact on the economic growth during the crisis; and (3) the impact on the income of the population.
Rumen Ovcharov (Coalition for Bulgaria) expressed heavy criticisms towards the draft law. He started by joining Mr Stoilov on the point that fiscal and budgetary rules cannot be treated as a value in and of themselves. Then Mr Ovcharov made a very important point about the consequences of a possible breach of the budgetary rules if they obtain a constitutional status. What was going to be the responsibility for the Government or the Finance Minister if the numerical quantities are not observed? According to Mr Ovcharov these were simply pointless good intentions serving as a political tool before the elections. The other main point that he made was that the flat tax rate was a temporary tool used by smaller economies to catch-up in their development. Being a temporary tool it has no business being constitutionally entrenched.
Ekaterina Mihailova (the Blue Coalition) expressed conditional support for the draft law. She expressed support with respect to defining the budgetary balance. However, she expressed strong discontent with the proposed qualified majority with respect to taxation. She saw this proposal as an example of bad governance due to the limitations it imposed on the freedom of any Government to conduct its policies. According to Ms Mihailova, taxation is a fundamental governance tool without which a ruling majority is dependent on the opposition to conduct its policies. Ms Mihailova stated that if this provision was removed the draft law may enjoy the support of the Blue Coalition as well.
Then, the word was given to the governor of the BNB – Ivan Iskrov. At the very beginning of his statement Mr Iskrov made two preliminary points. First, his statement was to be considered as made by the representative of an expert institution, as the BNB does not have an obligation to present an official statement but has always shown willingness to join discussions on macroeconomic governance when invited to. Second, his statement was not going to deal with whether the discussed rules must be the subject of constitutional or ordinary law regulation. He was only going to discuss the substance of the proposed rules. He started by discussing the balanced budget rules. Interestingly, Mr Iskrov was the only one to put a considerable emphasis on the role of EU law with respect to these rules. He even said that the Bulgarian rules were to be discussed only in the context of EU law and, in particular, the Euro-Plus Pact and the Six Pack that was in the process of creation at that time. Mr Iskrov drew the attention to two other points that were missing from the draft law but should be included: (1) an obligation to accumulate budgetary reserves in times of economic growth and (2) an exception for force majeure situations. With respect to the taxation issues Mr Iskrov only stated that the “catching-up” economies need low flat rate taxes and that Bulgaria had no interest in the harmonisation of the tax base which was being called for at the EU level.
Following these statements the President of the Committee put the procedural proposal of Mr Imamov to vote. The result of the voting was 4 ‘for’, 9 ‘against’ and 3 ‘abstaining’ and the proposal was not adopted. In response, Mr Imamov stated on behalf of DPS that it will not participate in the discussions and the voting of the proposed constitutional amendment until after the elections.
In the end, the word was given to Tsvetan Simeonov – the President of the Bulgarian Chamber of Commerce and Industry, who was an external participant in the meeting. Mr Simeonov expressed support for the draft law and even said that it would have been better if stricter rules were introduced. In particular, he referred to a 35% redistribution role of the State and as much as possible balanced budget – that is, lack of deficits, if possible. He also said that the proposed amendments should have been implemented years ago, when the flat tax rate was introduced. According to Mr Simeonov, it was important that these changes were included in the CRB because this was going to ensure higher observance of the rules. He also stated that the qualified majority was necessary in order to provide stability to the business. With respect to the points on wider public discussion and support, he suggested that the discussion has been wide enough, referring to the support for these proposed amendments given by companies comprising more than half of the GDP and more than 70% of the external trade of Bulgaria.
After Mr Simeonov’s comments the draft law for the amendment of the CRB was put to a vote. The result of the voting was 10 ‘for’, 3 ‘against’ and 1 ‘abstaining’ with which the Committee proposed to the National Assembly to adopt the draft law at first reading. The draft law got to its first reading in the plenary of the National Assembly as late as 28 July 2011 – that is, much later than initially anticipated in the first Committee meeting. The following (procedural) background and contextual recollection is crucial for understanding the first reading discussions.
Article 154(2) CRB obliges the National Assembly to discuss a draft law for a constitutional amendment within a certain period following the introduction of the proposal. However, interestingly, the plain wording of the provision does not necessarily imply an obligation for the draft law to be voted upon, although one could say it is logical. Second, the Constitution does not expressly provide for the procedure to be followed if an ordinary law or a constitutional amendment is rejected during its first reading, other than the scaling-down majority rule. That is, it does not state whether a rejected proposal can be reintroduced immediately after its rejection and whether it can be reintroduced without any changes made to it. Article 79 of the Rules of the National Assembly state that
“A draft law which is rejected when it is voted upon for the first time can be reintroduced only after substantial changes in its main points which shall be reflected in its explanations and it may not be reintroduced earlier than three months following its rejection”.
The Rules do not differentiate between draft laws for ordinary laws or constitutional amendments. Assuming the constitutionality of this provision with respect to proposals for constitutional amendments, this provision means that if a draft law for a constitutional amendment is rejected during its first vote it can only be introduced after substantive changes are made to it and not earlier than three months following the rejection. Rejection is not defined but it is logical to refer to situations where the required majority is not achieved during the voting itself, that is, when a voting is actually carried out. Conversely, a draft law is not going to be rejected if it never gets to a vote. Accordingly, there is a constitutional obligation to discuss a proposal for a constitutional amendment but not, necessarily, to put it to vote and without the proposal being voted upon, even if it never gets adopted, it is not considered rejected and does not need to be substantially changed in order to be reintroduced. While this clarification seems purely abstract and theoretical, it is the procedural framework within which the proposed in 2011 constitutional amendment perished.
The substantive discussion on 28 July 2011 was preceded by several procedural proposals. These procedural proposals turned into a sort of procedural battle between the representatives of GERB and Coalition for Bulgaria. The battle was for whether the debate should be done on this very day and time or postponed. The day was the last plenary day for legislative activities before the summer recess. The next day was the last day before the summer recess of the National Assembly but it was dedicated to parliamentary control, which does not usually include legislative activity. The time was in the early afternoon just before 14:00, which is usually the end of the plenary sessions according to the Rules of the National Assembly. The attendance of the national representatives was below 50%.
First, Menda Stoqnova (GERB) made a procedural proposal for extending the working time until the conclusion of the discussions on the proposal. Ivan Kostov (the Blue Coalition) criticised this by saying that debates for the amendment of the CRB must be done in normal working time and that this was disrespectful towards the idea of national representation. He also said that a possible explanation for such a move can be that the debate is considered lost beforehand and it was being done only for the record. The procedural proposal was voted and passed with 83 ‘for’ and 24 ‘against’.
Second, Georgi Pirinski (Coalition for Bulgaria) made a procedural proposal for the debate to be postponed until after the summer recess so that it can be properly discussed. He said that this was an irresponsible approach, especially in light of the fact that two of the most important aspects of the State were to be discussed – the financial stability and the Constitution. Before putting the proposal to a vote the President of the National Assembly referred to Article 154(2) CRB which requires the proposal to be discussed no later than three months after the introduction of the proposed constitutional amendments. If the discussion was postponed until after the recess (which was 28 August 2011 the earliest) this would have been after the three-month period, as the amendments were introduced on 26 May 2011. Thus, the discussion could not have been postponed. Then the procedural proposal was nevertheless put to a vote and failed with 27 ‘for’, 80 ‘against’ and 5 ‘abstaining’.
Third, Maya Manolova (Coalition for Bulgaria) made a procedural request for re-voting of Mr Pirinski’s proposal. She said that, looking at the number of present representatives, it was mathematically impossible to get the draft law passed on first reading with the required 160 votes in favour. She said that what was being done was disrespectful to the CRB. Ironically, Ms Manolova said that not observing the constitutionally prescribed period does not lead to any fatal consequences and requested the debate to be postponed until after the summer recess. The procedural proposal was re-voted and failed again with 23 ‘for’, 75 ‘against’ and 1 ‘abstaining’.
Fourth, Georgi Bozhinov (Coalition for Bulgaria) made yet another procedural proposal to postpone the discussion but for the following day and to put it as a first point in the agenda. He also reiterated the point on the low attendance of national representatives. Mr Bozhinov stated that this was a purely formalistic attitude trying the push forward the debates only for the record. This proposal was voted and failed with 24 ‘for’, 60 ‘against’ and 5 ‘abstaining’. Following these procedural proposals, the President of the constitutional Committee presented the Committee’s Report after which the proposal was presented by one of the national representatives that introduced the proposal. During these two presentations nothing new was added to what has already been discussed above. Consequently, the substantive discussion of the proposed constitutional amendment started.
Aliosman Imamov (DPS) repeated his position from the meeting of the constitutional Committee. He stated that while his political party was supportive of the idea to guarantee the long-term durability of the fiscal stability, it was not going to participate in the discussions and the voting. According to Mr Imamov, this decision was taken in response to the unwillingness of the majority to create more favourable conditions for discussing the proposal, which DPS thought to arise after the upcoming elections.
Pavel Shopov (ATAKA) started by making a preliminary comment on the way the proposed constitutional amendments were to be discussed. He said that it was an absurd to deal with the CRB in such a way. In his opinion, Article 154(2) CRB did not preclude a discussion on the amendment after the recess. He suggested that if a different approach was taken, it was not impossible for the proposed amendments to pass, albeit amended. However, he continued, with the approach taken, it was clear that the proposal was going to fail. Mr Shopov concluded his preliminary remarks by suggesting that what was being done was intentionally aiming at putting the end to the proposed constitutional amendment. In his substantive comments, Mr Shopov focused on several points. First, he said that the proposed amendments were going to give Bulgaria a neoliberal character, in contradiction with the preamble of the CRB, saying that Bulgaria was a social State. Second, he said that legally and systematically the proposed amendments must not be placed in the CRB because they are supposed to be regulated by other types of normative acts, such as laws or other secondary normative acts. Third, Mr Shopov saw the proposed amendments as problematic because they were going to entrench the flat tax rate, which was adopted with a very small majority and clearly representing neoliberal politics, which Bulgaria must abandon. Fourth, the qualified majority that was proposed with respect to taxation was seen as wrong because in this way the strongest lever for influencing and changing the public relations – the taxation – was being removed from the toolset of all future Governments. Adopting the proposed amendments would have meant, according to Mr Shopov, predetermining the actions of all future Finance Ministers, who will not be able to implement the policies for which they were chosen.
Martin Dimitrov (the Blue Coalition) expressed support for the idea that the proposed amendments represent – an idea that, according to Mr Dimitrov, has been applied and have shown fruitful results in other States. He admitted that some of the jurists in the Coalition doubted with good reasons the inclusion of the taxation rules in the Constitution. However, Mr Dimitrov said that, in his opinion, that the flat tax rate must be protected. He said that there was always a risk of somebody like Jean Videnov to reappear (the Prime Minister during the 1996 crisis discussed infra) and such risk had to be controlled as much as possible. Mr Dimitrov invited the Finance Minister and GERB to continue looking for consensus and not to proceed to a vote, which was clearly going to be lost. He said that this is a topic for which national consensus was needed and it was lacking at that moment. According to Mr Dimitrov, consensus could be reached with reasonable proposals and conversations.
The following three statements were made by national representatives from GERB and the Finance Minister, all in support of the proposed amendments. As they largely restated points that have already been discussed, only a short overview of their statements will be provided here. Dimitar Glavchev (GERB) focused on the notion of trust. He saw the constitutional amendments as addressing the problem of the ‘deficit’ of security and trust and as providing a guarantee that future election results will not undermine the financial stability of the State. Next, the Finance Minister made a rather short statement in which he focused on two points. First, he emphasised that the recent changes in the LPSB, which were corresponding to the constitutional amendments, led to an improved credit rating by Moody’s. Second, the Finance Minister said that it was time for the next step – to impose a qualified majority for the taxation in order to ensure sound fiscal policies in the future. According to him, this was going to lead to more effective and disciplined allocation of taxpayers’ money.
Krasimir Tsipov (GERB) continued the discussion. In his opinion, the proposed constitutional amendments were a logical consequence of the pre-existing goals set by the Government. According to him, these goals included four priorities: (1) maintaining the fiscal and financial stability of the State; (2) good management of the sovereign debt; (3) maintaining the low level of the taxes and increasing the effectiveness of the revenue administrations; and (4) maintaining the stability of the currency board. Mr Tsipov suggested that all of the measures the Government took in that regard – for increasing the stability of the public finances, as well as the Government’s policies for increasing the competitiveness of the economy – were addressing the goals of the Euro-Plus Pact. According to Mr Tsipov, these measures and policies led to the widely debated Bulgarian Pact for Financial Stability, which included the proposed constitutional amendments. Mr Tsipov concluded by calling upon the other national representatives to support the proposed amendments in order to ensure the long-term maintenance of a balanced budget and observance of a strict fiscal discipline.
Luben Kornezov (Coalition for Bulgaria) made a short statement, in which he said that, as a sign of protest to the timing of the discussion, Coalition for Bulgaria was not going to participate in the discussions. Following this statement, the discussion turned towards its end, filled with polemics and interruptions of the speakers. Iskra Fidosova (GERB) started her statement by criticising the abstentions from the debates. She said that there was an obligation to make the debate in the prescribed period and she pointed to the fact that nobody objected to having the discussion on that day when it was being included in the agenda. In her substantive comments, Ms Fidosova stated that adopting the proposed amendments would signal stability and consistency in the fiscal and financial policies of Bulgaria towards the investors and the Bulgarian citizens. Ms Fidosova also saw the amendments as contributing towards limiting public spending, in accordance with the TFEU. Ms Fidosova repeated what was said earlier with respect to the guarantee that the proposed amendments represented. She said that these amendments, before they were even formally introduced, had been widely discussed for four months. There were discussions with all of the political parties in the National Assembly as well as with interested organisations such as the Chamber of Commerce and the BNB. While Ms Fidosova admitted that more conversations and debates were needed, she asked the national representatives to support the proposed amendments.
Then an exchange between Georgi Bozhinov (Coalition for Bulgaria) and Iskra Fidosova took place again on the point of the obvious lack of support and the formalistic attitude towards the discussions. Following these exchanges the debates were closed and a procedural request was made by Ms Fidosova for checking whether there was quorum. This request was objected to by Qnaki Stoilov (Coalition for Bulgaria). The check was nevertheless made and with only 106 national representatives there was no quorum and the constitutional amendment did not proceed to a vote and the session was concluded for the day.
The procedural battle continued on 29 July 2011. In the very beginning of the session, Maya Manolova (Coalition for Bulgaria) made a procedural proposal for carrying a vote on the draft law for the constitutional amendment. It was argued that since there was quorum it was to be voted upon, also in accordance with Article 154 CRB. The President of the National Assembly – Tsetska Tsacheva (GERB), said that she cannot put the procedural proposal to a vote because the agenda included only parliamentary control for that day and no legislative activities were foreseen. Georgi Pirinski (Coalition for Bulgaria) stated that while this was not part of the agenda it was within the powers of the President of the National Assembly, as it has been done before, to propose a legislative vote to be included in the agenda. Ms Tsacheva agreed that she has such power but also said that it was discretionary. The procedure for this constitutional amendment stopped there and was never continued nor restarted. Nevertheless, the ad hoc constitutional Committee was not dissolved and occasional references to amending the Constitution were still made until the Government resigned in the spring of 2013.
On 14 December 2011 two references to an eventual Constitutional amendment were made. The first reference was made in the context of a request for including in the weekly agenda a hearing of the Prime Minister concerning Bulgaria’s position on resolving the Euro crisis. This request did not succeed due to the negative vote of the majority, much to the dislike of certain national representatives, including some from DPS. In his response to the failed vote, Hristo Biserov (DPS) stated that such rejections of hearing requests had been happening for three weeks and that this was damaging the relationship between the political parties. In that regard, Mr Biserov asked how the majority was going to dare inviting DPS and others to talks over possible constitutional amendments if it was acting in such a way. A little later, during a statement on the conclusions of the European Council meeting on 9 December, the Foreign Affairs Minister stated that Bulgaria had included the ‘golden rule’ in the LPSB and that the Government was working towards introducing it in the CRB as well. On 13 January 2012, in the context of the early discussions on the Fiscal Compact, the Prime Minister echoed the statement of the Foreign Affairs Minister. The Prime Minster stated that, while the fiscal rules on the budgetary deficit were already included in the LPSB, the Government was working towards introducing constitutional provisions limiting the increase of the taxes.
On 25 January 2012, in the context of the discussion in the European Affairs Committee on a Decision of the National Assembly on the participation of Bulgaria in the negotiations of the Fiscal Compact, a question was asked by Aliosman Imamov (DPS). The question concerned the faith of the provisions of the Bulgarian version of a fiscal pact, which included a proposal for constitutional amendments. Their faith was questioned because, under the Fiscal Compact, they were not required. In his answer, the Finance Minister stated that the process with respect to the proposed constitutional provisions was intentionally slowed down in order to see the final version of the Fiscal Compact and to decide whether the proposal need to be changed. Two days later, during the discussions of the Decision in the plenary hall of the National Assembly, two other references were made. First, Aliosman Imamov emphasised again the wider scope of the Bulgarian Pact for Financial Stability, compared to the Fiscal Compact, and asked why were the additional (constitutional) rules needed? Second, Plamen Oresharski (Coalition for Bulgaria) noted that the debate at the EU level with respect to fiscal rules developed in a different direction from what had been proposed in 2011 with the constitutional amendments. Mr Oresharski stated that Bulgaria should not have tried to be far ahead of the European leaders because that proved to have been counterproductive. According to Mr Oresharski, it was better that the constitutional amendment failed because a new one would have had to be done, considering the Fiscal Compact. The Finance Minister did not respond to these comments. No other discussions on the constitutional amendment were found.
If national constitutional law already contained relevant elements, such as a balanced budget rule or independent budgetary councils, before the crisis that are now part of Euro-crisis law, what is the background of these rules?
The CRB does not contain such rules on balanced budget or independent budgetary councils. However, it is interesting to mention at this point that there has been a sort of a constitutional convention created with respect to budgetary discipline through the practice of all Governments since the 1996 economic crisis in Bulgaria. This crisis can hardly be described in a sentence and certainly not by this author. However, in order to provide a certain idea of the crisis to the reader two purely indicative quotes from the literature can be placed here.
“The major reason for the adoption of the [Currency Board Arrangement] in Bulgaria was the severe financial destabilisation during the second half of 1996, which culminated in a hyper-inflationary shock at the beginning of 1997. The lead for this was given in early 1996. Expectations of the population for a sharp depreciation of the national currency were present because of the heavy foreign debt servicing obligations which were due in 1996. Meanwhile, the diminishing hard currency reserves of the state prevented the Bulgarian National Bank (BNB) from intervening in the foreign exchange market in support of the national currency (the lev). Soon, confidence in the reliability of the national banking system strongly deteriorated, causing increased demand for hard currency. The population was struck by panic and rushed to the banks, at first to get back lev deposits and turn them straight away into hard currency and, later on, to withdraw hard currency deposits as well in order to lock them up in safe deposit boxes.”
“The uniqueness of the Bulgarian case lies mainly in the combination of several serious problems that accelerated the crisis and amplified its magnitude. In fact, it was a combination of a fiscal crisis, a banking crisis and a currency crisis, and each of these three problems was so acute that it might have given birth to a major crisis on its own.”
In order to facilitate further inquiries on this topic this author would direct the reader to a certain collection of contributions which can serve as a basis for further in-depth research. The causes and effects of the 1996 crisis have been, and to a certain extent still are, subject of a great deal of controversy in Bulgaria. The collection proposed is purely indicative and does not imply that this author agrees or disagrees with these writings.
In the verbatim records of the National Assembly, during discussions on budgetary discipline, references have been made to a political consensus in Bulgaria, created since 1996. However, it is not clear what are the scope and the deterrence of this political consensus. It is not contained in a legal document (but it probably would have been if the proposed constitutional amendment was adopted). The fact that the proposed constitutional amendment failed due to a lack of broad consensus leads to at least two conclusions. Either the constitutional amendment did not really manage to capture this political consensus or it did manage to capture it but the political forces subscribing to it did not necessarily see the constitutional entrenchment as its correct status. The truth probably lies somewhere in between, considering the answer to Question III.2. Coming back to the essence of this Report, from a legal point of view, considering that the amendment failed and that the BCC has never suggested that constitutional conventions are a source of constitutional law in Bulgaria, the political consensus strictly speaking has no legal force.
Purpose constitutional amendment
What is the purpose of the constitutional amendment and what is its position in the constitution?
Due to the failure of the proposal for a constitutional amendment this question is not relevant to the situation in Bulgaria.
Relationship with EU law
Is the constitutional amendment seen as changing the relationship between national and European constitutional law?
Due to the failure of the proposal for a constitutional amendment this question is not relevant to the situation in Bulgaria.
Have there been changes to organic laws or other types of legislation that are of a different nature or level than ordinary legislation, in relation to Euro-crisis law or the budgetary process?
No. However, keep in mind the answer to Question III.1.
Constitutional Amendment and ordinary law
If ordinary legislation was adopted in conjunction with a constitutional amendment, what is the relationship between the two?
As explained in the answer to Question III.2, the proposal for a constitutional amendment failed in 2011. However, as it has been mentioned through this report, the amendment of the LPSB in 2011 was envisaged to be adopted in conjunction with the proposed amendment of the CRB. The two legislative initiatives were part of the Bulgarian Pact for Financial Stability. The Pact was put on the wider political agenda by the Finance Minister in the beginning of 2011 and only partially succeeded. Due to the change in the discourse at the EU level with respect to the Euro-crisis measures and the lack of political consensus at the national level, the proposed constitutional amendments were not formally reintroduced after their controversial end in a procedural maze. The adoption of the LPF includes the LPSB amendments and it has been seen as a natural continuation of the Pact for Financial Stability.
Perception source of legal change
In the public and political discussions on the adoption of ordinary legislation, what was the perception on the appropriate legal framework? Was the ordinary legislation seen as implementing national constitutional law, or Euro-crisis law?
The implementation of the Euro-crisis measures, in terms of appropriate legal framework, has not been a point of much discussion. The relevant measures have been seen as implementing the Euro-crisis law and not constitutional law, considering also the failure of the proposed constitutional amendment. The only point of controversy found was with respect to the Euro-Plus Pact. The discussions on the point of the origin of the Government actions that fell within the scope of the Euro-Plus Pact were found to be only in the parliamentary debates (see the answer to Question VI.2) and not in the general public debate.
The problem with the Euro-Plus Pact in Bulgaria originates in the lack of transparency that surrounded it and the controversy about its legal/political character. The Government only mentioned that it will join the Pact in the morning before the Council meeting in Brussels. The Government also did not state clearly what commitments (even if only political) it made under this Pact. The Government stated that the Pact was an important political act that was crucial for (1) managing the Euro crisis and (2) Bulgaria’s role at the EU level. It also said that it did not commit to adopting any measures that it had not planned to adopt anyway. Thus, according to the Government, all of the unpopular measures such as the increase of the retirement age were measures in pursuance of its own policies and not measures required from Brussels. However, the opposition, formed mainly by leftists, insisted that the unpopular measures were adopted in order to fulfil secretive commitments. This was seen as problematic because, in the opinion of the leftists, the state of the Bulgarian economy at that time did not call for such restrictive measures. Thus, the main discussions on the point of implementing Euro-crisis measures focused on whether the measures in the scope of the Euro-Plus Pact were genuinely necessary in Bulgaria and whether they were the consequence of Government’s commitments made in non-transparent ways.
What other information is relevant with regard to Bulgaria and to changes to national (constitutional) law?
No other relevant information.