(C) Fiscal Measures of Last Resort

The financial system is the backbone of every economy. Shall that backbone collapse the whole economy will collapse. Under certain good practice requirements imposed on the banks, the governments should support the banking systems with utmost concern. The banks on their side, however, should resume or continue financing the healthy projects in the real economy.

The major, fundamental questions remain unanswered in the Bulgarian case.

1. With regard to the unsatisfactory credit expansion restriction in 2007 and 2008, which has led to severe imbalances in the real economy and significant current account deficit, can the government and the central bank exert any… any influence on the financial system?

2. With regard to the pre-elections, irrational fiscal expansion, does the government have a financial cushion, to protect the economy against any financial system weaknesses?