Europe News

Bulgaria Boasts Stability Amid European Turmoil: Pres


Free market reforms and a flat tax rate have helped transform Bulgaria into an island of stability in Europe, a region under siege because of the euro zone's debt crisis.

Sofia, Bulgaria.
Dimitar Sotirov | Age Fotostock | Getty Images

Bulgaria’s budget represents just 36 percent of gross domestic product compared with 55 percent in France, Bulgaria’s president Rosen Plevneliev told CNBC’s “Squawk Box” on Monday.

Plevneliev, who is in New York this week for the United Nations meeting of world leaders, said that his country's policies aim to encourage private sector development over government intervention.

“We believe the private sector by it definition is more effective than the public one,” Plevneliev said. “Because of that, we leave the money to the private sector.”

The Bulgarian economy also benefits from a competitive tax regime, the leader said. Its tax rate is a flat 10 percent on both individuals and corporations — an idea that often surfaces in the U.S. as part of tax reform discussions.

“By reducing taxes, we have improved and increased the income of the state,” Plevneliev said.

By comparison to other debt-laden countries, Bulgaria is in solid fiscal shape. It’s debt totals $5 billion, or 16 percent of GDP, and it is running a budget surplus. (Read More:UK Deficit Could Surpass Greece: Morgan Stanley.) Bulgaria is not a member of the 17-nation club that uses Europe's common currency, and recently suspended plans to adopt the euro by 2015.

But most importantly, Plevneliev said the economy is growing. “Its 1.3 [to] 1.5 percent,” he said, which compares favorably to a euro zone dancing on the knife's edge of recession. “Next year, we’re planning 2 percent,” he added.

Unemployment is also moving in the right direction and is on trend to reach 9 percent from about 11 percent today, the country’s president said. Bulgaria is helped by a growing technology sector that has matured since the decades it spent under Soviet domination, before the former USSR was dissolved.

Flat Tax Lessons From Bulgaria

“During Soviet Communist times, Bulgaria was the Silicon Valley of the Soviet Bloc," he said. "Even now we have a vibrant IT cluster and start-up culture,” 

Bulgaria has also embarked on a host of tough economic reforms, including pension and education reform, among others, according to Plevneliev.

“If you are capable of taking tough decisions and you can prove that you can perform, markets will trust you and investors will do the same,” he said.

Even amidst Europe's difficulties, Plevneliev described himself as firmly pro-Europe. “Europe has a bright future. A more integrated Europe— a world economic power, but also a political power" is worth fighting for, he said.