REMEMBRANCE IN TIME - Index of

Daniel VACHKOV: The Changeover in Bulgaria in 1947 as a Form of Financial Repression 169
a supporter of the regime, member of the so called ‘Zveno’ (Unit), considered a partner
party represented in the ruling coalition. Only the fact that in March 1946, during a
lecture he delivered to the economic society (later published in his magazine) he
expressed a reserved criticism of the government financial policy and took the liberty to
note that the maintenance of the Soviet occupation troops cost a lot more than the support
of Germany before 1944, put an end to his academic career and soon after led him to the
hell of being arrested, investigated and sent to the camp in Belene vi . The concrete
example of the crackdown on Prof. Hristoforov shows eloquently that the new
government did not need in-depth scientific analyses to solve economic problems and
was ready to use its own methods of dealing with the crisis. So, in order to avoid the
emerging total collapse of the state finances the regime resorted to drastic measures
which no Bulgarian government had so far decided to impose. The idea was to sharply
limit the amount of banknote circulation and thus control the inflationary spiral and create
conditions for facilitating domestic government debt. However, all this had to be done at
the expense of the cash resources of the population.
After the peace treaty was signed, the government felt free to begin the implementation
of his radical monetary policy. Observing complete secrecy, prepared was an exchange of
the banknotes in circulation without resorting to denomination – i.e. seized were only the
old banknotes, while the value of money was preserved. From 10 to 16 March 1947
withdrawn from circulation were the banknotes of all emissions of 200, 250, 500, 1000
and 5000 Levs and all 3% of treasury bills. The conditions under which the exchange was
made were extremely severe for the citizens. From the old banknotes and treasury bills
presented by the population exchanged were only 2,000 Levs per person (this is a
negligible amount – less than $ 4 – my note D.V.) and the rest of the money went to a
blocked deposit of the exchanger vii . Then the blocked accounts were charged, subject to
the Law on the property tax specifically adopted for the occasion. The tax rates imposed
under this law virtually provided the seizure by the State of a significant part of the
population's money. The amounts of up to 15,000 Levs were exempt from taxation, while
the tax rates above it quickly increased. For example, deposits of over 200,000 Levs
(approximately $ 400) were taxed at 25%, and those over 2 million already at 70% viii .
The results of the financial operation were as follows: the banks forcibly collected much
of the money of the population; removed from use were the treasury bills which were
previously used, due to their considerable volume, as means of payment; severely limited
was the volume of banknotes in circulation. For the scale of the removal of monetary
resources of the population informative are the official data of the BNB. Before the
changeover, in circulation and in the banks there were 39 billion Levs in banknotes and
31 billion Levs in 3% treasury bills. From the total of 70 billion Levs owned by the
population and the state and private enterprises seized were 69 billion Levs. After the
changeover, the entire amount of money in circulation was reduced to 21 billion Levs,
which included only the new banknotes. The weights of the changeover were incurred
mainly by the ordinary people; forcibly collected from them were more than 49.5 billion
Levs ix . The main effect of the described government policy was to create conditions for
stabilization of the finances at the cost of cruel elimination of the savings of the
population and a drop in its purchasing power.
Shocked by this government initiative, the western diplomats present in Bulgaria voiced
strong protests against the way in which the changeover was carried out. Diplomatic
correspondence provides descriptions of many cases where Bulgarian citizens resorted to