Prime Minister Simeon Saxe-Coburg unveiled a radical package of measures aimed at reviving Bulgaria's sick economy on Sunday.

"Parallel to the formation of new ministerial teams and regional governments, the central government is beginning to implement its program effectively," said Saxe-Coburg at the beginning of a televised address. "This is done in full accordance with the commitments which have been made to develop a functioning market economy, improve the living conditions of ordinary people and fighting corruption relentlessly."

However, it appeared that the first of the announced measures would involve increasing electricity and heating charges as of October 1 - hitting the very electors whom the former king had promised a better standard of living.

On the other hand, the minimum wage, which at present stands at 85 leva, will be increased to 100 leva, also as of October 1. The increase of more than 17 per cent represents "a first step towards boosting the income of poorer Bulgarians," said the prime minister in his first television and radio broadcast since taking office on July 24. Moreover, family allowances would be doubled from January next year, he added.

As of October, Saxe-Coburg said the government would put in place funds to finance interest-free or cut-rate loans for entrepreneurs. A special guarantee fund of 20 million leva would be created to serve this task, he promised. He said these measures would help stimulate growth and create new jobs, and justified the politically sensitive rise in electricity and heating charges by claiming that they had been kept artificially low since 1999. He also said the rises were necessary given the exchange rate of the dollar against the lev, and the prices of the energy resources.

The radical tax reform to be launched at the beginning of next year will involve the introduction of a zero income tax rate for monthly earnings of up to 110 leva and a reduction of the rates for larger incomes from the current 20-38 per cent to 18-29 per cent. A zero tax rate will also be introduced for profit tax in cases of reinvestment of profits, and for capital gains.

"The planned easing of the tax burden will generate a better investment climate, higher economic growth, and new jobs," the prime minister said.

"The organization and activities of customs services will be reformed, and foreign inspectors will be invited for the purpose of more rigorous control. These measures will improve the customs charge compliance, curb smuggling and the corruption that goes with it, and bring part of the shadow economy into the light.

Saxe-Coburg also said that privatization will be made expeditious, transparent and efficient - partly by legislative changes to revoke all preferential terms for employee-management buyout companies and to abrogate "placement negotiations with potential buyers" as a privatization method.

Changes will also be made to ensure that the Privatization Agency was the only body in charge of privatization deals, and a specialized body for post privatization control outside the Privatization Agency will be established. "Guaranteed transparency and equal economic conditions for all participants in the privatization process will revive the interest of serious investors," said Saxe-Coburg.

Limiting national budget expenses in the state administration through a 10 per cent reduction of personnel as of October 1, and by other means, will be the first of a series of moves to streamline the activity of the state administration.

"The government realizes that although these changes will put a considerable strain on the national budget, it is but a minor contribution to the efforts to resolve Bulgaria's population problems and the economic difficulties experienced by young families," Saxe-Coburg said. "We thus give a clear sign of the importance which the government attaches to the younger generation.

"The positive reactions of the international community to the developments in the country and the public support for the cabinet gives me grounds to appeal to you - let us show greater solidarity with the economically disadvantaged and more optimism for Bulgaria's future," he added.

Meanwhile, Lidia Shuleva, deputy prime minister and labour and social policy minister, told a press conference on Monday that wages of public servants will not be increased on October 1 because inflation was lower than that initially incorporated in the national budget and, consequently, real income has not decreased.

Finance Minister Milen Velchev added that the increased percentage of budget revenue envisaged in the agreement with the International Monetary Fund was not a problem, because the agreement had already expired. In the meantime, it became clear that the IMF was warned in advance, and has not opposed the reduction of taxes and the increase of certain groups of incomes.

According to Velchev, the calculations of the Finance Ministry suggest that as a result of the reform, tax revenues will decrease by almost 500 million leva. The savings resulting from cuts in the state administration, decreases in capital expenses, and the restructuring of other state budget expenditures are expected to amount to the same sum.

Velchev is expecting a significantly higher income from customs and fees and a higher percentage of taxes collected. According to the minister, next year the budget deficit could amount to zero.

Deputy Prime Minister and Minister of the Economy Nikolai Vassilev is expecting a five per cent economic growth in 2001. According to him, 10 per cent growth would be ideal.

The 10 per cent increase in heating and electric power will apply both to companies and citizens, and will encompass both the day and night rates for electricity.