By Professor Krassen Stanchev (Professor of Macroeconomic Analysis and Public Choice Theory at Sofia University, former MP at the Bulgarian Constitutional Assembly (1990-1991), founder and Executive Director of the Institute for Market Economics (1993-2006))
Parliamentary elections are taking place in Bulgaria this Sunday. The stakes are high. The country is typically referred to as “the poorest and most corrupt” country in the EU. That both adjectives are used, is easy to explain, but they are not completely correct. There is a lot more to it.
Last Summer, in the midst of the pandemic, disappointed Bulgarians rallied for about four months, calling for both Prime Minister Boyko Borissov and the Chief Public Prosecutor to resign, while also demanding early elections.
Boyko Borissov, the PM and leader of the biggest party in the ruling coalition, took advantage of the good economic performance during previous years and of the pandemic to subsidize different groups of voters and state sponsored projects, while he also increased the salaries of public officials by 30%.
He has not bothered to appear in parliament since May last year, to the outrage of the opposition. Nevertheless, on a daily basis, he issued his comments on the pandemic, on the achievements of his government and on international relations, basically campaigning from his SUV.
The Chief Public Prosecutor, Ivan Geshev, has pretended that the protests were organized by “criminals” whom he and his subordinates were attempting to investigate and indict. Most, if not all, of these indictments later failed in the courts.
Looking only at Bulgaria’s economic track record, In 2020, its Prime Minister was in a much better place than most EU leaders: decent economic growth during the first quarter, of 2.4% of GDP, as Bulgaria was – and remains – the only EU country with no extraordinary budget deficit. The fiscal reserves of his government amounted to about 10% of GDP in February 2020 and 9% in March – in January 2021, these have fallen to close to 8% of GDP – while government debt to GDP ratio was only 25%.
The Chief Public Prosecutor’s track record was something to be less proud of. He and his predecessor’s policies have been questioned by many, including the European Parliament, while Bulgaria’s performance in rule of law indexes saw no improvement for years.
Rather old concerns about corruption
In September last year, the situation in Bulgaria was questioned several times in the European Commission’s Rule of Law Report,mentioning amonst others that “the ownership of several media outlets is closely linked to political actors, even if not officially owned by them”.
In October, the European Parliament adopted with a significant majority – 358 to 277, 56 abstained – a ”resolution on the rule of law and fundamental rights in Bulgaria”. It stated:
“The European Parliament deeply regrets that the developments in Bulgaria have led to significant deterioration of respect for the principles of rule of law, democracy and fundamental rights, including the independence of the judiciary, separation of powers, the fight against corruption and freedom of the media.”
The resolution had been initiated by two Bulgarian MEPs, from opposing factions – PES and Renew. EPP and ECR MEPs voted “against”, even if some abstained.
During the EP debate, the issue most often discussed was corruption. However, this is misleading, as corruption is merely the symptom and not the cause of public discontent in Bulgaria, where citizens have regularly taken to the streets to demand more since last Summer. What people really worry about, is what one could call the “Borissov – system”, which the Prime Minister and his party have been steadily developing from the point that they rose to power.
The situation with the rule of law in Bulgaria is nothing new. The independence of the judiciary has been measured by the World Bank since 2000. Bulgaria’s best score was in 2001. Then, it was still about one fifth worse than the average of the other former Communist countries that have become EU member states since. Bulgaria joined the EU in 2007, when it was well known that there are problems with the rule of law. Along with Romania, Bulgaria became a member state under the condition that they would be monitored more closely by the European Commission.
Until 2012, Bulgaria’s performance on judicial independence was relatively well. But in 2013, the country dropped below the performance of Zimbabwe, which was then among 10 most unfree countries in the world, before the situation improved.
Borissov’s alternating coalitions
Ruling with different coalition partners, the governing GERB-party and its founder and leader, Prime Minister Boyko Borissov, have been in charge of Bulgaria since 2009, apart from a 15 months break in 2013 and 2014.
Translated from Bulgarian, GERB stands for “Citizens for European development of Bulgaria”. It was elected on a platform to “fight corruption”, as an alternative to the coalition that ruled the country between 2005 and 2009 and that included Monarchists, Socialists and a party representing Bulgarian Turks, the Movement for Rights and Freedoms (MRF).
When GERB was elected to power in 2009, the country was already a member of the EU, and virtually no one in the country had ever questioned anything related to how EU policies apply to Bulgaria. Only a handful group of economists, including myself, were critical about how the EU’s increasing regulatory and spending deficiencies affected Bulgaria.
In the EP and the media, GERB has been portrayed to be some kind of center-right political force, but in reality, the party favors big government, large government projects and renationalization of privatized industries.
The party’s rhetoric is “pro-European”, but apart from that, it has supported all kinds of Russian state-funded energy projects in Southern Europe, which have been often disparaged by analysts. In 2012, Bulgaria imposed a de facto ban on hydraulic fracturing by Chevron, while delaying and opposing alternative pipelines and interconnections, which has kept the country energy-dependent on Russia.
During its first term, until 2013, disposing of 50% of the seats in the legislature, GERB cooperated ad hoc with whoever was at hand. Between 2014 and 2017, it tacitly cooperated with different liberal minor coalition partners, from liberal reformers to nationalists.
Borissov’s most recent coalition
The most recent governing coalition was between GERB and the United Patriots (UP) alliance. UP was a nationalist electoral alliance – now defunct – formed by three political parties to put forward a joint candidacy for the 2016 presidential election.
UP consisted of three political parties that are nationalist and all hostile towards the Romani “gypsy” minority:
- VMRO (“Internal Macedonian Revolutionary Organization”): a pro-Russian and semi-openly “contra” Macedonian outfit
- NFSB (a “National Front for Salvation of Bulgaria”) – a party that is almost pro-European, anti-Russian and pro-market economics, and also hostile to Islam
- ATAKA: a nationalist party in the Nazi sense of the word, which is using NSDAP-like regalia and, Nazi-slogans against gypsies. It advocates nationalization of industries and land, expelling foreign investors, sterilizing gypsies, restricting the rights of Muslims, central planning of exchanges and interest rates, prices and wages, as well as getting the country out of NATO and the EU.
VMRO are the political drivers behind Bulgaria’s de facto veto on North Macedonia EU accession, something which has also negatively affected Albania’s EU bid. Borissov’s GERB itself has never been openly anti-Macedonia (or hostile to the gypsy minority), but nevertheless always tacitly supported UP nationalist rhetoric, thereby often helping to implement their policy ideas on such matters. The public seems to like both, given existing distrust towards Roma and given the negativism about North Macedonia.
This despite the fact that for the last 10 years, in terms of exports, North Macedonia, with its 2.5 million residents, has always been more important for the Bulgarian economy than Russian market, with its 145 million people.
The “Borissov system”
The secret of Borissov’s GERB party’s electoral success is that it has managed to build and sustain a relatively closed circle of clientelism, based on government redistribution.
GERB’s successive electoral victories in 2009, 2014 and 2017 were the result from the following policy mix: a relatively short recession in 2009 and 2010, quickly followed by resumed economic growth, fiscal discipline combined with receiving ever more EU subsidies and the use of public procurement to sustain a clientelist system, with privileges awarded to companies to ensure support for the party and the government coalitions.
The key factor for the worsening of the rule of law, was the assistance of the Chief Public Prosecutor’s office.
Since 2012, when Sotir Tzatzarov was elected by the Supreme Judicial Council as new Chief Public Prosecutor, a system of political redistribution started to be developed and also intensified. This involved politically connected firms being handed lucrative contracts and easier access to privileges.
Profitable but not politically connected businesses on the other hand, were facing investigations on all kinds of grounds – tax evasion, violation of environmental regulations, money laundering and/or working with organized crime. Those investigations did not need to lead to conviction. In fact, convictions remained rare, while sometimes it didn’t even lead to court hearings. However, the very announcement of the alleged misdeed was typically sufficient to destroy reputations and business.
In 2014, such an announcement, involving Bulgaria’s Prosecutor’s Office, even sparked a bank run on the third largest bank, Corpbank. This ended in the bank being closed down by the Bulgarian National Bank, with an ultimate cost for the state budget of about 2 billion euro. This all happened under the watch of Prosecutor Sotir Tzatzarov.
In 2015 and 2016, there were several hostile takeover attempts of foreign businesses with the assistance of the Prosecutor. Only an interference by EU ambassadors stopped the raid.
Since then, no outright attack on foreign business has been registered by the media, but raids on locally owned business have become more frequent and intrusive. The threat of persecution has become a form of racketeering whereby legitimately elected authorities are involved.
It should not require any explanation that as bad normal racketeering is, it is even more detrimental to suffer racketeering by an elected authority. Matters have even worsened under Ivan Geshev, the new Prosecutor elected at the end of 2019, but rather with regard to domestic businesses.
Meanwhile, Bulgarian legislative initiatives to deal with this and create an effective accountability regime for the Chief Public Prosecutor remain in limbo.
What’s next for Bulgaria?
Chief Public Prosecutor Ivan Geshev has gone off the public radar, after he retired from any public appearances. This is very different from 2020, when he was on TV almost as often as PM Borissov.
Geshev has protected the PM from at least two corruption scandals, by not charging him or his friends and coalition partners. Instead, he has focused on the opposition and on business people that are disliked by the public at large. In February this year, his nominations to the EU Prosecutors’s office – which is supposed to investigate crimes relating to EU-funds – were rejected, due to a lack of competence.
Meanwhile, however, Prime Minister’s Borissov SUV campaign and his increased subsidies for pensioners, have succeeded to restore the approval rate at least for his GERB party. Also the EU “recovery fund” has been helpful for him. Bulgaria is projected to become one of the biggest recipients of this new scheme.
Bulgaria has also been accepted in the ERM2, together with Croatia, which evokes promises of massive monetary transfers and ECB debt programs.
Despite the European Parliament’s criticism on rule of law deficiencies, Bulgaria has borrowed from international markets at very low interest rates, lower even than the rest of Central and Eastern Europe, and much lower than Italy.
All that extra cash for the Bulgarian government, including a great role of EU funds, is something Borissov has been boasting about during the election campaign.
Due to the COVID-19 situation, turnout is predicted to be low in this Sunday’s vote. According to the latest public opinion polls, GERB is expected to win around 30% of the vote and the socialist opposition about 20%. The “Turkish” party and a newly registered party of a popular showman with and untranslatable name would most likely take 12% each, and the rest of the seats will be shared between two small parties that focus on the “rule of law” and the EU, and VMRO. In case the turnout is lower than 50%, only the first four parties will make it into the parliament.
Bulgaria, Alpha Research poll:
GERB/SDS-EPP: 28% (-1)
BSP-S&D: 20% (-3)
ITN-*: 13% (-2)
DPS-RE: 13% (+1)
DB-G/EFA|EPP: 6%
ISMV-G/EFA|EPP: 6% (+1)
…(+/-) vs. 26 Feb-1 March 2021
Fieldwork: 27-30 March 2021
Sample size: 1,007 #Bulgaria
➤https://t.co/KaaCTH8NHP pic.twitter.com/Su7R2j1pmq— Europe Elects (@EuropeElects) April 1, 2021
Will Borissov be able to hang on to power ? The fact that his party remains the biggest, makes this very likely. As a result, the “Borissov -system”, which is enabled by racketeering by an elected authority, may survive for longer. New EU funds only help to sustain all of this.
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