With the new Bulgarian government sworn in after weeks of political wrangling, the business of getting on with preparing for EU entry, scheduled for January 1, 2007, can now finally resume.
On August 24, Foreign Minister Ivaylo Kalfin told the press that all outstanding EU-required laws would be submitted by the end of September, ahead of the key October report by the European Commission (EC) assessing whether or not Bulgaria will be ready to join on time. He added that the government intends to approve all major reforms needed for EU entry by the end of October and that the EC report should reflect these efforts in its phrasing.
“By not including [such phrasing], the EC will be able to exert pressure on Sofia to implement reforms,” he added. “However, Bulgaria will push for the October report to include such phrasing.”
The formation of the government came as a great relief to many, who feared that faced with a deadlock, the country might have had to move to another round of elections. This would likely have dashed any hopes of entering the EU on schedule, as reforms would have been put on hold.
The new three-party coalition government, lead by the Bulgarian Socialist Party (BSP) in coalition with former ruling National Movement for Simeon II (NMSII) party and the ethnic Turkish Movement for Rights and Freedoms (MRF), must now undertake an important legislative programme.
The EC has recently stated that five problematic areas remain – the provision of free access to services, company law, the environment, justice and the interior, and agriculture.
Nihat Kabil from the MRF keeps his job as minister of agriculture, a position traditionally held by members of his party, given the large number of ethnic Turks working on the land.
Kabil’s first job will be to tackle the damage caused by the recent wave of flooding, which affected some 2m people, a large percentage of whom were farmers.
The cost of the devastation has been set somewhere in the region of Lv1bn (€500m) with huge amounts of farmland involved. Kabil told Nova TV after his appointment that “So far some 955,474 decares [95,547 ha] of agriculture land has been affected by the flooding in Bulgaria and a total of 683,839 decares [68,389 ha] have been completely devastated… The wheat plantations have been most badly damaged… More than 373,000 decares [37,300 ha] of wheat have been devastated.”
However, he reassured that “The possibility of a grain crisis is not imminent,” as over 3.3m tonnes of wheat had been harvested, whereas calculated consumption stays at 2.2m tonnes.
Meanwhile, the newly elected finance minister, independent deputy Plamen Oresharski, has proposed a reduction in taxes on donations to help with the flood relief effort. Under Bulgaria’s current legislation a 20% tax is imposed on donors.
Since taking over the keys to the national treasury, Oresharksi has also promised higher incomes and economic growth.
This has recently received support from the Bulgarian International Business Association (BIBA), which sent a letter of congratulations to the new prime minister, the BSP’s Sergey Stanishev.
BIBA’s president, Sasha Bezuhanova, who is also GM of Hewlett Packard in Bulgaria, expressed the expectations of Bulgarian businesses. “They hope for the continuity of good dialogue and co-operation between the governmental economic team and the employers’ organisations within the Council for Economic Growth.”
International market agencies also rallied behind the new government, with ratings agency Fitch declaring on August 17 that it had upgraded Bulgaria’s long-term foreign currency rating from BBB- to BBB and its local currency rating from BBB to BBB+. The country ceiling was also upgraded from BBB- to BBB. The short-term rating was affirmed at F3, which meant the outlook was now stable.
“Bulgaria’s sovereign credit fundamentals are underpinned by sound fiscal policy and falling government debt, large foreign direct investment [FDI] inflows, as well as rapid and sustainable growth,” Fitch Bulgarian analyst Nick Eisinger explained. “They are also supported by the good prospects for economic policy continuity with the government that has emerged from the June elections.”
Fitch still expects entrance into the EU by 2007, as long as the government sticks to a prudent fiscal policy and is able to finalise the necessary reforms to secure accession.
Meanwhile, the new government intends to work through the summer without a break to rush through 20 laws and the new penal code in order to meet EU requirements.
So with all eyes on Bulgaria, the question is, will it make it to the finishing line on time? Analysts are still divided on this, as they wait for the EC’s October report. Making sure it is full of the right phrases will take some determined effort from the new team in Sofia.
Read More from OBG
