Economic Update

Published 22 Jul 2010

As the dust began to settle on this week’s cabinet reshuffle in Sofia, many were left wondering what impact these changes at the top might have in the months leading up to this summer’s general elections.

The changes had been brought about by the crisis that followed the collapse back in January of the Bulgartabac privatisation deal with British American Tobacco (BAT). Prime Minister Saxe-Coburg then had to face a vote of no confidence that threatened to pull away support from his battered administration. Yet when it came to the crucial moment on February 11, the government pulled through.

However, at the time many were left wondering just what sort of trading had been done in order to secure the administration’s survival over the crucial next four months before the election. The support of deputies from the New Time faction – a breakaway from Saxe-Coburg’s party – had been crucial; this week, it seems they were rewarded.

Receiving much of the flack for the Bulgartabac failure was Minister of Economy Lydia Shouleva, who lost her post in the reshuffle. She now heads up the National Movement Simeon II (NMSS) general election campaign office, while her place at the cabinet table is set to be taken by the former energy minister, Milko Kovachev, if the cabinet changes are approved by parliament on February 23.

This has left space for a new minister – Miroslav Sevlievski. He will likely take over energy – and is a New Time deputy. Meanwhile, Culture Minister Bozhidar Abrashev and Agriculture Minister Mehmed Dikme are to leave the cabinet altogether. Dikme is set to be replaced by his former deputy, Nihat Kabil, a former agronomist and farming consultant and a member of the ethnic-Turkish Movement for Rights and Freedoms (MRF). At the same time, a new Culture and Tourism Ministry has been created, which is to be headed by NMSS deputy Nina Chilova, a lawyer who has specialised in tax and telecommunications law.

Announcing the changes, Saxe-Coburg said they had been made according to the principles of continuity and correspondence to European Union requirements. He also said that the reshuffle had been decided in the light of his responsibility to the partners in the “liberal alliance”, NMSII, the MRF and New Time.

Most commentators said there was little surprise that the reshuffle took place, although some were not expecting Kovachev to take over the highly important economy ministry job.

In any case, New Time has boosted its political clout. Yet Sevlievski immediately faces a number of key issues in the energy sector, although it is an area with which he has familiarity, after sitting on the parliamentary energy committee. In short, the issues he will soon have to make a judgement on are the choosing of a contractor for the planned Belene nuclear power plant and the restructuring of the country’s national electricity grid operator.

There are also some other large-price tag deals in the pipeline, including a Lv32m (16.36m euro) management contract for the energy efficiency fund. Coming up too is a 50m-euro contract for the rehabilitation of the Maritsa Iztok 2 thermal power plant.

The somewhat controversial Belene nuclear plant is the largest project of all, however. Around 2bn euros are expected by the government to be spent on the project, which will employ dozens of contractors and subcontractors. Others put the likely eventual price tag at as much as twice the official figure.

Mid-February, Vesselin Bliznakov, the deputy who presides over the parliamentary energy commission, told reporters that construction on the plant would be back online most likely within three months and that the EU had voiced no objections to it. Companies from Russia, Germany, the Czech Republic and Canada have all expressed an interest in the project.

However, environmentalists are opposed to the construction, as is the neighbouring Romanian government, with state secretary Constantine Popesku in Bucharest declaring February 9 that the plant constituted one of his country’s main environmental threats.

At the same time, Bulgartabac continues to trouble. The deal with BAT involved three key plants, in Sofia, Plovdiv and Blagoevgrad, for which the global tobacco giant had offered $325m. However, BAT pulled out of the talks when the MRF – the government’s most important ally – objected to the sale.

The MRF argued that the deal would likely lead to mass redundancies amongst tobacco workers – an important constituency for the party, as many ethnic Turks live and work in the tobacco growing and processing regions.

Parliament has voted to start the privatisation process again, yet many analysts remain concerned that the sell off may once again run into difficulties.

So, a tricky agenda faces the new ministers and Saxe-Coburg’s government as it tries to steer a steady course towards the ballot box in June. The difficulties faced in surviving the recent crisis may then be well overshadowed by the difficulties of surviving the voters’ judgement.