Changing Faces

Economic News

22 Jul 2010
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Prime Minister Sergei Stanishev has undertaken a cabinet reshuffle to reinvigorate his government and purge members suspected of corruption or incompetence. Bulgaria has been hit by a series of scandals associated with organised crime and corruption this year, and while several are not directly connected to the ruling coalition, they have damaged its popularity. The European Union (EU) authorities are also increasingly concerned about the situation in Bulgaria, ahead of the publication of a report that may recommend sanctions be imposed on the country.

The reshuffle involves four changes, falling short of the radical overhaul some demanded, perhaps because of tensions in the three-party ruling coalition. All the departing ministers are being replaced by figures from their own parties.

Health Minister Radoslav Gaydarski, of Stanishev's Bulgarian Socialist Party (BSP), the largest party in the coalition, has been replaced by Evgenii Zhelev, a former hospital director and mayor of the central city of Stara Zagora, who is aligned with the BSP. Gaydarski had become the focus of much opprobrium among medical professionals, some of who went on strike in January over low funding for healthcare, one of a number of protests in recent years. Some feel that he has been made something of a scapegoat for the health system's problems, but his replacement may help the government win more support for reform in the sector.

Agriculture Minister Nihat Kabil of the largely Turkish minority-backed Movement for Rights and Freedoms (DPS), whose ministry and party has been plagued by allegations of graft and inefficiency, was replaced by Valeri Tsvetanov, a specialist in agricultural research. Defence Minister Veselin Bliznakov, a member of the National Movement for Stability and Progress (NDSV), is stepping down in favour of Nikolay Tsonev, who is seen as a defence ministry technocrat.

The most high-profile departure was that of Interior Minister Rumen Petkov, a BSP stalwart, who was replaced by the party's floor leader in Parliament, Mihail Mikov. Petkov was forced to resign on April 13 after admitting he had met with leading figures in the criminal underworld. While Petkov maintains that the meetings were necessary for the national interest, some of the allegations made about him and links to the Bulgarian and international mafia are very serious indeed[MSOffice1] . Some members of the interior ministry were found to be tipping off criminals about investigations into them. At any rate, Petkov's role as minister for a department responsible for judicial reform and the fight against organised crime made his position untenable.

Petkov may have been for the chop anyway, partly because he is seen as the leader of a conservative faction at odds with Stanishev, and most importantly due to the lack of progress in tackling corruption and organised crime. Bulgaria came in for serious criticism from the European Commission (EC) in its February "progress report" on the country's efforts to lessen official graft and organised crime. With the concluding EC monitoring report due this summer, and the possibility of some of the 7bn euros Bulgaria is due to receive from the EU up to 2013 being cut, as well as the possible termination of European recognition of Bulgarian court orders and arrest warrants, the stakes are high.

Just days before its report was released, the Commission temporarily suspended 50m euros ($80m) of funding intended for Bulgaria's National Road Infrastructure Fund (NRIF) under the Phare programme, after the fund's directors were caught taking bribes. Then, in March, around 100m euros ($160m) of EU SAPARD funds for Bulgarian agriculture was frozen after the European Anti-Fraud Office (OLAF) found evidence of false expense claims. The SAPARD funds are frozen until May 15 when OLAF completes its investigation. While these funds are expected to be restored in time, and projects already underway continue to receive EU cash, the blow to confidence in Bulgaria's ability to deliver Union spending effectively and without leakage is called into question, as is the efficacy of the country's efforts to control fraud.

Hot on the heels of the SAPARD freeze, deputy foreign minister Feim Chaushev was forced to resign after it was revealed that he had significant undeclared business interests registered under a different name. While there has been no direct evidence of misdeeds, the scandal was enough to unseat Chaushev and amplify public mistrust of the DPS, to which he belonged.

Finally, on April 6, energy company boss Borislav Georgiev was shot dead in Sofia, and the next day, the same fate befell Georgi Stoev, an author of novels about the Bulgarian mafia based on his own experiences.

The series of incidents have caused serious concerns in Brussels. European Commission President José Manuel Barroso visited Sofia in late March and voiced his "frustration that some Bulgarians are undermining the reform process", adding "there is no place for corruption and organised crime in the European Union, they cannot be tolerated [...] honestly speaking, we cannot constantly repeat that more needs to be done."

As a response to the scandals involving Sapard and Phare, Stanishev appointed Bulgaria's ambassador to Germany, Meglena Plugchieva, as the deputy prime minister responsible for coordinating the absorption of EU funding. Plugchieva is not a member of any political party, and what is more, she is highly-regarded in Berlin, and so could play a role in convincing Germany to stave off EC sanctions.

Stanishev has said that the reshuffle was a necessary response to the predicament, but will not be enough to eliminate the country's problems. "The interior ministry scandal ... weakened trust not only in the ministry but in the government and the ruling coalition," Stanishev told a BSP meeting. "Politically it is right and necessary to make serious cabinet changes. But this does not solve the underlying problems," he said. "We need to find solutions at a high level."

While the BSP's popularity has taken a hit over the past few months, the reshuffle has given Stanishev the opportunity to reassert his authority and that of the liberal wing of his party and government. This could help reinvigorate the drive for reform, both judicial and economic.

The permanent docking of EU funding is still seen as unlikely, and not all of the coverage has been entirely fair - it has often ignored the EC's praise of the country's progress and political will in combating organised crime and corruption. But Bulgaria's reputation has taken something of a knock in recent months. Stanishev will hope that his reshuffle will have cut out those damaging the coalition, and will give renewed impetus to his reform process.

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