Popularity Abroad, Discontent at Home

Economic News

22 Jul 2010
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At the heart of contemporary Bulgarian politics lies an intriguing paradox: while international observers are quick to praise the country's "healthy and positive" macroeconomic indicators, the population at large is still anxiously waiting to see the benefits of their nation's difficult transition towards a market-led economy.



In his speech to the American Chamber of Commerce in early October, James Roaf, the newly appointed IMF representative for Bulgaria, made a direct reference to the paradox:



"The thing that has surprised me the most since my arrival," he told Amcham, "remains the mismatch that exists between the macro-economic indicators and the way people in this country feel about the way the economy is going. In Washington, Bulgaria is regarded as a major success story, particularly in light of the improved economic indicators."



A cursory look at fourth-quarter figures released by the National Statistics Institute (NSI) provides credence to these "improved economic indicators". During Prime Minister Saxe-Coburg's two years in power, total capita per income has risen by a yearly average of 14%. This compares favourably to the 7% yearly average achieved under the stewardship of his predecessor, former Prime Minister Ivan Kostov of the right-of-centre United Democratic Forces (UDF). For the past four years, growth has run consistently at 5% of GDP, despite the presence of a worldwide economic slowdown that gained momentum at the start of 2001. Moreover, the high inflation that brought the country to its knees during the mid-1990s is now at a comfortable 9%, according to ISI, the web-based financial news service. Finally, previously chronic unemployment has been reduced to a manageable 12%.



Earlier, Roaf had explained to the OBG why he - and many others - feel the current government is so unpopular. First and foremost, the majority of the public feel that those in power have become increasingly out of touch with the hardships the ordinary people face on a daily basis.



For example, 15 years following the fall of the Berlin Wall, the average salary remains at a lamentable $150, coupled with a low average per capita income estimated at roughly 25% of the EU norm, according to an EU Commission report published at the end of November 2003.



Moreover, these low income levels have not changed significantly despite the fact that essential items such as electricity have jumped in price by 49% since the National Movement for Simeon II (NMSII) came to office.



Popular discontent has received additional reinforcement in the face of broken promises made during the 2001 general election. Elected to office on a wave of euphoria, Prime Minister Saxe-Coburg, heightened expectations - though the administration now denies it - by promising to dramatically improve the average Bulgarians' standard of living within an unrealistic "800 days". Two years later, the majority of Bulgarians feel betrayed. This feeling is particularly strong in rural areas which, according to third quarter figures released by the Social Ministry in 2003, experience jobless rates in the 30% range.



Moreover, an inequitable distribution of the financial gains generally associated with the transition process has only helped fuel speculation that the majority of Bulgarians have not received a fair share of the pie. However, in the same interview with the OBG, Roaf made a point of adding that any attempt to provide transitional states like Bulgaria with income levels matching those of Western or Eastern Europe was a task of Herculean proportions requiring continual "struggle and sacrifice" on everyone's part. He added that despite its falling popularity, the government must stay the course in implementing fiscally prudent policies.



In an interview early November with the OBG, the Country Director for the European Bank for Reconstruction and Development's (EBRD) project in Bulgaria, John Chomel-Doe, also expressed his frustration with the current administration's lack of popularity - despite its successful undertaking of the reform process.



Chomel-Doe praised the government's success in "substantially improving the business environment within the country" and for having taken all the appropriate steps in "combating corruption through customs reform, implementing progressive privatisation laws to avoid the dodgy deals of the past and taking steps to change the constitution to facilitate much-needed judicial reform".



In addition, the EBRD's highly anticipated annual survey of Eastern Europe's emerging markets, entitled "Integration and Regional", drew international attention towards Bulgaria's exemplary role as the "key driver in the region's economic growth".



Nevertheless, the report also offered some important economic recommendations. For instance, the report stressed the importance of completing the privatisation process in a transparent manner. This is particularly relevant in light of the fact that on taking office, the NMSII had promised that mid-way through its first term (the end of 2003) it would complete the privatisation of two of the largest state-owned entities: Bulgartabac and the Bulgarian Telecommunications Company (BTC).



Lamentably, despite its promises, the government has so far failed to sell off either. In a move encapsulating the public's dissatisfaction with the current government, the EBRD's report also underscored the need to "improve living standards in a sustainable manner".



In country with some 8m people, the report said, nearly a quarter of the population (24%) is still living in poverty, despite the positive macro environment. Furthermore, according to the same fourth-quarter figures released by the NSI, 34% of those employed have recently experienced a decrease in their earnings.



Prime Minister Saxe-Coburg's shrunken creditability was reflected in his party's poor showing in the late October mid-term elections. Capturing approximately 10% of the national vote - resulting in a dismal fourth place showing - there is widespread speculation from political analysts, both within Bulgaria and abroad, as to whether this administration has what it takes to successfully complete its electoral mandate.



Judging from the recent polls, the government's days are numbered. According to Alpha Research, an independent research agency, public confidence in the current government has been steadily declining since the first quarter of 2002, culminating in the pitiful rate of 10% as of December 2003. This overriding sense of political disillusionment manifested itself during the same mid-term election campaign in the form of posters plastered around the capital, Sofia, depicting the prime minister as a devil with horns and a pitchfork and carrying the slogan: "800 Lies, 800 Days. Enough!"



While the government's future is no doubt precarious, Chomel-Doe is confident that Prime Minister Saxe-Coburg will retain control, adding that his party's disastrous mid-term performance was in fact "quite normal, considering that the majority of governments, even in the West, tend to face rising unpopularity during mid-term elections".



This point was reinforced by the prime minister, who dismissed the results, saying that local elections were always a different matter when compared to the more relevant national ones.



Yet NMSII parliamentary floor leader Stanimir Ilchev was more sanguine when he declared to the private BTV channel on October 28, 2003 that "The local election results reflect the judgement about the government... It is clear that it is not admired by the population." Ilchev went on to make the claim that this unpopularity was the result of the government's stringent economic policies, which had rapidly eroded the 43% electoral support it had garnered coming to office. One effect of this political fallout has been erosion of NMSII party loyalty. Saxe-Coburg addressed this issue at the opening of his party's national conference in late October 2003, lashing out at what he regarded as the "mavericks" within NMSII who, while in office, had lost their faith in the party's cause.



Thus, if the NMSII is to break contemporary Bulgarian political tradition by securing a second term in office, it is in its political interests to ensure that average Bulgarians, not just outside foreign analysts based in Washington and Brussels, begin to see real economic gains. While it is one thing to have the support of the international financial community, electoral victory lies in convincing an increasingly disillusioned electorate that they are about to experience genuine, positive change - for the first time in a long time.

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