Rocking the Boat

Economic News

22 Jul 2010
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With a government attempt to bring the controversial privatisation of Bulgartabac to a conclusion triggering a no confidence vote for this week, the issue is now threatening the downfall of the Bulgarian government itself.



The crisis came after an attempt to steamroll through a new deal with British American Tobacco (BAT) unleashed the anger of all the opposition parties, only five months before the parliamentary elections. And, while it is the sixth time that the minority government led by former king Simeon Saxe-Coburg and his National Movement for Simeon II (NMSII) has faced a no confidence vote, this time it seems both the risks and the political stakes are going to be a lot higher.



With 98 seats in the 240-unicameral chamber, NMSII will need the support of other parties when the vote is held later this week. Yet, in contrast with previous occasions, this time the government cannot automatically count on the support of its junior coalition partner, the ethnic Turkish Movement for Rights and Freedoms (MRF), or on the New Time group. Instead, both groups are demanding significant concessions in exchange for their support. In particular, both are demanding the resignation of the minister of economy, Lydia Shouleva, who they hold responsible for not informing the parliament about the deal negotiated with BAT.



Tensions surrounding the deal began to surface at the end of January, when the junior coalition MRF party surprised everyone by announcing that it was withdrawing its support for the BAT deal and was going to push for a new privatisation procedure. The offer of 200m euros for Bulgartabac was filed by BAT at the end of October last year after two other candidates had surprisingly left the race.



Shouleva told the local media that she had been surprised by the MRF's change of stance, since they had been supporting the talks with BAT until then. According to Shouleva, the offer was quite favourable, because it would have turned the country into a regional centre of BAT for the production of cigarettes. Yet, the MRF argued that BAT was not looking to export Bulgarian cigarettes, but instead was trying to capture the local market to sell its own brands. The dispute reached a boiling point after BAT decided to withdraw its offer, citing the political situation as the principal factor.



Visibly disappointed, Shouleva chastised the MRF politicians arguing that BAT's withdrawal from the Bulgartabac deal was a bad signal to investors and cast fresh doubt over the country's EU accession.



"I hope that all those who have frustrated a good deal and have escalated the tension in parliament are aware that they are jeopardising the signing of the EU Accession Treaty," she told parliament at the end of January.



However, her words seem to have fallen on deaf ears. But the fact that this latest government crisis is not just a storm in a teacup was then brought home to everyone on February 4, when a total of 119 deputies voted to remove the parliamentary speaker, Ognian Gerdzhikov, for preventing parliament debating the failed privatisation of Bulgartabac.



While the removal of the parliamentary speaker is not likely to have a significant impact on political stability, it sent a clear message to the government and the prime minister - who is widely held personally responsible for this latest political episode.



According to the Bulgarian Constitution, if a no-confidence vote passes, the president has to appoint a prime minister-designate, nominated by the party holding the largest number of seats in parliament, to form a government. Should no consensus on the formation of a new cabinet be reached, the president is entitled to appoint a caretaker government, dissolving parliament and scheduling new elections.



Early elections, according to Sofia-based ISI Intellinews analysts, would also tend to work in favour of the opposition Bulgarian Socialist Party (BSP), whose lead on other parties has slowly been declining over the last couple of months. The ousting of the government would almost certainly destroy any hopes of creating a centre-right party alliance, which would require an agreement of the ruling NMSII and the right wing Union of Democratic Forces (UDF). Even if the government survives the vote, the UDF's support for the no confidence motion is likely to undermine the future of any centre-right led alliance, thus giving the socialist a better chance to form a government.



Meanwhile, EU Affairs Minister Meglena Kuneva has repeated the warning to politicians that Bulgaria's EU accession may now be at stake.



"If the current cabinet is dismissed by a non-confidence vote," she told local media over the weekend, "Bulgaria may see a delay in its accession to the European Union."



According to Kuneva, the constitution does not authorise an interim cabinet to sign international treaties, which is why the signing of the accession treaty scheduled for April 25 may be in danger.



However, at the end of the day, most analysts argue the government will ride this one out. A flurry of inter-party negotiations over the weekend bears witness to the fact the government is treating the parliamentary crisis seriously. With MRF claiming that it is not going to vote against the government, if its demands are satisfied, and a few independent deputies still open to persuasion, there is an above 50% chance that this government will last a full term in power.



At the same time, even if the government falls, some critics say, it will not have much effect on political stability in the country, as the election campaign has pretty much begun already; there are only a few months left until the ballots are due. Meanwhile though, the political drama continues to unfold.

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