Simeon's 800 Days

Economic News

22 Jul 2010
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With October 2 marking the end of the "800 days" former King Simeon II had promised a government under his charge would take to dramatically improve Bulgarians' standard of living, the jury is still out on whether he can now claim any real success. Two years down the track, and in the face of a challenging nationwide mayoral election set for the end of the month, Bulgarians are now looking long and hard at those pre-election promises.



On April 6, 2001, the former king held a press conference at his Varna residence to announce his intention to run for office. He also chose the occasion to provide details on how he would achieve his ambitious goals: the adoption of a functioning market economy that adhered to EU membership criteria, and a tangible increase in the flow of foreign investment into Bulgaria.



Looking at the figures now, some macroeconomic indicators speak for themselves. According to recent data released by the National Statistics Institute (NSI), during Prime Minister Saxe-Coburg's two years in office, total per capita income has risen by a yearly average of 14%. This compares favourably to the 7.0% yearly average that was achieved under the stewardship of his predecessor, Ivan Kostov of the right-of-centre United Democratic Forces (UDF).



In addition, some 300, 000 people working in Bulgaria's 'grey economy' have entered the mainstream. The unemployment rate has fallen by 7% over the two years and currently stands at 13%.



However, some analysts question the official unemployment rate, placing it at around 20%, while other statistics are not so positive. The savings rate within the banking sector remains at the same level as it was during Kostov's last two years in office, at 26%, while foreign investment growth rates have fallen from the 30% levels that had been achieved under Kostov's governance.



This last point has been partioculalry troublesome. George Tabakov, the current chairman of the Bulgarian Economic Forum and a member of the former prime minsiter's cabinet, told OBG that the government had failed to honour its campaign promises over boosting foreign direct investment (FDI). He said that from October 2001 -- shortly after the king's National Movement for Simeon II (NMSII) party came to office -- until October 2002, FDI had decreased substantially, down by 41% to USD200m. According to Tabokov, the year 2001 was "a complete disaster" with FDI totaling USD480m, approximately half of what the Kostov government managed to achieve in 2000.



However, in the eyes of the International Moneary Fund (IMF), Bulgaria's macroeconomic indicators are a cause for celebration. James Roaf, the IMF's newly appointed Resident Representative to Bulgaria, commented on September 30 at his first official press conference that "In Washington, Bulgaria is regarded as a major success story."



He then went on to point out that growth had been running at 5% of GDP a year for four years. Meanwhile, inflation has fallen to low single digits, with the Sofia-based First Financial Brokerage House predicting that it will reach a manageable 4.5% by the end of the year. Elsewhere, public debt has been massively reduced and the share of investment in GDP has been consistently increasing."



However, Roaf also drew attention to a troubling paradox for outside observers: With its macroeconomic ship relatively in order, why isn't the local population singing the government's praises? Roaf refuted claims made by members of the media and the political opposition that this newfound wealth has only served the interests of the Bulgarian elite. In the same speech, he cited evidence of what he perceived to be a more even-handed distribution of wealth - since 1997, real wages have experienced a remarkable 50% increase, while pensions have risen by a third since 1998 and there have been continuing efforts to reduce unemployment.



Not one to miss an opportunity in extolling the virtues of his government, Prime Minister Saxe-Coburg trumpeted his achievements during an open address to the public held on October 2. He highlighted his cabinet's proficiency in reducing Bulgaria's external debts and its approach to foreign policy.



"The government has been more responsible in managing its heavy external debt," he said. "At the same time, the foreign-exchange reserves and the fiscal reserve have increased substantially. Moreover, our country has a clear prospect - we will be partners in NATO within several months, and Bulgaria's EU membership has a fixed date: 2007."



While the prime minister and members of his cabinet brushed off negative assessments of their record in power, a majority of political analysts within the country agree that the cabinet has failed to achieve two of its primary goals: the curbing of political partisanship and combating corruption. UDF spokesman Nikolai Mladenov accused the MSNII of "thwarting the future development of Bulgaria's infant democracy by reckless use of a Machiavellian-inspired client-based form of governance, ruled by self-interest."



Moreover, the prime minister's successful efforts in recovering USD169m in real estate assets seized by the government during the Cold War have not helped mobilize popular opinion in his favour. This is due to the widespread suspicion that the former king pushed this through only to get back his ancestral holdings.



The prime minister's shrunken creditability is reflected in the current polls. According to Alpha Research, public confidence in his performance has been steadily declining since the first quarter of 2002, culminating in the present dismal rate of 31%. 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!" have captured this sense of growing frustration, in a country where the average monthly salary remains at a paltry USD140 per month. This low income level remains despite the fact that essential items such as electricity have jumped in price by 49% since the NMSII came to office.



International observers have also expressed dissatisfaction with the government's record. In an interview with the BBC's Bulgarian service, Timothy Ash, a London-based economist within Bear Stearns Emerging Markets Department, predicted that the government would be hard pressed to complete its term by mid 2005, if it continued pursuing the same policies.



Ash singled out a number of factors behind this. First, the government's failed attempts to privatise Bulgartabac and the Bulgarian Telecommunications Company (BTC), despite promises made during the 2001 elections. Then there is its inbility to attract increased and sustainable levels of FDI, and finally, NMSII's inability to keep its tendency for in-fighting under control.



"I'm not optimistic about the future of this government," Ash concluded.



While the government asserted its state of readiness to carry on with another 800 days in power earlier this week, many observers feel it has to make more of an effort to listen to its domestic critics. If not, it could follow the path of preceding administrations: a one-term government voted out by an increasingly dissatisfied electorate, grown weary of unfulfilled promises.

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