instruments of EU leverage on the political and economic development in Bulgaria; has EU

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1 Bulgaria s Integration in the EU Summer 09 Research The main purpose of this study is to examine the impact of Bulgaria s accession in the EU on its economic and political development. The main questions it addresses are: what are the instruments of EU leverage on the political and economic development in Bulgaria; has EU leverage diminished or increased in importance in the years following accession; has it been beneficial or damaging to the transition-to-democracy agenda of Bulgaria; has it triggered applause or Euroscepticism in the public area? The study begins with a quick overview of the state of the economy by examining various aspects and indicators in the years around and following accession. In addition, I also examine the evolution of the welfare state and whether and how EU policies have impacted it. A special section is dedicated to the impact of the global financial crisis. The last section of economic development discusses the instruments of EU leverage on the Bulgarian economy and their effect. The next part of the study, political development, examines the evolution of the Bulgarian political system in the years prior to accession until now. The main focus is the analysis of the elections for European Parliament and the Parliamentary elections that took place in Bulgaria this summer. Economic development Growth According to 2007 Eurostat data, Bulgaria s GDP per capita (in purchasing power standards) represents only 38.1% of the EU average. This is the lowest level of GDP per capita in the whole EU. Bulgaria s GDP per capita in nominal value is also the lowest among the EU

2 countries it is just 3,800 or 6.5 times less than the EU average. Although during the past decade Bulgaria s GDP per capita in nominal terms exceeded its own previous values more than three times, and GDP per capita in purchasing power standards increased from 27% to 38.1% of the EU average, Bulgaria is still facing the challenge of catching up with EU average income. Bulgaria s annual economic growth rate in the period was over 6%. In 2007 GDP growth was 6.2% and in the first half of 2008 it reached the record 7.1%. In 2007 the highest growth was recorded in the construction sector (16.9%) and industry (13.2%). A decrease was noted in the agriculture sector (-29.75%) because of poor harvest. In the first quarter of 2008 the situation changed agriculture recovered steadily at the rate of 11.7%, while the growth in the construction sector slowed down to 7.7%. At the same time, the Bulgarian finance sector grew by more than14%. The economy does not depend on the performance of one single sector and this enabled the continuation of economic growth despite the shocks in some sectors. The largest contribution to the growth of the Bulgarian economy depends on investments (gross fixed capital formation), which have increased by almost 350% in the past decade and have secured high growth in recent years. In 2007 a growth of more than 21% in real terms was recorded. In 2008 this trend continued, reaching almost 23%. Inflation In 2007 the inflation rate reached levels of 12.5% on an annual basis (compared with 6.5% in 2006 and 2005). Inflation was driven mainly by the drastic increase in food and fuel prices on the international markets (the poor harvest in Bulgaria also contributed to increases in food prices). In addition, in 2008 electricity and natural gas prices also went up as a secondary effect of the increased oil price. At the same time, the huge increase of excise duties (due to the need to harmonize duties with the EU minimum level) also contributed to the general rise in

3 prices. Thus, in July 2008 the inflation rate reached a peak of 14.5% per year. As a result, food and fuel inflation subsided and the inflation rate started falling rapidly, reaching 11.2% in August. In general and regardless of the crisis, inflation in Bulgaria is higher than the EU average level. This is due not only to the EU-driven continuous rise of excise duties, but also to the gradual convergence of all prices toward the EU average level as the economy expands (currently, Bulgaria has the lowest price level in the EU). FDI flows In the last 15 years, Bulgaria has attracted 28 billion in the form of FDI. Almost half of these investments have come in the last three years. In 2007 foreign investments reached 6.1 billion or more than 20% of GDP one of the highest levels worldwide. The majority of foreign investments come from EU member states. They are concentrated mainly in the following sectors: Real estate, renting and business activities; manufacturing; financial intermediation; transport, storage and communication; trade, repair and maintenance of cars and motorcycles, personal and household goods; construction; production and distribution of electricity, gas and water. The economic and institutional reforms, together with EU membership, have enabled the huge inflow of foreign capital into Bulgaria. Budget deficit At the beginning of the transition period from 1990 to 1997 the state budget spent more than it collected as revenue. Annually it accumulated large budget deficits an average of 6.3% of GDP. After the crisis the budgetary situation improved dramatically, which has resulted in a budget surplus in most of the years since then (in 2006 and 2007 the surplus reached about 3.5% of GDP, and in 2008 it exceeded this level). These positive developments

4 have considerably reduced the fiscal risks. Government spending in recent years is about 40% of GDP. The biggest part of the expenditures, about one third, goes for the social security system. The rest goes for public services, government departments and public investment, and for payment of interest on public debt. Debt The government debt in the mid-1990s reached levels of over 150% of GDP, but in the last decade it has decreased significantly and currently stands at 15% of GDP that is, among the lowest in the EU. The Bulgarian government has paid all of its debts to the IMF and much of its obligations to the World Bank and other international institutions. Bulgaria s ranking in the international index of economic freedom has improved significantly. According to the latest economic freedom index of the Canadian Fraser Institute, Bulgaria ranks 68th in the world, approximately 40 places higher than at the end of the 1990s. However, the country holds one of the last places in the EU in terms of economic freedom (only three EU countries have a poorer ranking than Bulgaria). Bulgaria s performance in terms of monetary stability and international trade is positive, but the level of legal protection of property and ownership is low as well as the size of government (reflecting the state s involvement in the economy through state companies, taxation and spending). Bulgaria is 59th in the Heritage Index, with good scores on trade, taxes and monetary stability, but property rights and corruption are defined as very weak points. Developments in terms of the business environment are quite similar according to the World Bank ranking. Though there is some improvement, Bulgaria occupies 45th place in the world and one of the last places in the European Union in terms of business environment. According to the World Economic Forum Global Competitiveness Index, Bulgaria is 74th in the world and the last among all EU countries.

5 Trade and competitiveness Bulgaria s exports increased rapidly by 22.5% on a yearly basis, according to data on the balance of payments from July While exports of goods and services in 1998 amounted to only 5.3 billion, in 2007 they reached 18 billion. Imports also increased rapidly, from 5.2 billion in 1998 to over 24 billion in Bulgaria s biggest trading partner is the European Union 60% of the country s total exports go to the EU and 51% of total imports originate from the EU. Other important trading partners are neighboring countries and Russia (mainly in oil and energy imports). The biggest imports are raw materials (38%), investment goods (27%), and energy (19%); the remaining share of about 16% comes from consumer goods. The significant rise in exports is a good indicator of the improved competitiveness of Bulgarian companies. Another indicator is the share of exports in GDP, which was almost 67% of GDP in the first half of In recent years, Bulgaria has been one of the few countries to increase their share in international trade. Still, as in the case of GDP, competitiveness and trade should increase much further. Adoption of the Euro and economic convergence with the EU Bulgaria is not yet a member of the Euro area and has not adopted the Euro. Despite the political and economic will to quickly enter the ERMII mechanism, a year and a half after joining the EU this has not yet happened (as the media reported, the reason might be the reluctance of the European Central Bank). Although not a member of the ERMII, Bulgaria meets most of the Maastricht criteria for convergence and membership in the Euro area (only the inflation rate is higher than required). Bulgaria runs a budget surplus and low government debt, has a fixed exchange rate and qualifies for the long-term interest rates criterion. The problem with inflation is related to the need to increase excise duties in order to achieve the minimal

6 levels in the EU and to gradually increase prices and incomes, closing the gap with EU levels. Fast economic convergence drives fast income and price convergence an inflation factor that was not present in Western Europe, but that is important for Bulgaria in its catching-up process. Impact of the Global Economic Crisis The global economic crisis did not have the immediate and dramatic effects as in other CEE states. The currency board that has been maintained since 1997 has prevented currency fluctuations, helped sustain the financial system and cushioned the direct impacts on the economy and the people. But as with all open economies, the advent of the crisis impedes the flow of wealth, and it is believed that both 2009 and 2010 will be as hard as it gets. The financial sector has so far been weathering the turbulences, but the biggest banks in the country are foreign ones and the parent banks themselves have been quite exposed including UniCredit, Raiffeisen, OTP and a host of Greek banks. The biggest problem is that the crisis affected the most prospering sectors of the economy real estate, construction, production of construction materials. The export sector also suffered as the recession plunged deeply the EU, as the EU members have the largest share of Bulgarian exports. The exports fell 27% for the first two months of 2009 to the same period of 2008, the imports fell even sharper with almost 40% for the first quarter, and industrial new orders were down 35% than in March The unemployed rose with 90,000 for the first quarter of The government response was the Stanishev plan (after the prime minister), which relied on social spending for the most vulnerable and the unemployed, measures to keep jobs, at the same time ambitious public investment program in infrastructure in order to keep the construction sector alive after the tightening of the real estate market. There are also buffers in the budget (e.g. limiting spending to 90%) and the planned surplus in case the situation worsens. While this

7 sounds good in theory, the implementation poses questions, especially the effectiveness of the public investment and the ability to maintain fiscal discipline (e.g. the government made some pre-election spending to lure voters such as raising pensions while the revenues were falling). A growing concern is the implementation of the budget. First quarter data for 2009 shows decreased revenues due mostly to diminished revenues from VAT and corporate tax as a result of lower imports, consumption, falling commodity prices and company profits. The ministry of finance reported 5.5% decrease in revenues in April in comparison to the same period in The social and healthcare contributions are also falling, with the National Health Insurance Fund receiving only 60% of the expected revenues so far, putting strain on the social safety net. At the same time, the growing unemployment put more demands for social payments. The budget does need urgent update, but the political cycle will make that possible in late summer at the earliest. The country is pursuing a quick entry into the Euroarea as the most feasible strategy to anchor the economy and the only exit strategy out of the currency board. Paradoxically, the crisis may help as it has lowered down the high inflation, which was formally the biggest obstacle to the ERM II, and has also decreased the troubling current account deficit. But the obstacle is political discretion at the ECB and Euroarea countries, which are not inclined to let newcomers right now out of concerns of destabilization. The crisis does have a high impact on the public opinion in the country. There is high anxiety among the public regarding the economy and ensuing social problems. An OSI-Sofia opinion poll (released in May) say that 30.9% say the economic situation in the country will worsen sharply, and another 30% also expecting worsening, with 26.1% and 32.2% respectively expecting varying degrees of worsening of the situation of their household. Uncertainty (84.4%), crime (78.85), decline in incomes (70.5%), losing the job (57.5%) are at the top of Bulgarian

8 citizens concerns for About 62% of Bulgarians think that they would be better protected in the face of the financial and economic crisis if Bulgaria adopted and applied measures in a coordinated way with the other EU members (EB71; the same opinion is shared by the same share of citizens in the EU27-61%). EU leverage Following Bulgaria s entry into the EU, there are fewer instruments and mechanisms to impact economic activity. Although Bulgaria is already a member of the EU, the Union, continues to have leverage over its economic policy. Firstly, this is due to the fact that economic policy issues represent an important criterion for entry into the Euro area and Bulgaria must comply with the requirements of the EU in order to achieve its goal. Secondly, the Lisbon process (including the national reform program and better regulation program) as well as the accomplishment of the common market work as a stimulus for policy change. For instance, some reform initiatives were launched only because of the Lisbon agenda demands and the common market requirements (especially better regulation and the introduction of an electronic commercial register). However, the tools for influence are not as effective as they were before the country s accession to the EU. The unclear policy and lack of criteria for admission of new countries into the ERMII further lessen the effectiveness by hindering countries in deciding whether the implementation of certain reforms would allow fast entry into the Euro area or not. While countries already in the ERMII know precisely the Maastricht criteria to be met to adopt the Euro, it is not clear what criteria are required to enter the ERMII itself. The EU would have significantly greater opportunities to promote reforms in the economic field if it defines a clear

9 set of criteria for membership in the ERMII. Thus, the EU will be able to use Bulgaria s willingness to adopt the Euro as a driver for new and deeper reforms that will increase the pace of development and convergence. Welfare System and Social Inclusion Bulgaria did remarkably well in reducing unemployment and increasing employment rates in the run-up to EU accession. Whereas in 2005 Bulgaria had unemployed people, in 2007 it had According to Eurostat, unemployment in Bulgaria reached a record low rate of 5.6% in August 2008, which is more than three times lower than the level of unemployment at the end of the 1990s. The level of employment also increased in the second quarter of 2008 the number of employed persons reached 3.37 million and the employment rate rose to 63.9% (compared with only 53.1% five years ago). However, employment is still far below the requirements of the Lisbon Strategy (70%). The quality of the labor force and the deficit of qualified workers is a problem that is becoming more and more urgent. The average salary in Bulgaria has tripled in the last decade, reaching BGN 515 (approximately 250) per month in mid The growth of wages in 2008 reached 25% per year. Despite this significant increase, the average wage in Bulgaria is the lowest compared to all other EU member states. EU leverage The EU started to play an increasing role as Bulgaria joined the Open Method of Coordination (OMC) in employment and the social field and had to begin reporting on different common and national objectives and targets. Bulgaria also had to adopt the EU definitions of

10 poverty and all common welfare indicators. Bulgaria s employment policies follow the EU employment guidelines. In the field of employment the EU suggests eight guidelines, asking member states to take them into account in their employment policies and to report back through their national reform programs. In the progress report on the implementation of the National Reform Program (NRP) in Bulgaria there is no reference to the Integrated Guidelines. This is partly due to the very broad and vague requirements which allow for rather free interpretation on the part of member states, as is in fact the case with the Bulgarian government s reporting. Bulgaria started negotiations with the EU and eventually joined the Union at a time when the European social model and the welfare state were in a process of transformation. This coincided with a rather prolonged transition in Bulgaria, which happened at a high social cost. Bulgaria also had a legacy of pre-transition institutions and approaches to social policy, which created a strong path-dependent trajectory of the country s social policy agenda. Last but not least, the EU has been neither the single nor the first international player to influence Bulgarian social policies. The EU started to dominate the external agenda-setting only towards the end of the nineties, with the release of the first reports on Bulgaria s progress towards accession. The early post-socialist years, if not the whole period of the nineties, were shaped by the domestic political process and the influence of international organizations and bilateral development programs the IMF, the World Bank and USAID. Hence, while Bulgaria and the EU have been simultaneously undergoing a change in their social policies, what can be called recalibration in the case of the old member states, in the case of Bulgaria, is complete reshaping or even starting from scratch. That is the case with most of the programs addressing poverty, homelessness, school dropout and other dimensions of

11 extreme marginalization, which did not exist or were not recognized as such in socialist times. In conclusion, full continuity exists in the country s participation in the social OMC before and after its effective EU membership, therefore EU membership itself does not impact upon the dynamics of social policies development in Bulgaria. However, the tools which are part of the social OMC need some improvements. There is a need for expanding common objectives and indicators into new fields as well as for setting national targets. Policies without such strict targets are not always respected enough by the national governments. The apparent lack of coordination at the EU level between first class policies from the renewed Lisbon agenda and social inclusion policies is translating on the national level. Social inclusion policies need to be given higher priority by stricter monitoring and reporting. This is especially necessary in Bulgaria, where the welfare system is still very vulnerable to neoliberal experiments and populism. During the last three years and especially after Bulgaria s entry into the EU, the Bulgarian government has decisively deviated from most of the anti-poverty policies outlined in the Joint Inclusion Memorandum and has embarked on a neo-liberal model. It seems that the EU has little leverage to influence this process through the OMC. Some more rigorous reporting requirements will help to at least identify and analyze more clearly the circumvented commitments. Political development The platforms of political parties in Bulgaria evolved in a peculiar manner with the beginning of the country s integration into the EU in The accession consensus agenda

12 dominated the political discourse and all major political parties had to follow the European agenda instead of elaborating competing platforms. As a result, ideological differences have been overshadowed by the emerging EU agenda. The party platforms were to a large extent standardized by the European discourse and this limited the scope for development of more authentic, ideologically specific programs. The brief period between the opening and the conclusion of negotiations ( ) marked the decline of the previous party model of leftright divide, and heralded a new type of a party system - the quick rise and success of a populist party followed by its quick downfall. Previously, the politics of transition in Bulgaria have been dominated by a polarity of the competing agendas of the two major parties the former communists of the Bulgarian Socialist Party and the reformist Union of Democratic Forces. In the 2001 elections, the former king Simeon s hastily assembled political movement won a landslide victory. The popular appeal of his promise that he would make the country prosper in 800 days, and the charisma of his return helped him win almost 50% of the seats in the National Assembly. Similarly, the extremely nationalist Ataka party founded in April 2005 won 21 out of 240 seats in the National Assembly in the June 2005 parliamentary elections; the 2006 opinion polls claimed it to be the second most popular party in Bulgaria. The third wave of similar changes came with the establishment of GERB, (the Bulgarian acronym for Citizens for European Development of Bulgaria), which was founded as a political party in December The party very soon gained considerable popular support, winning the largest share of the votes in the May 2007 European Parliament elections. Since then, GERB has been the leader in public opinion polls. A new phenomenon since the last local elections in 2007 is the rise of various business

13 parties of local tycoons, which is further disintegrating the party system in Bulgaria. Some representatives of the Bulgarian business community have opted for direct participation in politics, rather than relying on the intermediation of politicians. Though their influence is limited at present on the national level, it may grow in future and they ought to be regarded as a significant social force. The coalition governing Bulgaria upon its entry into the EU was led by the Bulgarian Socialist Party (BSP) in partnership with the Movement for Rights and Freedoms (MRF; Turkish minority party) and the National Movement Simeon II (NMSII; now renamed to National Movement for Stability and Progress). The Socialists and the two liberal parties formed an uneasy alliance in the name of European integration after two months of negotiations following the 2005 elections, as the country had to prove its stability and continuation of reforms in the period preceding accession in January The government has been enjoying a comfortable majority in parliament with 169 seats in the 240-seat assembly, despite the fact that the NMSII group was subsequently left by 18 MPs. The most formidable challenge to the government emerged with the establishment of the GERB party of Sofia Mayor Boyko Borisov in late GERB has remained the most popular party in Bulgaria for over a year, and its leader Boyko Borisov is one of the two most popular politicians together with President Parvanov. GERB won the majority of the votes cast in the European Parliament elections in 2007 and in the local elections the same year, and in 2008 joined the European People s Party as a fellow center-right party. The government coalition, though controversial, has been stable. Despite its demonstrated efforts for sound liberal economic policies and EU membership oriented behavior, it has faced numerous scandals and impediments, including severely critical EC reports and

14 freezing of EU funds because of high-level corruption and mismanagement of funds. The government s performance in two key EU policy areas fighting organized crime and corruption, and EU funds absorption has been assessed as poor. Bulgaria received a score of 3.6 in Transparency International s 2008 Corruption Perceptions Index, the worst among all members of the EU. All this impacted public trust, with the government s public support running at alarmingly low levels of less than 17% (Eurobarometer 69). EU membership does not in itself guarantee sustainable democratic development. On the contrary, high levels of conditionality and the inability to meet all criteria have generated a certain anti-democratic backlash in specific circles of Bulgarian society. Temptations to employ populism and nationalism are not rare in Bulgaria. The sudden success of both the NMSII after 2001 and of GERB after 2006 has been partly attributed to their populist appeal. However, both are examples of how populist messages can be disciplined through the necessities of policymaking ( EU requirements, above all) as well as through the efforts to emulate and join EU peer groups (e.g. the European parties). Extreme nationalism proved to be an easy way to mobilize voters for the Ataka party in 2005, when it became the fourth strongest political party in Bulgaria virtually overnight, and then again in 2006, when its leader finished second in the presidential elections after popular incumbent Georgi Parvanov. Ever since, Ataka has maintained a stable electoral support of 7-9%. It is even represented in the European Parliament by three MEPs, following the 2007 EP elections. Extreme nationalism (often openly anti-minority and with racist speech and models) however cannot fully explain the Ataka phenomenon and calls for a more complex reading. There is enough evidence to suggest that Ataka s nationalist message comes secondary to its

15 anti-corruption and anti-status quo rhetoric. It is Ataka s promise to tackle corruption in highlevel political circles that has enticed its supporters. Furthermore, the party s message targets also those who feel they have lost from the transition and who are afraid of the effects of Bulgaria s opening up as a result of EU accession. Euro-skepticism Some Bulgarian parties have criticized Brussels for political ends, though no party at present questions EU membership. There have been indirect attacks on Brussels dictatorship on issues such as that of the Kozloduy Nuclear Power Plant (four reactors had to be closed down as a prerequisite for accession), which has become a convenient casus belli for Euro-skepticism and nationalism and has been used by representatives not only of nationalist parties (VMRO, Ataka) but also of mainstream ones like the BSP especially after the EC s harsh reports and actions against the BSP-led government in the second half of Since the coalition s reaction to the criticism from Brussels, any questioning of Brussels politics has been interpreted in the public arena as a pathetic attempt by corrupt politicians to defend themselves by attacking the institution that has exposed them. The claim that Euro-skepticism has not found fertile ground in Bulgaria can be substantiated by the Bulgarian public s growing trust in the EU, which reached a record 63% in Conclusion Prior to accession, the expectation was that EU political leverage would diminish once Bulgaria became a member. In fact, the evidence strongly suggests that the EU s influence on Bulgarian politics has not only not disappeared but may actually have increased in significance.

16 Public opinion polls strongly support this thesis, with 34% of the Bulgarian respondents claiming in a recent survey (Eurobarometer 69, Spring 2008) that the EU contributes to democracy in the country. For comparison, only the Romanian citizens are more confident in this effect of membership (40% support), while only 5% of the respondents in established democracies, such as Denmark and Sweden, say that the EU contributes to democracy in their country. After accession, the EU s ultimate anchor the promise of membership is no longer valid, but there are other mechanisms for exerting influence which have ultimately have had a political impact. Some of them are direct such as the Cooperation and Verification Mechanism (CVM) in reforming the judiciary, fighting organized crime and corruption. Though the EU has not resorted to imposing a safeguard clause, the regularly dispatched monitoring reports have proved an efficient tool in enhancing reform. The oversight and management of EU funds is another tool for influencing policy-making with a direct impact on politics. The first two EC reports under the CVM (in June 2007 and February 2008) only diplomatically expressed hopes for improvement of the government s performance. From January 2008 onwards however, the EC used more serious tools by freezing funds on the grounds of corruption and mismanagement. Criticism from the European Commission and peer pressure from other member states culminated in the summer 2008 reports two by the European Commission on the monitoring of the fight against organized crime and corruption, and the OLAF report on corruption and mismanagement in the SAPARD program. The most serious measure, unofficially discussed (see Capital weekly, No. 19), was the possible activation of Article 7. This would have suspended Bulgaria s rights in decision-making and isolated the country from the mainstream process in the EU. While this measure was never

17 discussed officially, the very fact that it was in circulation in the discourse of inner circles was in itself a slap in the face and a punitive measure for the government. The political significance of the mechanisms discussed above lies in the findings and allegations of high-level political corruption associated with senior politicians, public officials and business figures part of the naming, blaming and shaming instruments. Thus the EU has assumed the role figuratively speaking of opposition in the country. Of course, this is not to say that the EC has taken sides in Bulgarian politics but by criticizing policies it has disciplined the governing parties and constrained politicians misconduct. The EU stick seems to be working to a certain extent, mainly as the government deliberated particular measures that otherwise would not have been implemented: (a) taking more seriously the plans for action in fighting corruption and organized crime and (b) launching an action plan on improving EU funds absorption. In other words, this means providing support to more decent policy-makers, trying to block the access of corrupt officials to public funds and to decrease their influence and legitimacy. In general, the effects of EU membership have been to moderate the turbulences in Bulgarian political life by setting commonly accepted boundaries of what is acceptable and what is not as well as by injecting predictability in policy-making through its common decisionmaking mechanisms and rules (sort of a spillover effect of the mode of governance). The examples of such indirect influence include the requirement for adopting the Euro, which provide for prudent public budgeting and spending, thus limiting populist urges of politicians to lure potential voters by spending public money. EU leverage on national politics is tangible. Whereas the EU cannot be a substitute for authentic political culture and mature institutions of democracy, its influence definitely impacts

18 national political behavior. The EU influence reflects public perceptions. The Eurobarometer 69 survey (Spring 2008) demonstrated that a vast majority of Bulgarian citizens have more trust in the EU 63%, as against 17% who trust their own government. In fact, the growing criticism from the EU in 2008 was followed by an increase in the trust of Bulgarians in the EU as a whole and in its institutions. Trust in the EC grew to 51%, up from 46% in the autumn of June EP elections The European Parliament elections were dominated almost exclusively by the upcoming general elections in July This overshadowed the significance of the EP elections, with agenda, debate and parties campaign strategies subdued to the national election goals. The public similarly sees the general elections as the more important of the two, indicated by differences in stated interest and intention to vote in the two elections (only 22% saying the EP elections are very important). The arguments in the EU debate boil down to the capacity of the parties to capitalize better on EU membership. The substantial debate on topical EU issues is missing and attempts at linking Bulgaria s and the EU wider debate are all but patchy. There are more detailed European programs of the major players but they are as a rule disconnected from the general debate. The global economic crisis did not have the immediate and devastating effects as in other countries, but as the economy plunges, 2009 and 2010 are expected to be particularly challenging, and with expected decrease in GDP growth from 6% in 2008 to 1% or more probably a negative growth of up to -2% (IMF prognosis).

19 The economic crisis is a top concern of Bulgaria s citizens, with 50% to 60% saying the crisis and its social impacts are their preferred themes for the EP campaigns (Alpha research). The main contenders were the Bulgarian Socialist Party (BSP) with its Coalition for Bulgaria, the Movement for Rights and Freedoms (MRF) of the Turkish minority, the main opposition GERB party (Citizens for the European Development of Bulgaria) and the nationalist Ataka party. The smaller center right Blue Coalition (around the Democrats for Strong Bulgaria and Union of Democratic Forces), the National Movement for Stability and Progress (of former king Simeon), the new Order, Law and Justice party (OLJ of Mr. Yane Yanev), as well as the Forward-VMRO coalition had varying chances of success, depending on voter mobilization. Main issues in Bulgaria s EP debate The parties attached relatively low significance to EP elections, which were seen as a test, a rehearsal or prestige issue for the upcoming general elections. This understanding determined the campaign strategies of the parties. This resulted in at least three layers of messages directed at the Bulgarian voters. First, with the general elections just a month away, the European debate unavoidably got subsumed in the domestic debate. In other words, the incumbent coalition emphasized the past solid economic performance of the country and represented the center right opposition as a wild card that would be destructive to the country. The aspiring opposition, as far as EU issues are concerned, emphasized the failure of the government in EU funds absorption and fighting organized crime and corruption as required by the monitoring mechanism. Second, the major parties indeed prepared more detailed programs for the EP elections, covering major EU debates and relating them to national priorities. But the main points in the programs were

20 quite identical and competed in proving which party is most capable of implementing the European project. The support to one-voice and stronger EU, the institutional reforms and the Lisbon Treaty, the closer cooperation in addressing the economic crisis, the better regulation, etc. were all present. There are ideological differences, often borrowed from the programs of the pan- European parties, but they often pay lip service to the profile of the party. The socialists emphasized the need of New Social Europe and the center right emphasized anti-protectionist policies and the role of the common market. But these programs rarely if at all reach the public and remain for more specialized debates. Third, there were the catchy positions that the parties used most often, picking on what are deemed outstanding national issues and promising to address them on European level. The following are the main issues that sparked the main political debates: Defense of national interests vs interests of the European citizens debate. The ruling BSP has elaborated a detailed program for the EP elections, but decided on a more nationalistic touch of its campaign. This inevitably brought the opposing GERB (which itself wouldn t mind embarking on patriotic positions in other cases) on the opposite pole, arguing rightly that the EP is about representing the citizens of Europe. The smaller Forward coalition, LIDER and of course Ataka, also relied on varying degrees of nationalism to get votes for the EP. The pan-eu political battles have also been imported as an argument, with the BSP saying that GERB would bolster the European People s Party, which have always been critical of Bulgaria s membership and dismissive of the state and the institutions.

21 Nuclear power plants and energy policy in general have somehow entrenched as a major part of Bulgaria s domestic European debate and the reactors of the Kozloduy power plant, closed as part of the pre-accession deal, inevitably popped up in the discussions. It is fair to say that all parties support big energy projects, but the socialists are more pronounced, promising to make Nabucco, South Stream and Burgas-Alexandroupolis pipeline European priorities, to ask for support to the new Belene nuclear plant, and to request more compensations for the closed reactors of Kozloduy; No to Turkey in the EU is the slogan of the nationalist Ataka party, which decided that not letting Turkey in is the best way to serve country s problems in The party has also shown a fare amount of nationalistic internationalism, applauding the advent of likeminded parties at European level. There are unexpected gems in the campaign, with the Ataka party, though Euroskeptic in principle, promises to be the party that will return EU s trust to Bulgaria, apparently lost by the current governing coalition. Public attitudes towards the EP elections The public opinion in Bulgaria registered a slight rise in interest in the EP elections, with 48% in the winter of 2009 in comparison to 44% in the autumn of 2008 (EB71, EB70). Domestic opinion polls register even lower interest in the significance of the EP elections, with only 22% saying they are very important (Alpha Research). The turnout is about 38%-39% and is slightly above the EU average of 34% (EB71, winter 2009). But even this marks a difference from expectations on the basis of Alpha Research survey of March 2009 where only 29% Bulgarians stated intention to vote in the EP elections, and 45% said they will not vote at all. But this lack of interest may be viewed in the context of growing aversion to politics in general. In a newly

22 published OSI-Sofia study, 32.6% said they are not interested in politics with additional 20.8% claiming they have recently lost any interest. Thus, the EP results reflect the state of the domestic politics and not so much the attitude of the citizens towards the EU or the European debate. This can be clearly observed in the certain paradox of voters, who see the EP elections as less important the supporters of the BSP, MRF and OLJ - show a higher intention to take part in the elections (Alpha Research data). There is also an apparent contradiction in the attitudes towards the EU in general. The EuroBarometer70 study showed a decreasing support to membership at 48% (53% for EU27), but despite that the trust to the EU remains very high at 58% (47% for the EU27) with only 15% trust to the national government (34% for the EU27). Thus, the decrease in membership support cannot be attributed to Euro-skepticism of Bulgaria s citizens, but rather to the dissatisfaction of the citizens with the state of affairs in the country and the inability to capitalize on the benefits of memberships (e.g. the freezing of funds, the critical monitoring reports). OSI-Sofia s own polls (March 2009) show a strong 62% approval of membership, with only 18.3% disapproval. A prequel to the national elections Bulgaria was part of the center-right wave in Europe, with the EPP-ED group winning 6 representatives from Bulgaria five from the opposition GERB and one from the Blue Coalition (led by DSB and UDF parties; they will get additional one seat if the Lisbon Treaty enters into force). The Bulgarian Socialist Party, which is the main party in the governing coalition, came second with four seats and will join the Group of the Party of European Socialists. Still, both the

23 opposition GERB and the governing BSP delivered beyond the high expectations that latest opinion polls predicted. Party Results Seats (17) Seats 2007 (18) Affiliation GERB 24.48% 5 5 EPP Coalition for Bulgaria (BSP led coalition) 18.59% 4 5 PES Movement for Rights and Freedoms (MRF) 14.21% 3 4 ALDE Ataka 12.01% 2 3 NMSP 8.00% 2 1 ALDE Blue Coalition 7.99% 1 (+1 under Lisbon) EPP Turnout 37.49% 28.60% The results of the Turkish minority party of MRF and the nationalists of Ataka were more or less as predicted, winning 3 and 4 seats respectively. The MRF will join the liberals at ALDE. Ataka is hoping to join a new group of euro-skeptics and nationalists. The surprise among the winners is the National Movement for Stability and Progress of former king Simeon, which managed to get 8% of the votes and 2 seats in the EP. The highest result in polls before the elections was 4.35%, below the required 5.88%. NMSP narrowly won its second seat with only 0,01% from the Blue Coalition (8% to 7.88%). The success can be attributed to the popularity of Commissioner Meglena Kuneva, which headed the election lists. It was nevertheless expected that she would add substantially to the party performance, but the result may have been a surprise even to them. But after Ms. Kuneva all will seek second term in the

24 European Commission rather then become MEP. With the success of NMSP, all three governing parties (BSP, MRF, NMSP) managed to enter the EP. The relatively new LIDER party of tycoon Hristo Kovachki narrowly missed a seat by winning 5.73% at a threshold of 5.88%. The conservatives in the EP will not have a representative from Bulgaria as their local partner. Order, Law and Justice party of Yane Yanev did well with 4.69%, but it was not enough. Six parties managed to win the 17 seats, with only four having high enough support before the elections. A recount of votes was requested by the Blue Coalition and LIDER, but even if it had occurred it would not change the current reality and switch the places of the NMSP and the Blue Coalition and/or make way for LIDER to enter the EP. The aftermath of the elections confirmed the feeling that as far as the parties are concerned, the EP elections were all about preparation for the July general elections. Any references to the European agenda were all but put at the backseat. The parties used the results to measure their strength, weigh down coalition options and decide where to invest more efforts. The turnout of 37.49% was expected and is considered not that bad considering the previous turnout in 2007 of 28.6%. But it is surely due to the close general elections as voters also saw the EP elections as prequel to the national ones, which would be indeed a test for Bulgaria s democratic institutions. Parliamentary elections GERB won the parliamentary elections on the 5 th of July, 2009 by a landslide victory over the ruling coalition. The party won 39.71% votes and 116 out of 240 seats in Parliament. This is 5 seats short of full majority. GERB s leader Boyko Borisov formed a single party minority government with the political support of Ataka in Parliament.

25 Regarding another phenomenon on the Bulgarian political scene, namely the business parties, such as LIDER, (small parties of political brokers), the surprise was that they performed worse than expected. This happened despite the controlled votes and the corporate votes which was estimated to reach 16-17%. Their failure was due to the high voter turnout of 60.20% (in contrast the turnout for the EP elections was 37.49%). The main issue now is whether GERB is similar to NDSV in 2001: landslide victory, quick glory, followed by a quick downfall. In this case this would be a part of the cycle fragmenting the political scene, which deprives the parties from a long-term planning and implementation of policies, and ultimately repels the civil society from the democratic system. GERB s actions in the weeks to follow will demonstrate whether they will take part in this cycle or on the contrary will break it. EU leverage The Bulgarian elections of summer 09 could serve as an example of the effectiveness of EU leverage. First, the EU exerts its influence through the reports issued by the EC which give Bulgarian citizens an alternative, relatively objective (at least more than certain local media or newspapers) and an authoritative external source to form an opinion. This is confirmed by the results from the elections. According to sociologists, the increase in public trust to GERB and the fall in trust to BSP was registered immediately following the issue of the critical report of the EC in the summer of 2008 regarding the inability of the government to deal with corruption in the high echelons of power, organized crime and the mismanagement of the EU

26 funds. The new Commission s report issued on the 22th of July, 2009, gives concrete recommendations regarding institutional and legislative reforms aimed at severing unhealthy relations between business and politics. The second mechanism is the freezing of the funds coupled with the requirement for taking measures against political businessmen. On one side, this prevents the siphoning of public funds into shady politicalbusiness circles, and on the other hand, it has an impact on the politicians reputation. This was registered in the results from the elections. Another way in which the EU exerts its influence is through its political formations. A case in point is when GERB presented Ataka and Law, Order and Justice with a memorandum to support its one party minority government, the European political parties responded immediately. The EPP ( the Blue Coalition is its member), and the European Conservatives and Reformers ( LOJ is an affiliated member), showed clearly to their Bulgarian counterparts that they disapprove of any collaboration with the nationalistic Ataka. The Blue Coalition and the LOJ followed suit and refused to sign the memorandum.

27 References: Alpha Research Bulgarian research opinion poll agency Ataka official website of the party Capital Weekly various issues from Jan, 2009 until now available at Center for the Study of Democracy Center for Liberal Strategies Eurostat Eurobarometer Frasier Institute available at GERB Citizens for European Development in Bulgaria official website of the party Institute for Market Economics KNSB Confederation of Independent Syndicates in Bulgaria available at

28 en&u= %3Foption%3Dcom_frontpage%26Itemid %3D1&rurl=translate.google.com&client=tmpg&usg=ALkJrhjI8kD3mhXScbzX0uy9eO4WKqz CJA Ministry of Finance official website Ministry of Labor and Social Policy Open Society - Sofia Index of Economic Freedom Heritage Foundation and Wall Street Journal available at