BULGARIA is preparing to join the European Union on January 1 2007, or a year later if the safeguard clause is invoked because the country fails to meet its reform commitments.
The safeguard clause is designed to protect the EU from a non-performing Bulgaria, rather than protecting Bulgarians who are about to enter a union where they will be among the poorest citizens.
In a recent interview with bTV, European Affairs Minister Meglena Kuneva said that the poorest Bulgarians would benefit most from the country's accession to the EU. The EU was a social project in which the richer countries helped the not-so-rich ones, Kuneva said.
It appears that she was referring to the fact that after joining the Union, Bulgaria will pay an annual EU membership fee of 660 million euro and up to 2009 it will receive a total 5.5 billion euro. However, saying that EU funds will improve incomes of local people may not be a sound argument.
The poverty line in Bulgaria is 2.8 times lower than the average in the 10 new EU member states and is about one-thirteenth of the average level in the 15 older EU members, according to a National Statistical Institute (NSI) report. The report was unveiled at a seminar on "Promoting Anti-Poverty Policies in the Context of the Joint Memorandum on Social Inclusion", organised by the Labour and Social Policy Ministry.
The Joint Memorandum on Social Inclusion was drawn up by the Labour and Social Policy Ministry and the European Commission's Directorate General for Employment and Social Affairs. It is designed to prepare the country for full participation in the open method of co-ordination on social inclusion on accession to the EU.
The only soothing conclusion from the report is that at 15 to 16 per cent, the proportion of households identified as "poor" in Bulgaria is similar to that in the EU. But, this may not persuade less well-off Bulgarians that they are equal to EU citizens, some of whom even manage to pay for holidays abroad with their social assistance.
Social assistance produces a stronger positive effect in the EU than in Bulgaria, the NSI found.
Compared to other EU aspirants, the poverty line in Bulgaria is lower than in Turkey and higher than in Romania, but poor people constitute larger segments of the population in those two countries.
One positive development was that while the poverty line in this country rose 74.1 per cent between 1999 and 2004, there are no indications of the poverty problem having worsened in the past five years.
One step in the right direction is the fact that the Labour and Social Policy Ministry is trying to find the proper approach to solving the poverty problem, and not through social assistance, the approach that it has taken so far. National social policy until 2006 is focused on creating jobs, promoting economic enterprise and investment in human capital, and proper use of EU funds, Deputy Labour and Social Policy Minister Rumen Simeonov said during a discussion on the preparedness of the Bulgarian labour market for EU membership.
The European Commission's most recent annual report on Bulgaria had a positive assessment of the labour market in the country. The report predicted a two per cent rise in employment in 2005 and one per cent in 2006. These forecasts show the EC's confidence that the country will be successfully included in the European labour market, Simeonov said.
In 2005, employment policy will target primarily long-term jobless persons, young people lacking experience or training, people with low education, people with disabilities, and jobless people aged over 50.
In order to create jobs, however, a country needs a stable and prospering economy, which is built on a strong small and medium-sized sector. But many analysts fear that half of the small- and medium-sized enterprises (SME) will not survive long after EU accession in 2007. With little hope of securing large markets in the EU, smaller companies are looking to find and fill small gaps in the European market.
Many companies will not be able to live up to European standards, especially the small- and medium-sized enterprises, of which only 10 to 15 per cent are functioning well even now," said Bozhidar Danev, the chairman of the Bulgarian Industrial Association (BIA).
BIA deputy chairman, Dikran Tabeyan, said that half of these businesses probably would go bankrupt.
Ironically, according to analysts, it is the two industries that led the way under communism, organic food and tourism, that are truly ready to brave Europe and find niche markets.
At the moment, 40 per cent of Bulgaria's meat-processing businesses, 10 per cent of local dairy producers and four per cent of the fruit and vegetable canning companies have been certified for export in the EU. Their competitive pricing will give them a good chance of survival in the wider European market after 2007, Danev said.
But the metallurgy, mining and chemical industries need investment of up to 16 billion euro in order to bring their environmental standards and work safety conditions up to EU norms, he said. Danev said that these companies were so far behind that they would struggle to get up to speed even by 2015.
A recent survey showed that only 7.2 per cent of all businesses felt ready for the EU. Another 25 per cent estimated that they would be fully prepared by 2007 and 32 per cent said they hoped to be by 2010. According to Centre for Economic Development datas, about half of all Bulgarian companies are not even considering entering the European market but say they will continue to cater only to the local market.
Recently, some Bulgarian-language media reports said that the main area where Bulgarian companies stood a chance for success was, in addition to tourism and organic farming, the textile industry. Clothes manufactured on contract in Bulgaria form 20 to 25 per cent of the country's total exports. However, Bulgaria, together with other European producers, is at risk of losing ground to cheap Chinese textile imports.
The software industry, with its low prices, and the potential development of the transport industry thanks to Bulgaria's strategic position on the crossroads between Europe and Asia, could also prove profitable. That is, if it does not fall victim to another dumping offensive from the Far East.
In 2004, the Bulgarian economy registered 5.6 per cent growth, inflation was four per cent, and industrial production was 21.5 per cent. Foreign direct investment approached two billion euro. However, macroeconomic stability cannot make up for one of the lowest standards of living in Europe.
The country's GDP per capita was only 2497 euro in 2004, and a 2003 report found that the average wage here was 16 times lower than in Germany, while prices were only three times lower. Bulgarians' standard of living put it second to last on the list of EU member states and candidate countries, with only Turkey doing worse.
But analysts say a big informal job market meant that people often were doing better than official figures indicated.
As one political analyst put it, "since our salaries are the lowest in Europe and still our restaurants are full, our ski-runs crowded, and our car dealers prospering, this means that we have one of the strongest shadow economies in Europe".
In spite of optimism stemming from this shadow economy, the future of Bulgaria as an EU member may not be as bright as some may hope. This country's citizens have just 30 per cent of the purchasing power of their Western neighbours. Analysts have estimated that it could take Bulgaria anywhere from 35 to 70 years to catch up with the living standards of the 25 nations that make up today's EU.
How long until Bulgaria attains that goal depends on the political will needed to carry out the reforms to put Bulgaria on the path to prosperity, analysts say. But if past performance is any guide to future results, Bulgaria has signed up for a long, slow struggle to prosperity.
Even the employment programmes might not prove enough. Bulgarian companies may find a shortage of qualified workers in coming years, further harming the economy. The country is already experiencing a shortage in some sectors, like the metal-processing, construction and textile industries. It also lacks highly skilled managerial staff.
High unemployment and low pay have helped convince between 700 000 and a million Bulgarians to leave the country since the fall of communism. More are expected to follow. It appears that when Bulgaria joins the EU in 2007, many of its citizens may already have become citizens of the Union as immigrants.