THE three-party coalition formed in August by the Bulgarian Socialist Party (BSP), the National Movement Simeon II (NMSII) and the Movement for Rights and Freedoms (MRF) has so far struggled to find the proper way of communicating with the public on the most important priorities of the country’s development.

The lack of consensus inside the coalition on key topics like support for business, as well as social insurance and health care, has shown that the partners have yet to find the common elements in their differing views of how the country should be run.

A hunger threat

“If you do not meet our demands we will start a hunger strike,” teachers from all over the country shouted a few days before November 23, asking for more decent wages. And they did so, appearing on television having medical tests as they went without food to drive their point home. But it is not only teachers, but also thousands of Bulgarian households, that have received with discontent and concern the increased prices of electricity and heating that will eat into their thin budgets in the winter months.

This winter of discontent is lately expected to turn into a spring of discontent as the beginning of next year will bring further substantial increases in the prices of cigarettes, alcohol and coffee. Instead of becoming heavier, Bulgarians’ basket is turning lighter and lighter. And the hopes of higher incomes have most likely died with the end of the last parliamentary elections, when promises by political parties about wage increases and improved standard of living have evaporated.

The socialists, of course, are carrying the heaviest burden of unfulfilled promises. Prime Minister Sergei Stanishev, the leader of the BSP, has found it extremely hard to excuse the failure to stick to the pre-election promises, resorting to putting the blame on his coalition partners. Stanishev’s Cabinet also has to meet, with maximum speed, the requirements of the European Commission, which is expected to decide whether Bulgaria should join the European Union on January 1 2007 or face the invocation of the safeguard clause that would delay accession by a year.

Budget trouble

Most Bulgarians seem to be either unaware or uninterested in the bickering going on inside the ruling coalition, and the teachers’ strike is only the most obvious example of the lack of interest. The teachers insist that their salaries should be increased by 20 per cent at the beginning of next year, rather than by the proposed six per cent next July.

However, there were also tens of thousands of other Bulgarians who were expecting, in the light of BSP promises, to see their incomes go up by 15 to 20 per cent. And not just because of the wish to fill the household basket with more goods, but also in order to feel better on the path to the EU, where incomes are 10 to 20 times higher.

Such an increase was impossible, it turned out. And it turned out that a number of social benefits, also promised during the election campaign, will begin to be implemented only in early 2007.

The most apparent example of the Government’s failure to plan for considerable income growth and social improvement is the budget for next year. The draft budget still awaits final approval by Parliament, and may see some minor changes, but its framework is enough proof of the lack of the funds required for radical changes, as well as that there are objective obstacles to a rise in incomes for Bulgarians.

Despite receiving criticism from all political parties represented in Parliament, including the ruling coalition members NMSII and MRF, the draft budget passed its first reading on November 17.

The document envisages gross domestic product (GDP) growth of 5.5 per cent and inflation of about 5.8 per cent. The projections are that the current account deficit will drop to 12 per cent of GDP (from the expected more than 13 per cent by the end of 2005).

Revenue in the 2006 consolidated budget is set at about 18.3 billion leva, or 40 per cent of GDP, 12.4 per cent or two billion leva in nominal terms up on the 2005 figure. 

Expenditure in the 2006 consolidated budget is projected at about 18.3 billion leva too, which in absolute terms represents growth of about 1.8 billion leva. Thus, the Cabinet expects to have a balanced budget with zero deficit.

The budget allocation for salaries and remuneration in the state-financed sector is 2.7 billion leva, 275 million up from the 2005 figure, which allows an increase in salaries of more than 11 per cent. The improvement of salaries in the sector by six per cent as of July 1 2006 ensures an average monthly gross salary of 459.90 leva in absolute terms, and a growth on 2005 by 9.5 per cent in nominal terms.

The amount of subsidies in the 2006 draft budget is 592 million leva, which is 148 million down from the 2005 figure of 740 million. The budget bill envisages a considerable rise in capital expenses - from 1.7 billion leva in 2005 to 2.2 billion leva in 2006. The increase is more than 540 million leva.

Social security expenses are fixed at about 6.2 billion leva, or 573 million leva up from 2005. The 2006 amount of expenditure on defence and security is 2.3 million leva, or almost 220 million more compared with 2005.

The allocation for health care is about two billion leva, also about 220 million up from 2005.

Expenditure on education is set at 1.9 billion leva, or 102 million more compared with the 2005 figure. The amount for culture is 291 million leva.

This budget was drafted on the basis of the parameters of the macroeconomic framework that was proposed and the agreement reached with the International Monetary Fund (IMF) concerning the major issues of the consolidated fiscal programme. But, it is the IMF that has been seen as one of the major obstacles for raising incomes and giving more serious social benefits.

The fund is against any sharp (and even any!) increase in incomes, which according to the international financial institution will lead to further worsening of Bulgaria’s current account deficit. Do not pay more to Bulgarians because they will spend it on imported goods and you will be losing your GDP, the Fund insists.

Furthermore, the Government still has to reach an accord with the IMF on the zero budget deficit, since the Fund wants to have at least three percent surplus. The last mission of the IMF to Bulgaria, whose talks in Sofia were kept in total secrecy, ended in public failure and only some “skeletons in the closet” are keeping the incumbents from emulating Romania by discontinuing its relations with the Fund. 

The budget for 2006 has to meet the expectations of the public of accelerated growth on the brink of EU accession, Finance Minister Plamen Oresharski told MPs. He said that the bill focuses on preserving macroeconomic stability, creating conditions for sustainable growth, preparing the country for EU membership, increasing social responsibility and offsetting the flood damages of the summer of 2005.

Nice words, but they contradict to the exact figures in the budget, some would say. Critics might put the blame on Oresharski, who is the only independent appointee in the Cabinet. Political analysts have said that Oresharski has been appointed for no other purpose but to be the “scarecrow”, limiting other ministers’ wishes to spend more.

Prime Minister Stanishev appears to have been the only one to see that next year’s budget would send clear messages to Bulgarian business, to the public and to Bulgaria’s foreign partners. Yes, the IMF can happily rest assured that the PM will not spend more than it allowed him. But, businesses or the public may not take the same view.

Obviously, the 2006 draft budget did not appeal much to the MPs. It was roundly criticised by representatives of all parliamentary forces, including members of the ruling majority.Of course the right-wing opposition was harsher in its “bites” saying the document did not reflect the agenda of society and did not provide financial resources for the reforms related to Bulgaria’s EU accession or conditions for faster economic growth.

“This budget only increases the percentage of confiscation and reallocation of taxpayers’ income,” said Ekaterina Mihailova of the Democrats for a Strong Bulgaria.

United Democratic Forces (UtDF) leader Petar Stoyanov described the draft as a “budget of guaranteed poverty”, arguing that a very favourable opportunity to carry out key reforms for improvement of the quality of life in Bulgaria had been missed through this budget.

Ultranationalist coalition Ataka also voted said  that it was “the budget of the non-sovereign Republic of Bulgaria, because it is prepared and adopted under the dictation of a foreign financial institution, namely the IMF”.

Programming for peace

Some steps that followed the first approval of next year’s budget showed that even Stanishev, the main person behind the draft, does not appear to believe too much in what he has served up to Bulgarians.

Firstly, Stanishev said that, as a citizen and a person, he would like to see more social priorities addressed by the 2006 budget, but income policy and the rises of pensions and wages were not the only dimensions of social responsibility. He said that it was not the fault of BSP, whose priorities should not be viewed as part of their own social and economic policy but as part of what he and the leaders of NMSII - Simeon Saxe-Coburg, and of MRF - Ahmed Dogan, had agreed.

And to show the public and the businesses that he was very concerned about them, Stanishev hastily presented a governance programme that is officially designed to mark the key priorities for the next several years. Unfortunately, many found the programme a futile effort, since it looks like nothing more than an economics textbook, instead of a set of serious and exact commitment.

The document envisages the creation of 240 000 jobs to permanently reduce unemployment  to below 10 per cent. The minimum monthly wage will be raised once a year and its extent will serve as a state regulator on the labour market. The Cabinet also plans to set up an investment fund to offer support to the pension system.

The Government also promises regular increase of wages related to the GDP growth. Growth itself is projected to be at least six to eight per cent in the next four years.

Income tax rate will not be increased and the progressive taxation system will be preserved. Family taxation system will be introduced in full by the end of 2007. Corporate tax rates will not be changed.

Empty words, the trade unions said. Confederation of Independent Trade Unions in Bulgaria leader Zhelyazko Hristov described the programme as “a comprehensive and ambitious document” but “sparing in details about the way the planned actions will be carried out”.

The document lacked concrete figures, which was important in order to compare what had been promised and what would be achieved, said Bulgarian Industrial Association chairman Bozhidar Danev. He said he had not found in the programme any clear definition of the future tax and budget policies that would lead to the envisaged social and economic growth.

It seems, according to analysts, that the document reflects the ruling coalition’s unwillingness to look outside the short period within which its existence is guaranteed. In fact, the programme has been drafted with two purposes, both of them with a one-year horizon - Bulgaria’s eventual accession to the EU and next year’s presidential elections. The coalition’s future depends on them.

However, it seems to be clear to the incumbents themselves, as no clearly outlined long-term, four-year targets can be seen anywhere in the programme. Strangely enough, the programme projects a six to eight per cent economic growth for the four-year period, while the 2006 budget draft envisions an economic growth below six per cent.

Therefore, it turns out that a drop in economic growth instead of an increase is envisaged even for the first entire year of the incumbent Cabinet’s term in office. This indicates that the Government is not ready to take any risks and work in the direction of speeding up economic growth through decisive political measures. Thus, the private sector has been again left like an orphan as there is no synergy at all between business activities and the state. The Cabinet, it seems, simply is not going to make the private sector’s life easier. But, everyone should understand that reforms require money, and this is what any government in this country has lacked.

A political assessment

THE theme of Sergei Stanishev’s Coalition for Bulgaria campaign ahead of the June 25 parliamentary election was “continuity and change”.

On August 16, after protracted negotiations, Stanishev emerged as the Prime Minister of a tripartite coalition Cabinet, with the majority share held by his coalition, and with the participation of the National Movement Simeon II (NMSII) - formerly the dominant partner in the previous government - and Ahmed Dogan’s Movement for Rights and Freedoms, the MRF. NMSII leader Simeon Saxe-Coburg chose to stay out of the Cabinet, as did Dogan, meaning Stanishev was the only party leader to combine this role with membership of the Government.

By common consent, however arbitrary the choice of the number, the passing of 100 days of the Stanishev Cabinet being in office has been chosen as the point at which its performance should be assessed. There has been continuity, and there have been changes, but perhaps in either case not quite along the lines that Stanishev promised.

Political identity

It is difficult to say accurately, outside the bounds of the shorthand descriptions used by domestic and foreign media, how ordinary Bulgarians perceive the political identity of this Cabinet.

While it may be described variously as a “BSP government”, “a BSP-dominated government”, “a tripartite coalition Cabinet”, none of these is quite accurate in the political rather than the literal sense. Certainly, the BSP occupies the nominal leadership, has the largest share of seats and most of the crucial portfolios, but it retains the circumstances of its conception - founded in compromise, for the sake of stability, for the sake of averting the need for a second parliamentary election. Most of all, formed for the sake of fulfilling Bulgaria’s “must do” list related to European Union accession. Because, in truth, the agenda for the governing of Bulgaria is set in large measure outside the borders of the country: by the European Commission, mainly, in telling Bulgaria what it needs to be seen being done, and to a lesser but still significant extent by multilateral organisations that are Bulgaria’s partners, including the International Monetary Fund, the World Bank, and, in certain respects, the North Atlantic Treaty Organisation.

Those who currently govern Bulgaria must not only make compromises among themselves within the tripartite Cabinet, they must also satisfy, as far as possible, the requirements of the country’s outside partners.

What has happened?

There was talk that certain media bodies gave the new Cabinet a “honeymoon” during its first days in office, though there was not much evidence of this, going by the many critical reports and commentaries that followed in the first weeks after August 16. Whatever the media did or did not do, the world did not stop revolving to give the Cabinet breathing space. The disastrous summer floods that started in the closing days of the Saxe-Coburg government continued; there were further high-profile public murders, including of top banker Emil Kyulev, IMF missions flew in for tough talks; mayoral elections had to be fought, including in the capital city of Sofia; the saga of the Bulgarian medics in Libya continued; there was the threat of bird flu; the EC released its October regular report on Bulgaria’s state of readiness for EU accession.

What has been done?

Assessing the 100 days, Coalition for Bulgaria floor leader Mihail Mikov said that 50 items of legislation, most related to EU accession, had been approved.

“No other period in Parliament’s history has seen such intensive adoption of EU-related laws,” said President Georgi Purvanov, approvingly. For those who like this kind of arithmetic, that means laws were approved at the rate of one every two days.

Meanwhile, few could accuse Interior Minister Roumen Petkov of inactivity, although the net effect remains to be assessed. Petkov, apart from an intensive series of meetings with key players in law enforcement, prosecution and court structures, launched Operation Respect, which thus far has produced a large number of arrests and detentions for questioning, but as yet, no high-profile court convictions. Perhaps Petkov’s activities may be assessed as evidence of the longed-for political will to act against powerful organised crime interests, perhaps not.

Elsewhere on the domestic front, there was radical action in regard to long-standing problems in the financial management of hospitals, with the firing of a number of heads of hospitals. But whether this was a sustainable solution - the question remains whether the problem was really personality-driven, by the hospital heads being inadequate to the challenge of properly managing their budgets, or whether it was systemic, will be evident in the long-term. In the education sphere, the final shape of the budget has led to a teachers’ strike, perhaps an anomalous outcome from a Cabinet that promised to step up the quality of education in Bulgaria. In fact, on the domestic front - with regard to social support, education, and health care - there seems every indication that the Government is not going to carry out the BSP-dominated Coalition for Bulgaria’s lavish election promises.

Politically, there is also the question of a “Red purge”. In an interview with The Sofia Echo in January 2005, Stanishev said that there would not be a clearing of house in the state administration; his government would not do what the centre-right Union of Democratic Forces did when it was elected in 1997, when it purged the state of those who did not spring from the same political gene pool as itself.

Speaking to journalists on November 23, Stanishev said that out of Bulgaria’s 37 000 public servants, about 130 had lost their jobs in the previous three months, most having left voluntarily. Of these, only four worked for the Cabinet, including two who retired. Stanishev said that of 220 agency chiefs, only nine had been replaced. Personnel changes had been made on 44 boards of commercial corporations.

It may be added, of course, for the sake of context for Stanishev’s comments, that this Government is not made up purely of the BSP, and that therefore it might be expected that there would be some degree of security and preferment for those associated with other parties.

Finally, brief note may be made of the social and economic development programme adopted by the tripartite Cabinet. While it will take some time to see whether this leads to sustainable long-term positive effects, the fact of an agreement may at least be taken as evidence that, politically, the Cabinet is functioning as it is meant to. To this may be added that so is the working coalition in Parliament, as evidenced by the first-reading approval of Budget 2006.

What has not been done?

Given that, as noted above, Bulgaria’s agenda is not really that set by the Cabinet in isolation, but is in essence about the country’s progress towards the Holy Grail of EU accession, it is trite to point out that much remains to be done.

Organised crime and corruption have not yet been brought to heel. Other issues listed as of serious concern in the EC October report were inadequacies in regard to freedom to provide services, company law, agriculture, and regional policy.

There are other matters not yet resolved that are outside the framework of EU accession. These include achieving a diplomatic solution to the case of the Bulgarian medics in Libya, finalising a deal on United State use of military bases (although by insider accounts much progress has been made), achieving agreement with the IMF, and resolving the question of the shape of Bulgaria’s future involvement, if any, in Iraq.

For the moment, let us be realistic in considering these questions, any one of which on its own is massively sensitive and complex, and remember that 100 days is an artificial cut-off point, suitable best for headlines and sound-bites from praise-singers and critics alike.

What of the next 100 days?

Or, a better way to put that question (but not as convenient for a headline) is, what of the next four months before April, when the next crucial turning point is reached in the process of deciding whether Bulgaria will join the EU as scheduled in January 2007?

One cause for confidence is that, given that the Cabinet has functioned as intended for its first 100 days, it should be capable of doing so for the next 100 days, and the next after that. But this does not answer the real question: whether it is capable of implementing the steps that the EC wants to see, and after 100 days, it is too early to tell.

It may be that the biggest challenge that could face the Cabinet would arise if a decision is made in the first half of next year that the “pause clause” of the EU accession treaty is invoked, and Bulgaria’s accession is postponed until January 2008. The very least consequence from this would be the opportunity that it would provide to the opposition in Parliament to table a motion of no confidence in the Cabinet.

Apart from the EU accession process, as important as it is, the Cabinet faces another mighty challenge. A recent poll showed that the vast majority of those questioned had no faith in Bulgaria’s political establishment (confirmation of the trend seen in the low voter turnouts in the 2005 parliamentary and mayoral elections). This is a profound challenge. Outside the country, much praise is spoken about the political stability of Bulgaria and its coalition Cabinet and working majority in Parliament. Yet within the country, there appears to be growing alienation and disillusionment with the political elite, and how this Government handles that question will be another true test of its stewardship of the country.