Bulgaria's parliament adopted on Tuesday, Oct 22 a controversial measure that aims to extend the moratorium on the purchase of agricultural land in the country by foreigners until 2020. The measure is not itself an extension of the existing ban, which expires in January 2014, but rather a motion obliging the executive branch to initiate a process that should result in an extension.

What to expect from the European Commission?

Chantal Hughes, the spokeswoman to the European Commissioner for internal market and services, told state radio broadcaster BNR on Tuesday that an extension could be achieved only if Bulgaria's EU accession treaty is amended and re-ratified by the other 27 EU member states. However, this is improbable, as the EU's founding principle is free trade and free movement of capital. Hughes added that if Bulgaria does not open its market for land, this would trigger the EC's infringement procedures, potentially leading to court action.

The politics behind the motion

The controversial motion was approved with the votes of legislators from radical Ataka, opposition CEDB and the senior ruling party BSP. It was supported by a total of 171 legislators, while 38 were against it and 12 abstained. The junior ruling partner, MRF, voted against it. 

It is speculated that Ataka submitted the motion in an effort to consolidate its voters and accumulate political capital that will be needed for the upcoming European Parliament elections in May 2014. Ethnic Turk MRF opposed it on historical grounds (the measure was first adopted in the years after communism fell in Bulgaria in order to prevent the purchase of land by Turkish people).

Accession to the EU and the transition period

During the negotiations for the 2007 accession to the EU, Bulgaria requested the possibility to maintain existing national provisions restricting the acquisition of agricultural land or forests by foreigners. This was considered  necessary in order to protect the socio-economic agricultural structure of the country from shocks that might arise from the differences in land prices and incomes with the rest of the Union, and from the problems in the local rural credit markets. The combination of these factors was expected to lead to an undesirable sale of land to foreigners. Accordingly, Bulgaria was granted a 7-year transitional period that ends in January 2014. 

It must be noted that even now the acquisition of agricultural land by foreigners is not entirely restricted. Arable and forest land may be acquired by those citizens of the EU who are self-employed agricultural producers and wish to settle and reside permanently in Bulgaria. In addition, legal entities are allowed to hold and acquire land without restrictions as long as they are registered in Bulgaria.

The economics of the moratorium

It is common knowledge in economics that the restriction of transactions hinders development and economic growth. In that context, the moratorium on the purchase of land by foreigners decreases the flow of capital to Bulgaria's agricultural sector, reduces the access to new technology and know-how, and thus generally impedes productivity.