Bulgaria's new caretaker government faces tough task

By bne IntelliNews August 6, 2014

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Bulgarian President Rosen Plevneliev on August 5 appointed a caretaker government to rule until parliamentary elections set for October. The interim administration faces a tough two months; it needs to deal with several urgent issues while attempting to introduce some political stability.

Plevneliev said in a televised address that in addition to preparing for the October 5 elections, the interim government - headed by university professor and former Bulgarian Socialist Party (BSP) member Georgi Bliznashki - will have to draft a revised budget and work to unfreeze EU funds. Bliznashki’s administration will also need to tackle the dangers that have threatened the banking sector since the central bank stepped in to take control of Corporate Credit Bank (CCB) in June.

Bliznashki, a lecturer on constitutional law, was a senior member of the BSP - the largest party in the outgoing coalition government; he narrowly lost out in the race to become the party’s presidential candidate in 2011. However, he was also an outspoken critic of the former government headed by technocrat Plamen Oresharski, and was expelled from the party in March over his support for student activists and opposition to proposed changes to the electoral system. 

Other key appointments in the caretaker cabinet include former senior civil servant Rumen Porozhanov as finance minister, presidential chief of staff Ekaterina Zaharieva as deputy prime minister for economic affairs and regional development minister. Iliyana Tsanova will be deputy prime minister in charge of European affairs and EU funding - a key issue for the temporary government. 

While it has no authority to amend the budget or pass new tax legislation, the new administration will be responsible for drafting a revised budget, Plevneliev said. On August 4, the parliament turned down proposed amendments that would have opened the way for Sofia to take on additional debt in order to help bail out CCB. 


However, the biggest challenge will be to try to cultivate at least a little political stability ahead of the vote in October. Having been forced to hang on in the face of ongoing protest against the political class for practically the whole year or so that it served, Oresharski's administration was finally felled by a poor showing in May's European elections. That mirrored the struggles in the vote of many established political parties across the EU. 

Oresharski’s cabinet officially stepped down on July 23. Appointed when the previous centre-right government led by Boiko Borisov's GERB was forced to resign by mass street protests, the new government was almost immediately tarnished by a scandal over the appointment of controversial media tycoon Delyan Peevski as head of the state security agency. During his time in office, Oresharski faced no less than five no-confidence votes.

Bliznashki pledged that his interim government will work to provide more stability, dialogue and transparency in government. "European Parliament elections held on May 25 restated the non-conformity of [political] forces in the National Assembly and societal attitudes. Political parties reached an agreement on early parliamentary elections on October 5, and the parliamentary crisis grew into a governmental one...  This requires that we uphold the constitution and the laws in the country," the interim PM said, according to Novinite.

In particular, stability is needed to try to address the dire effects of recent turmoil on the Bulgarian economy. The International Monetary Fund (IMF) warns that continuing uncertainty will put at risk the "modest pick-up" in GDP growth it had forecast for this year. In the first five months of 2014, foreign direct investment (FDI) dropped 33.8% compared with the same period of 2013. The BNB reports FDI dwindled to just €8.6m in May, compared with €151.8m the previous year.

However, while there are hopes that the October elections could produce a more stable government, current indications suggest yet another vulnerable coalition. 

GERB, the largest party in the current parliament, also took the largest share of the vote in the European elections, and is widely expected to come out on top. However, it managed just 30.4% in May; a similar showing in October would not deliver a majority. Other parties expected to take seats in the new parliament include the BSP, DPS - which is based on rights for Turks - and the newly formed Bulgaria Without Censorship, which made a strong showing in the European elections.


The recent instability means the outgoing government also leaves Bliznashki and his cabinet with several pressing issues to resolve. The ongoing crisis at CCB is among the most urgent. 

After speculation of deep seated corruption sparked a run on the country’s fourth largest bank, it was taken over for supervision by the Bulgarian National Bank (BNB). Later the same month the state was forced to step in to halt panic at another major lender: Fibank. 

However, the BNB has thus far failed to secure political support for a bailout plan presented in mid-July, and CCB looks set to remain closed for several months while an independent audit is carried out. Hopes have since shifted, putting a possible rescue package from the State General Reserve Fund (SGRF) of Oman in the spotlight. 

At the same time, Bulgaria continues to struggle against being caught in the middle of the stand off between the EU and Russia. Plevneliev reiterated on August 5 that no further work will take place on the South Stream gas pipeline project unless the EU gives the go ahead. Sofia is a keen supporter of the Russia scheme to build a 63bn cubic metre route under the Black Sea and into Europe, but Brussels has ordered EU member states to halt work on the project. 

Bulgaria is tempted by the prospect of cheaper gas and revenue from transit fees. However, Oresharski's government has hardly helped its own efforts to push South Stream forwards.

The opposition slammed the departing government for selecting a consortium led by Stroytransgaz – a Russian company owned by Gennady Timchenko's Volga Group and a named target of US sanctions – to build the Bulgarian section of the pipeline. Opposition leaders also claim the €3.5bn project cost is inflated. In the final days of Oresharski's tenure, Plevneliev stepped in to prevent the government accepting a €620m loan from Gazprom for state-owned Bulgarian Energy Holding. 

Bliznashki’s interim government will also have to decide whether to finalize a deal Oresharski agreed during his final days in office with Westinghouse to expand Bulgaria's nuclear capacity. Under the agreement, US-based company will  build a €3.6bn reactor at the Kozloduy power plant. The deal would help Bulgaria reduce its dependence on Russian fuel imports. 

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