Lumping Eastern Europe Together Is Wrong

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It is not that countries like Bulgaria are perfect. They are not. But Bulgaria has its own crisis pluses and minuses. Politicking ahead of the approaching elections to the European Parliament in June and the national parliament a few weeks later will multiply its problems at least threefold – and, if you are a foreign investor, it is necessary to see the situation in complete clarity and detail.

On the plus side Bulgaria has a stable currency: the lev is firmly tied to the euro. That's why this country enjoyed formidable fiscal discipline in the last decade. Now Bulgaria has a huge budget surplus to serve as an anchor in a sea of financial troubles. It does not rely on the International Monetary Fund and has not asked for assistance so far – although Prime Minister Sergei Stanishev hinted in a TV interview on 20 April that the government is considering such an option. Unnamed IMF and World Bank officials say Bulgaria is financially safe and sound. Its banking system has one unexpected advantage: it never developed the complex financial instruments which brought down some Western banks; so it benefits from its imperfection.

This does not mean the crisis is absent, far from it. Bulgaria's boom in the last decade was based largely on foreign investment, easy credit, emigrant cash, construction, real estate, the English and Irish buying houses; it relied on tourism, hotels, and shopping malls. All this is shaking now. Unemployment, which had almost disappeared, is gradually returning; factories are closing; inflation is to be replaced with deflation. Emigrants could return from crisis-stricken England, Greece, and Spain, asking for jobs back home. These are effects directly related to the crisis and quite far removed from the matter of EU funds frozen because of ineffective administration and allegations of corruption and fraud.

Did Bulgaria prepare well in its seven fruitful years for its seven years of drought? This will be put to the test in the months to come. And the structural deficiencies of the Bulgarian growth model will plainly manifest themselves.

Would it have been wiser to develop more high-tech than tourism, more industry than shopping malls, and plant more fields rather than build more hotels? Was that path of development even possible after the fall of communism? For whatever reasons, the voters are not ready to ask these questions this election season. Instead, they are immersed in the personal quarrels of politicians who are using every means to attract attention – even reality shows. Voters watch as some political leaders, inspired by modern PR methods, appear on Big Brother, others on TV drama shows, still others work out on camera.

The only thing that could redirect the public's gaze to serious issues is … the crisis itself. When your job is at stake, you're interested in the economy, not in virtual reality. But, as the writer Kalin Donkov claims, Bulgarians are experts in survival. They have seen crises bigger than this – and outlived them with rational thinking and skill. So, why worry?

What could take Bulgarians unprepared is an alliance of virtual reality and real crisis. The negative factors on the spot may join Eastern Europe's bad image and the positive ones could fade as well. Jokes about investors are nastier than those about bankers; one goes, the investor is the biggest scaredy cat in the world. If investors and banks get more scared, then we could be left wondering whether financial stability is possible without finances.

Provided by Transitions Online—Intelligent Eastern Europe

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