Bulgaria Gets Real about Its Economy

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While there is still a lot of uncertainty shrouding the new government's policies and the development of the economic crisis, Borisov registered some quick victories. Many corruption cases were sent to court within weeks, including one against a former agriculture minister. The EU reacted very positively to this strong approach and announced the unblocking of hundreds of millions of euros worth of funds (the precise amount of money that the economy can absorb will depend in part on what action the government takes in the coming months). A radical reform in the customs and border police is under way, and the force's information system is being linked to that of the revenue system. In this way, the government hopes to collect an extra 600 million euros by year's end.

After some initial tensions, even Russian investors appeared to react positively to Borisov's overtures. Last week, Sergei Kirienko, the director of the Russian nuclear agency Rosatom, announced that Russia might be willing to buy a larger share of the Belene nuclear plant should the Bulgarian government decide to reduce its investment.

The road ahead remains fraught with challenges. Bolstered in part by the EU's financial support, Borisov's team has prioritized the construction of roads and other transport infrastructure: a move as if straight out of the Keynesian toolbox for combating a crisis. The impact of other proposed policies, however, is less clear and more difficult to gauge. While restructuring government agencies and slashing state spending might be difficult to avoid and economically profitable in the mid- to long term, in the short term it will leave thousands unemployed.

Will Borisov be able to compensate for this? A unique aspect of this particular crisis in Bulgaria is the proportion of the burden borne by the public. Whereas in the 1990s the state was responsible for the overwhelming portion of Bulgaria's foreign debt, today over 82 percent of the country's 37 billion euro debt is privately held. Moreover, the gray economy is part of everyday life here, and statistics show that between 25 percent and 40 percent of all economic activity is part of it. It is absurd to assume that just a few rich criminals profit from the gray economy: small-scale economic activity "under the radar" has traditionally been an important survival mechanism for many Bulgarians, particularly in times of crisis.

History is full of examples where those most in need are those most affected by an economic crisis; there is a great danger that in Bulgaria, too, the poor will pay the price of economic stability for the state.

Provided by Transitions Online—Intelligent Eastern Europe

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