Analysis

Another Nail in the Coffin of the Bulgarian Economy

With anti-government protests continuing for more than 60 days, there is a limited chance that the political crisis will be resolved before the beginning of the new political season in September. Nikolay Manov explains why politicians are sleepwalking towards a new foreign debt.

Imagine 500,000 of these.

Imagine 500,000 of these.

The current Bulgarian government, a Cabinet of ‘experts’ backed by the Bulgarian Socialist Party, the Movement for Rights and Freedoms and the nationalist party ‘Ataka’, does not seem to listen to its people. Having made no headway against anti-government protests, it continues to make decisions that are controversial and genuinely unpopular. A clear example is a proposal to borrow €500 million, to be added to Budget for 2013.

Firstly, the public has not been presented with a clear, numerate explanation as to why this loan is necessary. It has been said that the money will be used to raise the social benefits of certain groups, to pay back debts to businesses, to provide funding for services such as health care and to fill the fiscal reserve. Only a small share of the money will go to the reserve – a fact, that is a major source of conflict between the government and the opposition. The leader of Citizens for Urban Development of Bulgarian and Former Prime Minister Boyko Borisov said that if the whole sum was to be put in the country’s reserve, his party would support the proposal.

A second major problem is the attitude of Bulgarian youth towards their future in the country. A recent survey revealed that 45% of those aged 15-35 want to stay in the country, 43% want to leave temporarily and 12% permanently.[2] With 55% of the country’s young workers planning to spend a number of years abroad, the question is, who will remain to work and repay the loan. The workforce is shrinking, and Bulgarians are among the fastest-aging nations in Europe. A study published by the World Bank estimates that by 2020 Bulgarian workforce will account for 67.2% of the total population of the country.[1] This, combined with high dependency rates (those outside of the working age are estimated to be 50% of the population in 2025)[2], makes it hard for the Bulgarian people to pay the money back.

Thirdly, there is inconsistency in what the Cabinet says and what it does. For instance, during the debates preceding the defeat of the Presidential veto on 16 August it was argued that part of the €500 million would be used for healthcare. As a former Communist state, Bulgaria’s national healthcare system has undergone several unsuccessful reforms and it badly needs restructuring and additional funding. However, despite the fact that in the revised budget 5 million leva will be added to the budget of the Ministry of Health, the government has announced that it planned to reduce the staff in state hospitals by 10%, affecting specialised services such as A&E, mental health and special needs care. In order to reduce tension, the Ministry ‘clarified’ that the 10% reduction of staff was directed at administrative personnel.

As it can be seen from these examples, the cabinet continues to work on a ‘trial and error’ basis, disregarding the ‘voice of the street’. Its supporters remain limited to people organised by the BSP with little or no education, from disadvantaged regions, who are paid to do so and have no idea why they are support the policies of the Oresharski Cabinet. With no signs of the government’s resignation apparent, I expect a really interesting political season to follow in the autumn.


[1] Chawla, M., Betcherman, G. and Banerji, A. From Red to Gray: The “Third Transition” of Ageing Populations in Eastern Europe and the Former Soviet Union (World Bank, 2007)

[2] Ibid.

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