Fast reads

The end of the Council of EU Presidency, the cabinet is already shaking, Desislava Ivancheva, the Bulgarian judiciary

The end of the Presidency of the Council of EU will probably lead to instability within the ruling coalition of GERB and nationalists, as the accumulated problems of the past few months may take the upper hand over the diplomatic activity of PM Boyko Borissov.

The cabinet is already shaking. On June 12 PM Borissov rejected the resignation of Social Policy Minister Biser Petkov, who filed it a day earlier because of his inability to meet disabled people's demands for change in funding rules.

On May 2 the Bulgarian government merged all anti-corruption bodies in the country into a new super-agency which will supposedly fight graft more efficiently. The Commission on Anti-corruption and Forfeiture of Illegally Acquired Assets is headed by Special Prosecutor Plamen Georgiev.

The mayor of Sofia's Mladost District Desislava Ivancheva was arrested and charged with receiving a 70,000 euro bribe to allow a real estate development.

The Bulgarian judiciary finally, albeit slowly, started seeking the culprits behind the bankruptcy of Corporate Commercial Bank in 2014 who syphoned off 2,5 billion levs (1,25 billion euro) from the bank.

In April the long-awaited unification of the three out-of-parliament, opposition center-right Bulgarian parties took place. Now the Democrats for Strong Bulgaria, the Greens and Yes, Bulgaria! are part of Democratic Bulgaria movement.

The Bulgarian parliament mandated the government to start looking for strategic investors in the Belene Nuclear Power Plant project. The deadline is October 31. The China National Nuclear Corporation is showing some interest.

Bulgaria is in talks with Russia over the potential extension of the Turkish Stream gas pipeline to Bulgaria and then to Central Europe. Sofia hopes to save its gas transit business following Gazprom' decision to redirect gas flows directly to Turkey under the Black Sea, circumventing Ukraine.

Bulgaria plans to apply to enter both the Exchange Rate Mechanism (ERM 2), known as the euro's waiting room, and the EU's Banking Union by the end of June 2018.

Bulgaria's economic growth seems steady at 3.5% for the second straight quarter but as Western European economies start slowing down they may affect growth in Bulgaria. At the same time, consumer prices are on the rise after three years of deflation.

Bulgarian long-haulage companies protested in May in Sofia against the new EU rules that could restrict their ability to compete on the West European markets.

The Bulgarian subsidiaries of Greece's Piraeus Bank and France's Société Générale, as well as Bulgaria's First Investment Bank are still awaiting new investors. The Greek and the French bank are in very advanced stages of the sale of their Bulgarian units.


REARMAMENT / The parliament endorsed two of the most ambitious rearmament projects in the modern history of the Bulgarian army in the first week of June. Worth a total of 3.26 billion levs (1.6 billion euro), the two projects ought to see the Bulgarian land forces acquiring at least 150 armored military vehicles and auxiliary units and the Bulgarian air force purchasing at least eight fighter jets. Ideally, the armored vehicles will be assembled in Bulgaria, using NATO-standard technology blueprints. Bulgaria will choose between a dozen new and used aircraft to substitute its aging Soviet-era MiG-29 fleet.

CORPBANK / The court case seeking the culprits behind the Corporate Commercial Bank (Corpbank) bankruptcy and the siphoning off of over 2.5 billion levs (1.25 billion euro) from the bank began on 9 May. There are 18 people charged, including the former majority shareholder and CEO of Corpbank, Tsvetan Vassilev, who is living in exile in Belgrade, Serbia. Mr Vassilev still pleads not guilty and claims that the bank run that led to the collapse of the lender occurred under pressure from the Prosecutor's Office and 'certain media'. His former business partner Delyan Peevski is conspicuously absent from the indictments, despite being frequently mentioned in the collected evidence.

INSTABILITY / On 12 June PM Borissov rejected the resignation of Social Policy Minister Biser Petkov. It followed Mr Petkov's reignation on the previous day, because he couldn't meet demands made by protesting parents of disabled children. In February, Energy Minister Temenuzhka Petkova submitted her resignation in order to "erase all doubts" about a deal that saw the assets of the largest private energy company in Bulgaria, CEZ, sold to a family-owned business to which she has friendly ties, but PM Borissov rejected it. In October 2017 the healthcare minister Nikolay Petrov became the first minister to resign from the Borissov-3 government.

CORN PRODUCTS / Bulgaria has been chosen by one of the leading corn processing companies in the world for its largest investment announced year-to-date. The 200 million levs (€100 million) project of US-based Archer Daniels Midland Company (ADM) will more than double the output capacity of its plant in the city of Razgrad, Amylum Bulgaria, and add a new product, ethanol, to the product list in two years. The decision is the result of the lifting of quotas for sugar and sweeteners in the European Union in October 2017 and the expected surge in demand for such products. Besides the direct effects for the company, i.e. internal synergies and larger volumes, the installation of additional capacity is likely to stimulate corn production in the country, as Amylum Bulgaria is the largest single consumer.

COURIERS / Speedy, one of the largest courier services companies in Bulgaria, is in talks to acquire its smaller local competitor Rapido Express & Logistics. The price will be in the range between 6 and 12 million levs depending on the financial results of the target company, Speedy said in a stock-exchange announcement. The deal is subject to approval by the Commission for Protection of Competition but it will most likely get clearance as there are about a dozen of companies on the market. Majority owner of Speedy is Valeri Mektupchian, while France's Geo-Post holds 25% of the shares. Rapido is controlled by its managers, Vasil Atanasov (80%) and Radoslav Krumov (20%), who acquired the majority package from Liechtenstein-registered Venax Establishment in March 2018.

PACKAGING / Germany's Multivac has opened a plant for packaging machine components in the Bozhurishte industrial park near Sofia. The investment amounts to €18.8 million and provides 153 jobs. The facility has an area of 7000 sq. m and includes production space, a warehouse, a showroom and offices. The plant will manufacture various steel components for packaging machines with an option for production of whole modules at a later stage. Multivac's Bulgarian investment is expected to boost the production capacity of the German group by some 10% this year.

MARKET MOVERS / According to a real estate agency Forton's survey, Sofia's southern and southeastern districts are the real estate developers' favorites. Over one million sq. m. of residential area was under construction in Sofia at the end of 2017. Most of those developments were located in the Vitosha District and the southern and southeastern regions which are generally considered the most attractive for new projects in the residential segment. From a pricing point of view, all those areas fall into the medium segment of the market. According to the survey, the prices per square meter of new construction there vary from 1020 euro in the Studentski Grad district to 1160 euro in the neighboring Malinova Dolina district.

BACK TO THE SEA / Varna's real estate market sees revival. Increased demand for housing in Varna in the first quarter of 2018 and a rise of 5%-6% in the number of deals were reported by the Imoteka real estate agency. The average purchase price of residential property in the coastal city increased by 8% year-on-year in the first quarter, reaching 827 euro per square meter, while in the central part of the city prices rose by more than 10%. Local buyers dominate the housing market in Varna but there is also interest from Russian citizens. Yet, although the share of deals with foreigners is insignificant. Imoteka noted that 26% of the buyers intend to let their residential property.

GROWTH IN NEW BUILDS / The number of building permits for apartments issued in the first quarter in Bulgaria rose by more than 30% year-on-year, according to the National Statistical Institute. Most documents were issued in Sofia, while most construction works started in Plovdiv. In Sofia, almost the same number of building permits for housing projects was issued in the first quarter of 2018 compared to the period October-December 2017 which is somewhat surprising, since construction activity in the first quarter of the year typically is slower compared to the last quarter of the previous year. Countrywide, permits were issued for 1162 residential buildings with 6247 dwellings and combined floor area of 815,987 sq. m.

POLISH EXPANSION / Polish real estate group Globe Trade Center (GTC) has acquired Mall of Sofia for a touch above €90 million. The seller of the shopping center is Europa Capital, part of Rockefeller Group. As much as €30 million of the price has been provided as own financing by the buyer and the rest has been borrowed from Bulgaria's DSK Bank and its Hungarian owner OTP. Mall of Sofia has 23,700 sq. m of rentable shopping space, 10,300 sq. m of offices and more than 600 underground parking lots. Some 98% of the shopping space and 100% of the office space has been rented out. This is the fourth shopping-center deal in Sofia in less than a year after Serdika, The Mall and Paradise were acquired by South-African investors.

EXPENSIVE RENTS / 20% growth in rents in one year, deals dwindle. Real estate agencies, approached by Capital newspaper, report almost 50% decline in the rental deals in comparison with the same period last year. That is why most real estate brokers predict that the peak of the rental prices in Sofia has been reached and from now on the options are two - to maintain or (in certain neighborhoods) to start a slight downward change. If the rent of a one-bedroom apartment in Sofia was about 600 levs at the begging of 2017, the average level is currently close to 800 levS. In the two-bedroom flats, the average rent also grew by about 200 levs, according to data from the Address agency.

LOOSE MONEY / The Bulgarian National Bank (BNB) expects no rise in interest rates in the second and third quarters of 2018, because of strong competition among lenders and stable cash inflows. BNB monthly statistics of the banking sector in Bulgaria show that consumer credit grew by 17% year-on-year in the first four months of 2018, while the volume of mortgage loans increased by 12.6% on the year during the same period. The average interest on consumer loans in levs in April 2018 was 8.61%, an increase of 0.81 percentage points in comparison with the previous month. Mortgage interest rates fell to 3.51%, a slight decrease of 0.05 percentage points over the previous month.

NEW SOFIBOR PROVIDER / Thomson Reuters will probably replace the BNB as provider of the SOFIBOR (Sofia Interbank Offered Rate) index. The change is necessitated by the EU regulation which requires the calculation of benchmark loan rates to be conducted only by licensed EU administrators.

GREEN GROWTH / The EU's newly adopted Renewable Energy Directive will require the bloc to reach a share of 32% of renewables in gross final energy consumption by 2030. The transport sector is required to derive from renewable sources 14% of the fuels it uses (including electricity). The share of renewable energy in gross final energy consumption in Bulgaria rose to 18.2% in 2016 from 9.2% in 2007, according to the last official data available. However, most of the increase came from the so-called heating and cooling renewable energy, which in the Bulgarian case means mainly the use of firewood. If the contribution of this source is excluded, Bulgaria will need to almost double the rate of growth of renewable energy use achieved thus far in order to meet the 32% goal, which is not mandatory.

MARKET INTEGRATION / Bulgaria and Macedonia agreed to couple their electricity markets. The first step is to еnsure free trading in the day-ahead segment of the market. In practice, the agreement will make Bulgarian electricity exports easier and cheaper for Macedonian consumers. It will also guarantee that it will be impossible to discontinue exports by a government decree, which happened in 2017, causing a significant disruption on the Macedonian market.

BONDS / State-owned Bulgarian Energy Holding (BEH) floated a new, seven-year Eurobond worth 400 million euro in June to refinance its 500 million euro Eurobond debt maturing in November 2018. The five-year Eurobond was issued in 2013 to cover BEH's payments related to the Belene nuclear power plant project. BEH considered to expand the new offer to 1 billion euro in order to consolidate another bond issued in 2015.

The end of the Presidency of the Council of EU will probably lead to instability within the ruling coalition of GERB and nationalists, as the accumulated problems of the past few months may take the upper hand over the diplomatic activity of PM Boyko Borissov.

The cabinet is already shaking. On June 12 PM Borissov rejected the resignation of Social Policy Minister Biser Petkov, who filed it a day earlier because of his inability to meet disabled people's demands for change in funding rules.

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