Bulgarian politics is still in the conscious but comatose state in which it has been mired for the last 18 months. The new elections did not make things better - on the contrary, they seem to have deepened the crisis, producing just as divided a parliament, but this time without the remotest possibility of a viable coalition.
GERB's return as the leading party is practically mining every possibility for a reformist-oriented coalition, while the other possibility offered by Boyko Borissov - for a "Euro-Atlantic," "anti-Putin" expert government - looks like a gimmick to repair his tarnished image with Western allies.
The political deadlock, however, could not have come at a worse time. Bulgaria - like the rest of Europe - is confronting a harsh winter with possible energy price hikes and soaring inflation. Worse still, the fractured National Assembly urgently needs to pass an inordinate number of legislative changes to unclog the access to much-needed EU money under the Recovery fund. Otherwise, the already strained state budget might not receive its injection on time. Talking about the budget, the one for 2023 has to be passed in the same short lifespan that the Parliament promises to have.
Oh, and Sofia can easily miss the last trains for the Schengen space and the Eurozone because of internal squabbles.
In short, in the coming months, Bulgaria is likely to sink deeper into the periphery of the EU and pay the price for missed opportunities. Here are the five main issues that might arise from the deadlock:
- Political schism blocks decision-making
The 2 October election did not lead to structural changes in the parliamentary representation, but only shifted the balance slightly. Voters have not given a clear formula for a majority (even a coalition one) and the next Parliament will be fragmented and short-lived because the dividing lines between the parties are too deep and insurmountable.
The only possible route to a coalition would involve lots of compromises that will almost certainly not be tolerated by voters, with the pernicious decades-long issue of corruption still the proverbial elephant in the room. At the same time, the old status quo parties (MRF and GERB) try to reframe the epicenter of political debate away from corruption and towards the formation of a nationally-responsible Euro-Atlantic coalition.
The problem is that there is a deadlock alongside the other axis - "parties of the status quo" vs. "parties of change," which dominated public discourse in the previous parliament. GERB and MRF (which officially have never entered coalition, but which, unofficially, have long worked in synchrony) have 103 MPs, while the "reformist bloc" of WCC, BSP and Democratic Bulgaria have 98. Neither bloc can succeed in passing a cabinet in Parliament without resorting to some level of support from Vazrazhdane - either direct or indirect, through non-participation (Stefan Yanev's party has too few MPs to count at this stage). Yet, any sort of support from Vazrazhdane would be considered toxic, especially for the parties' international image.
Two days after the vote, GERB leader Boyko Borissov extended an olive branch to all parties (although he initially claimed it's all pro-Western parties, he also invited Vazrazhdane) to restore his image as a responsible politician trying to form a regular cabinet via a proposed "anti-Putin" coalition. This way of framing it is patently a bid on his part to: 1) clean up his controversial image that is tainted by corruption scandals; 2) acquire a new reputation as a pro-Western leader, one designed to woo Western allies; 3) blame any potential failure to form a coalition on WCC and Democratic Bulgaria. So far, his offer has fallen on deaf ears among its intended targets, the openly pro-Western parties, with only Mr Yanev and the MRF responding to Mr Borissov's offer and BSP refusing such talks outright.
If (or rather, when) this attempt fails, the second mandate will fall to WCC, which unofficially is planning for a minority government, backed by MPs from Democratic Bulgaria, BSP and GERB, without any of these parties having their own ministers. This government would then implement a clear program, involving unequivocal support for Ukraine, reforming the judiciary and removing Geshev as head of the Prosecution. It would also continue to steer Bulgaria towards adopting the euro and implementing necessary legal changes to guarantee the funds under the EU Recovery plan. Of course, it is also unlikely to succeed; WCC, GERB, Democratic Bulgaria and BSP have unofficially told Capital weekly that, if neither mandate succeeds in forming a government, a new election is certain.
- Do not expect judicial reform
Even if GERB somehow manages to pass a cabinet, one of the most important tasks that it will face - passing substantial judicial reform - is doomed to fail. In theory, GERB is willing to countenance discussing judicial reform and it has even offered Democratic Bulgaria the chance to propose its own variant. But Mr Borissov immediately added a caveat - that reform has to be based on principles and that current Prosecutor General Ivan Geshev should not be replaced by a new person (notably singling out former Internal Minister and WCC politician Boyko Rashkov, who made a reputation of going after GERB and MRF vote-buying schemes in 2021. Rashkov was later nominated as head of the Anti-Corruption Commission, CIAF, by WCC, but then their cabinet fell).
In practice, Mr Borissov is repeating the 2015 judicial reform fiasco. At the time, he left the reform entirely to then Justice Minister Hristo Ivanov (later co-founder of Democratic Bulgaria), who pushed through various key amendments that were supposed to check and balance the actions of the Prosecutor General. These were then overturned at the last minute by GERB in the final vote in Parliament, with the argument that "all changes should take effect after [then-Prosecutor General] Sotir Tsatsarov's mandate ends," according to Borissov. The reason is simple - Borissov knows that a truly independent Prosecutor General, one not dependent on the active patronage of GERB and MRF, would try to prove his independence precisely by probing the most flagrant corruption allegations of the past few years, which are almost exclusively linked to the GERB and MRF leaderships.
- Parliament not working means no EU money
In the election campaign, all significant political forces promised to focus on unlocking the access to funds from the European Recovery and Sustainability Plan. This is important, as the state budget deficit has to be refinanced by money from the EU funds, as Bulgaria finds it more and more difficult to place state bonds on the market anymore.
A number of bills have to be passed by the end of the year because of the more than 1.4 billion euro already in the pipeline. Deputy prime minister for EU funds management Atanas Pekanov recently summarized that there are a total of 22 laws, one of which was passed by the previous parliament and two of which, approved by the Petkov cabinet, are awaiting a vote in parliament. The caretaker government started preparing some of the important bills, which are a prerequisite for the second payment under the Plan amounting to 724 million euro.
However, the deadline for meeting the 66 total preconditions set for this tranche is December 31, 2022, or in less than three months. Currently, only 3 of the reforms in question have been implemented. The others are mostly waiting for parliament as they would require changes to legislation. In all likelihood, the National Assembly will be able to start working effectively (with the drafting of rules, the formation of committees, etc.) only at the end of October. And this further shortens the time frame to achieve anything, especially since the main topic will be the budget for 2023.
The first payment under the plan of 2.67 billion BGN should have already been in the Bulgarian budget, but it has not yet been transferred. Of the 21 preconditions, the country has not yet fulfilled one of them - the public procurement for the development of the TETRA system and the radio relay network. This situation is likely to repeat itself for the next installments
- State budget can become hostage to pre-election populism
And while it is reasonable to assume that the parties would do their best to unlock the access to EU funds, there is an additional risk linked to state funds - that they might use the 2023 annual budget negotiations as a springboard for the likely new election campaign and vote for excessive spending - without having to actually implement the budget. Consider also that this year's budget was planned to factor in a significant sum coming from the EU (which might not arrive in the end), and you get a grim picture of the state finances.
The short-term risks are related to the rising interest rates and therefore the price at which the state is currently financed. Recent issues of government bonds on the domestic market have attracted little interest from investors, combined with rapidly rising yields and valuation risk. The deficit for 2022 is set at 6.2 billion BGN, external and domestic debt maturing during the year is over 2.5 billion BGN, so the finance ministry needs roughly 8.5 billion BGN. Since the beginning of the year, however, around 6.65 billion BGN has been raised, so it seems, at least at first glance, that more debt will be needed.
Hence, regardless of whether there is a government, or a draft budget prepared by the caretaker cabinet is approved, if populism prevails and spending is further inflated, the budget deficit could well become higher than allowed by EU rules. And if there is no government, it is highly likely that what happened in the vote on the 2022 and 2021 budget updates in parliament will repeat itself - massive pre-election populism and money for all. With such a policy, even if Sofia somehow miraculously manages to fit the euro criteria, hardly anyone will want it in the Eurozone.
- Towards further EU marginalization
This brings us to the final - and likely, the biggest risk of all - Bulgaria becoming even more sidelined within Europe. There are two ways in which that might happen - stumbling on the road to the Euro and missing the last train to the Schengen free-travel space.
The biggest risk for the Euro adoption - that officially has to happen on 1 January 2024 - is that Bulgaria might overspend beyond the EU-set limits and not meet the convergence criteria by then. "The Commission recognizes that ensuring inflation convergence at the current juncture may prove challenging for Bulgaria and is subject to high uncertainty and volatility. Bulgaria needs to address its public finances. The 2022 adjusted budget includes a significant set of measures to mitigate the effects of inflation [1.2% of GDP], in addition to higher social transfers and wage increases. Energy support measures must be well targeted at the most vulnerable to keep fiscal costs under control," a Commission spokesperson told Capital weekly last week.
As for joining the Schengen free travel space, the decision is to be taken at the December Justice and Home Affairs Council (December 8, 2022 in Brussels). It is supposed to include the three countries that are not full Schengen members - Bulgaria, Croatia and Romania. "The Czech presidency is currently working on both technical and political level to prepare the accession of Bulgaria, Croatia and Romania to Schengen. We believe that we are on the right track to address all the related concerns," Vit Rakusan from the office of the Czech Deputy Prime Minister told Capital weekly.
With the EU Parliament and Commission behind Sofia, the decision remains in the hands of the Member States, or, to be more accurate - their Prime Ministers, who will have to approve the membership in the Council of Ministers. German Chancellor Olaf Scholz recently publicly supported the three states becoming full Schengen members. There is also backing this time from France. According to Capital's sources, everything depends on the Netherlands, which has not yet made a political decision whether it will support us in the process.
Crucially, if for some reason Sofia is not allowed in this year, it will probably remain outside for quite some time. In the current climate of war, energy crisis and inflation, this is far from good news - and if it materializes, it will be partially due to the domestic political deadlock.