The week: Fear not the political feuds, even when they tell you to on the TV

Turns out, the National Statistics was wrong on the GDP last year. Very wrong. From the data published on October 19 by the Statistical Institute it transpires that previously published data in March about economic growth in 2021 was incorrect - it grew not by 4.2%, but by as much as 7.6%.

That's a huge difference. It's actually so big it raises questions about the quality of government data and the way it works. But let's leave those for another day. The important point is, that in a tumultuous year, in which we had 4 different governments - 2 caretaker ones and 2 regular ones - the economy grew at a record pace and volume. The last time we had such growth was back in the 1990s when we were exiting a hyperinflation period, and from a very low base.

The record growth now puts us in the upper bracket of the EU last year and also lowers the deficit from 4.1% to 3.9%.

I would argue that the only important political event was the loosening of GERB's complete control over the economy. After that "stability" faded, it seems the economy kept on humming rather well - even with almost zero EU funds and no political presents for various municipalities.

So don't take my word for it - the data proves it. Once you remove the political lid from the business field, it boils fast. We don't need a "stable, regular" government. We need someone to keep the books, keep the racketeering capabilities of the state in check and pay salaries to administrative staff.

And we need someone to make and amend laws. Which brings us to the current political stalemate (as you will see below). It's, of course, essential to have a working parliament from time to time. But having political parties perpetually feuding there is by no means the tragedy we've been led to believe. I have a hunch the data might prove that also, in the near future.

This newsletter is, as usual, helped by Martin Dimitrov and Evgeni Ahmadzai

1. Politics this week:

All the signs were there, but nobody expected the 48th National Assembly to malfunction on its first day of office. In effect, as you read this, the Parliament would have (most likely) not yet have chosen its Speaker, three days into its constitution on Wednesday. It's not even properly constituted yet - it can't formally close the first session until a Speaker is elected.

If you can start me up...

Basically, the reason for the deadlock is that none of the seven parties can convince 121 MPs to back their nominee - GERB's Rossen Zhelyazkov could only muster 103 votes (from his own party and MRF), WCC's Nikola Minchev got 98. Both were withdrawn later on and MRF's late entrant, Yordan Tsonev, never managed to lift off. One idea of Democratic Bulgaria was for a rotating presidency. It also got nowhere. So unless someone starts talking to someone else and there is a breakthrough, this Parliament is probably not gonna even start.

...I'll probably stop again

Just imagine what it will be like for this bunch of deputies to pass a budget together (which needs to happen soon). It is unclear how the parties would find a way out of the mess they created. But the damage has certainly been done. The toxic atmosphere will only exacerbate the rising mistrust in the current Bulgarian constitutional order.

One clear winner: President Radev

He continues imposing his own agenda, people and policies completely unrestrained. In his opening statement in Parliament, he warned that Bulgarians will not forgive "those who push the country towards the fire of war," i.e. Democratic Bulgaria, which still pleads for weapon support for Ukraine. Then he went to Brussels to represent Sofia on the European Council, saying that "people around here are getting used to seeing the President (instead of the PM), and that's not a good thing". Is it not, though, if you are the President?

He obviously plans to stay for a while

In the meantime, Radev's cabinet continued taking consequential decisions - it urgently launched competitions for the boards of directors of 20 state-owned firms, restarted the bid for new armored vehicles for the army and approved a proposal for the purchase of the second batch of 8 combat aircraft for the air force

Spain and Italy bolster Bulgarian defense

Spain is not the only NATO ally arriving in support of Bulgaria this month. On Monday the Italian army officially took over the command of the multinational NATO force in Bulgaria that reinforces the country's defense. The formation, whose core will be nearly 800 Italian soldiers and officers, should reach full operational capability by the end of the year and be ready to carry out combat missions together with troops from Bulgaria, Albania, the United States and possibly several other NATO member states.

While the Netherlands still thinks Bulgaria isn't a suitable friend

A day after the European Parliament voted a resolution with overwhelming support in favor of accepting Romania and Bulgaria into Schengen from next year, the Dutch parliament voted a resolution, requesting its government to veto that. The Dutch have been stopping us for over a decade now and seem unmoved by the latest technical check that proved everything is fine. Tough crowd for President Radev, indeed.

2. Economy: The markets are not especially fond of us, neither

Bulgaria has not been giving the best signals, it turns out, to the markets, since the latest 5-year bond placement reached a 5.65% yield, which is 1.5 percentage points higher than a month ago. This is the highest level Sofia has paid since 2009.

Figures:

1.6%

Is the forecast for next year of The Ministry of Finance. Unemployment is expected to be 4.6 percent, and inflation - 6.4%

11.6

Billion levs, or 6.6% will be the deficit next year, according to the same ministry.

3. Business:

Industry

The Devnya giant invests between 150-200 million euros in an alternative fuels installation. This will prove successful for a company which wants to stay competitive in a market where many producers don't pay for emission quotas.

Beverage

The company is investing over 23 million levs in a new can-producing factory in Blagoevgrad. This will allow for more locally produced beer cans, which are currently imported.

Startups

The VC fund is announcing the new Eleven Alpha program. Participating startups are going to receive up to 300 thousand euros in exchange for a 10% stake in the company. Eleven call it "a Unicorn deal" as it imitates the model of their investment in Payhawk - their first company with a valuation over 1 billion dollars.

4. Energy: We filled up the gas reserve!

This week Bulgaria's gas storage in Chiren reached unprecedented levels of 84%. It is quite frankly surprising considering that gas supplies were cut by Russia and the caretaker cabinet did not find a long term LNG deal. Chiren now has almost 500 mill cubic meters of gas which could be used in the span of three months. In the meantime, gas prices have fallen throughout Europe and the regulator will most likely reduce the price for the regulated market by 20% in November.

5. Watch out for:

The long-serving Dutch PM will have to decide next month whether to support Bulgaria's entry into Schengen. Rumor has it that ex-PM Kiril Petkov had negotiated with Rutte and Emmanuel Macron for Sofia's entry into the border-free zone, in exchange for our support for North Macedonia. Even if such a deal did exist, it seems long dead now. Yet it still will fall on Rutte to say "yes or no" to our application and earn the gratitude or scorn of lots of people here.

Date:

The vignette tax goes down by 10%, while the toll tax is going up by 50%

Company:

KillNet - over last weekend, the Russian hacktivist group temporarily restricted access to several Bulgarian institutional websites by conducting a DDoS attack, including those of the Presidency and the Defense Ministry. Read the whole story - and why it matters - here.

Place:

The borders - more and more illegally crossing people have been caught by the state authorities in recent months, the Interior ministry reported. A total of 2,822 third-country nationals were detained in September, 23.3% more than in the previous month. In the first 9 months of 2022, a total of 12,740 migrants have been detained, a 2.6-fold increase compared to the total number of detainees in the same period of 2021 - 6,560.

Picture of the week: The unlikely canine star of the Parliament opening

Source: Facebook