"There is no political blockade against Bulgaria in the eurogroup". The words of Valdis Dombrovskis, the commissioner for the euro and the European Commission representative in the eurogroup, were supposed to be encouraging.
We met yesterday, on his visit to Sofia, to discuss how is it, that when we met a month ago (if you remember) Bulgaria was still on track to join in 2024, and now we might join in 2025. Nothing surprising, says Dombrovskis. He points out that it's simply a question of numbers, more specifically, Bulgaria's rampant inflation. A country is considered to meet the price stability criterion if, over a one-year observation period, its average inflation rate does not exceed the inflation rate in the three best-performing EU member states by more than 1.5 percentage points . As you can read here: the average Harmonised Index of Consumer Prices (HICP) in the euro area was 8.5% in January, compared to 14.1% in Bulgaria.
Yet it's not only that. Dombrovskis is too polite and too experienced to say it out loud, but this was somewhat inevitable.The eurozone accession is a process which requires a stable and committed government and continuous institutional pressure to deal with the array of challenges which arise from entering a fiscal union. Bulgaria hasn't had a regular government in a year and even when it did have one, it wasn't exactly committed to eurozone membership as a priority. There were laws needed to be adopted and in the short-lived parliament they were not only abandoned, but sabotaged.
So not having a parliament and a government is somewhat of a drawback when you have a task like that before you.
I'm not really sure that is fixable in time for 2025.
Even if there is a stable government (and I'm not envisioning this before the local elections at the end of the year but that's a topic for another newsletter) there will still be obstacles. Not only of vested interests, as the insurance mess showed, but more and more, that of public opinion.
A huge campaign against the euro is ongoing, with Vazrazhdane at the helm. The Russophile party exploits all the channels of anti-Covid and anti-Ukraine propaganda, but its tentacles reach wider because so many people are worried about their currency, their salaries and prices. Inflation is not only Eurogroup's worry.
So at some point, if this drags on for too long and other debacles such as Schengen continue, popular support for euro-entry will collapse. I doubt that many tears will be shed in the Bulgarian National Bank or some party headquarters for that. I even think there will be sighs of relief in Frankfurt. Bulgarians treat eurozone entry rather like the recalcitrant kid told to eat his vegetables: you eat them because you should and someone tells you to, not because you like them.
At least this time we're not stopping Romania from joining (yet).
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1. Politics this week:A year after the war started: one step forward, two steps back
Today marks the tragic anniversary of the start of Russia's full-scale invasion of Ukraine. To say that the war changed a lot would be an understatement - but did it change enough in Bulgaria? Let's recap:
- Ever since the outbreak of hostilities, Bulgaria and its political leadership have projected a strange, ambivalent position. Parliament, split on Russophile-Russophobe lines, condemned the aggression last 24 February (although it took them a whole day). But it took several months to show even symbolic support for the besieged country. Although Sofia actively embraced EU policies against Russia, President Rumen Radev kept speaking about "the need for peace" and declared that "we will not send any weapons". So we seem like a reluctant, half-hearted NATO ally.
- This has real-world implications. While other Eastern European states donated military hardware and rearmed with Western weapons, Bulgaria has failed to take advantage of this window of opportunity. It now seems we're not going to get any new weapon systems, which - let's face it - is a ludicrous failure for a country basically led by a general.
- On the other hand, Gazprom's brutal extortion and the continuous pressure from the US (and now the UK) appears to have finally broken the stranglehold of the Russian energy lobby in the country. Sofia has almost entirely shifted from the direct reliance on Russian gas and is now seeking ways to diversify away from Russian nuclear fuel. It's a start.
- Ukrainian refugees were welcomed at first, then forgotten, then welcomed again, then left to their own devices. Some local, private efforts did wonders but overall we didn't manage to keep too many of them, which is a shame for a country with such a huge labor shortage. We're good humans, albeit not great managers.
They still want to steal the elections!
The attempt by the "paper ballot" coalition of parties - GERB, MRF and BSP - to suppress machine voting reached the Central Electoral Commission (CEC). On Tuesday it ruled that the protocol with the election results will not contain the data from machine voting. This basically means that it will be impossible to compare the manually counted machine votes with the machine slips that count them electronically. There is no other apparent reason for that except if you plan to hide something.
The decision triggered the resignation of the most respected member of CEC, elections expert Tsvetozar Tomov, as well as a protest by reformist parties and election watchdogs. Transparency International's Bulgarian charter published a statement, saying that the ruling "reduces transparency regarding the formation of the election result and continues the trend of de-emphasizing and eliminating electronic voting in the electoral process".
More from this week:
2. Economy:Sanctions coming, this time for Russians
It's not Magnitsky this time, so the corrupt elite can take a break. But the 10th package of sanctions will require a lot more reporting and oversight from countries regarding the confiscation of Russian assets. Bulgaria, it has to be said, hasn't done a lot in this area. I would suggest we'll see some assets being frozen.
Construction companies to get up to 50% inflation "bonus" from the state
Public works contracts that have been signed in the first half of 2021 should be indexed by about 70% for the work performed under them in the fall of 2022. Such annexes are already being signed, but will only become public in a few weeks once they are uploaded to the electronic procurement register. It is uncertain exactly how many millions more will be paid, but the overall "inflation bonus" that key infrastructure companies might benefit from would amount to 50% from the initially contracted expenses.
EBRD revises down its growth forecast for Bulgaria
The forecasts for a rapid decline in inflation in Eastern European countries are too optimistic, and rapidly rising prices are expected to further depress economic growth in the region, according to the updated forecast of the European Bank for Reconstruction and Development (EBRD) published on Monday. The bank's analysis covers 36 economies in Central and Eastern Europe, North Africa and Central Asia. Despite the nominal increase in incomes, high prices are eroding the countries' purchasing power and by October-November 2022, in real terms, wages in most countries, including Bulgaria, are actually at a minus. The bank also revised its forecast for Bulgarian economic growth for 2023 down from 1.5% to 1%.
The percentage Bulgarian exports have grown in 2022, according to preliminary Eurostat data. Contributing to the strong result that places the country first in export growth in the EU is the 240% increase in fuels and energy sold abroad, and 150% in vegetable/animal oils and fats
The unemployment rate as of Q4 of 2022 in Bulgaria. The record-low unemployment coincides with a significant increase in the number of employed, which grew by 3.8% in October-December, NSI says.
3. Business:Aviation Dronamics
The Bulgarian start-up that wants to produce cargo drones (but still hasn't) announced that investments in the company have already reached 40 million USD. Financial infusions into the company have so far come in the form of SAFE instruments. The company already has a secure investor for the coming Series A round - the European Innovation Council (EIC), which will participate with 12.5 million euro after investing a 2.5 million euro as a grant in November 2022.
A civil war within the state-owned yogurt company began this week after the CEO of the firm Nickolay Marinov announced a significant discount (5%-30) on the company's products, which was followed by his dismissal by the firm's principal, the State Consolidation Company. If you are wondering why we have a state-owned milk producing company, it is because it owns the patent for Bacillus Bulgaricus - the bacteria that produces yogurt.
The shared electro-mobility platform increased its car park with a 100 new Dacia Springs and now boasts more than 650 cars. The new vehicles fall into the most sought-after and inexpensive price segment, which also includes the company's VW Up and Skoda Citigo.
More from this week:Devnya Cement: double revenues, splendid profits
4. EnergyFalling energy prices spell end to Bulgaria's coal revival
Since the beginning of February the state-owned coal-powered Maritsa-East 2 Thermal Power Plant (TPP) has again found itself in trouble with the sale of electricity it produces. After working at maximum capacity since mid-2021 and throughout 2022 and reporting huge revenues and profits due to high electricity prices, the situation is now reverting to previous years, when the TPP worked only for state procurements and reported hundreds of millions in losses. The reason for this is trivial - simply the cost of producing electricity at the state-owned plant is high and at current exchange prices for electricity its output is becoming uncompetitive. As a result, on the working day of February 20, its capacity utilization was below 60%. If the trend continues, it would mean an end to the short-lived revival of Bulgarian coal.
5. Watch out for:Date:
Capital weekly organizes the Energy and Power Conference, which will discuss the energy future of Bulgaria within the EU. You can register here.
The chief prosecutor in the Bulgarian office of the European Public Prosecutor's Office (EPPO) is in trouble - another of her local prosecutors is leaving, making this the fourth who leaves (or will soon leave) EPPO in just a year. Rumors have it that there's simply too much work there while there is basically no work in the Bulgarian prosecution.
Company:"Transportno Stroitelstvo I Vazstanovyavane"
the building company of the Ministry of Transport, just got a new add-on to its board. Vanyo Tanov was appointed as a state representative in the company which is infamous for a 400 million euro project on deepening the Varna port, subcontracted to two Russian entities. Fun fact: Mr Tanov is not only not an expert in anything building or transport related, but is the coordinator for GERB party youth in Sofia. Wonder what went towards taking that decision.
The village near Sofia was the scene of another tragedy involving migrants. Over the weekend, police discovered 18 dead migrants - mostly Afghans, including a 6-7 year old child - crushed in a crammed truck transporting wood. The driver of the truck, which contained 50 migrants, reportedly fled, leaving many injured persons aboard.
The section of Hemus highway reaching Yana village near Sofia had been constructed with almost 10 cm less asphalt than required (18-21 cm instead of the required 28 cm). This was announced by Regional Minister Ivan Shishkov after an inspection.
Video of the week:
Here it is, your moment of zen.
View this post on InstagramA post shared by Най-добрите мемета на едно място! 365 дни в годината (@365mementsa)Word of the week:
МОЧА - Memorial to the Liberating Red ArmyIt's that time of year again, where someone vandalises the memorial standing in the middle of Sofia. This time it was the commemorative plaque that got broken. Truth be told, it does say "to the liberating Red Army with gratitude" and this has always been offensive for those who point out that "the liberators" ushered in a communist regime. Now it now sounds even more sinister given the war in Ukraine.
It is going to reignite the decades-old debate about whether or not we should take this statue down. For my 5 cents, it's very much open to debate whether you should bring down your memorials or keep them for future reference. Whether it should be kept in the center of the city, though, is another story.