Imagine the following scenario: right after the resignation of a government, which was perceived by most as illegitimate and turning a blind eye to Russian aggression, Bulgaria's nominally pro-European political factions broker a truce and form a cabinet. It is an imperfect setup and neither side is too happy about it, but it seems like the only feasible compromise.
Apart from steering a new geopolitical course and fixing state finances, both main political forces behind the new coalition - the newly created reformist faction and the "old dogs" from GERB - want to fix the judiciary. The process, to be led by long-time judicial reform advocate Hristo Ivanov, aims to decentralize the prosecution and limit its authority over the judges in the Supreme Judicial Council (SJC). But in order to succeed, the constitutional amendment process requires wider political support - and this comes from the oligarchic MRF, which had been in isolation for some time, but now is among the few acceptable partners
Does this remind you of something? Newcomers to Bulgarian politics might wonder why I'm explaining the current developments as an imaginary scenario. But readers who were around in 2014-2015 might remember that the situation today is very, very similar to that of almost a decade ago.
The question is - will it end up the same way?
For the latter part of our audience, let's complete reconstructing the 2014-2015 storyline: despite nominally ruling with the Reformist Bloc (the now defunct pro-Western, reformist-minded coalition), GERB cozied up to MRF and sabotaged Mr Ivanov's reforms at the last minute, which led to his resignation, but not to the end of the ruling coalition. Soon after, Boyko Borissov found the right moment to dismantle it, called an early election and won it, trampling any hope of judicial reform for more than six years.
Now, of course, the situation is very different. With the advent of a much more coherent reformist faction like WCC-DB that will, hopefully, be harder to corrupt by Mr Borissov, coupled with a much weaker GERB that is targeted by the prosecution and foreign partners (remember Magnitsky?), we can at least hope for a different outcome.
But, at the same time, there are already alarming red flags that GERB and MRF might try once again to hijack judicial reform, the sine qua non of the newly formed cabinet and the sole policy with a lasting impact that WCC-DB, and especially Mr Ivanov, hope to achieve.
This week - just two days after the inauguration of the Denkov cabinet - the two parties of the old status quo already demonstrated synchronicity by assigning infamous Magnitsky-sanctioned mogul and MRF MP Delyan Peevski a seat in the constitutional reform committee in Parliament. This is a clear sign that they plan to use the justice reform process to clear up his (and, likely, Mr Borissov's) name. What is more, they did it with the tacit support of the radicals from Vazrazhdane who left the Chamber to enable the needed quorum for the decision to pass.
There is, however, another worrying sign - all the leaders of WCC-DB, including Mr Ivanov and Kiril Petkov, demonstrated complacency about Mr Peevski's appointment by voting "abstaining" instead of "against." While their votes wouldn't have changed the outcome, they disheartened many reformist supporters who saw the shadow of another "historic compromise" like the one in 2014-2015. And who can blame them? Many still remember how it ended.
1. Politics this week:The Denkov-Gabriel cabinet takes office: what are its first tasks?
With 132 votes "in favor," 69 "against" and no abstentions, on 6 June the Parliament approved the prime minister and the composition of the Denkov-Gabriel cabinet - Bulgaria's first rotating regular government, supported by the two largest parliamentary groups - GERB and WCC-DB, which until recently were bitter foes. Interestingly, Delyan Peevski and Mustafa Karadayi from MRF also supported the government, while the rest of their parliamentary group left the hall and did not vote. The two explained that this was not support for the composition of the cabinet, but for the promised constitutional reform. You can find out who's who in the cabinet in our piece from Tuesday, and these are its immediate tasks:
- Pass a new budget - PM Nikolay Denkov said that the first task of the new government would be to make a "normal budget" for 2023. For six months now, the state has been working with the so-called extension law, which until now allowed it to pay its bills normally. But it expires on 10 June and, as long as it is in operation, the deficit continues to grow as there are no measures to limit it. Finance Minister Assen Vassilev promised to publish a regular budget with a 3% deficit by the 10th;
- Change the directors of the Special Services - the topic of changing the heads of the secret services caused an ever larger rift between the President and WCC. It is logical that the new cabinet ought to proceed with substituting Mr Radev's men ASAP;
- Adopt The Recovery Plan Laws - for the second payment under the Recovery Plan, which was supposed to happen this spring, parliament needs to adopt 33 more laws. As for the third payment, which Bulgaria can also claim in 2023, it would require 43 additional legal changes, which makes it very unlikely that Sofia gets the EUR 749 million before April-May 2024;
- Send aid to Ukraine - The new defense minister Todor Tagarev is tasked with restoring the Euro-Atlantic community's shaken confidence in Bulgaria and showing that we are not Putin's Trojan horse in NATO. From the very first day on the job, he will surely face serious resistance from those in the army who gravitate towards President Radev. Yet, he firmly committed to supporting Ukraine in its upcoming counteroffensive;
- Changing the composition of a bunch of regulators with expired mandates - a total of 17 institutions - regulatory and supervisory bodies, including the National Bank, SJC and the anti-monopoly watchdog - are waiting for the National Assembly to elect new members to replace those with expired mandates. Electing new members of all these regulatory and supervisory bodies will not be easy. For one thing, the arrangements for commonly acceptable personnel between the two formations in government are not guaranteed to be conflict-free. And on the other hand, some of these bodies - such as the SJC and its Inspectorate, for example - require a qualified majority, which means agreements with other parties.
2. Law and OrderIt seems like this section is here to stay for some timeDead man walking (across the border)
The old guard of the Bulgarian mafia continued dying under strange circumstances for yet another week. This time around, the victim was Angel Hristov - one of the two "brothers" Galev, who are, in fact, not brothers, but ex-colleagues from a specialized police unit. They became famous in the early 2000s, when they effectively privatized most of Dupnitsa, a town at the foot of Rila mountains. The two evaporated into thin air in 2012, on the day after their final conviction for organizing and leading a criminal group for racketeering and extortion. Until last Sunday that is, when news broke that Mr Hristov had passed - supposedly, from a heart attack, in his mansion in the Dupnitsa village of Resilovo, which by the way was supposed to have been seized by the Revenue agency. Absurdly, Internal Minister Ivan Dremdziev tried to hide the police's impotency by claiming that "brother Galev" might have been brought dead from abroad or that he could have crossed the Greek border at a time of "lowered document control." In the meantime, many locals said it is entirely possible that Mr Hristov had lived peacefully in his house for a long time
Geshev's last stand
While the SJC has been burying itself in deep procedural red-tape to avoid tackling the question of Prosecutor General Ivan Geshev's dismissal, the beleaguered Mr Geshev launched a full-fledged offensive against all his political enemies. First of all, the six prosecutors who used to be his allies, complained of various forms of pressure, including threats and media accusations - since they surprisingly turned against their boss. The SJC largely ignored their pleas.
Secondly, Mr Geshev filed a record number of indictments against his enemies in Parliament. These included:
- Filing new evidence on the "Barcelonagate" case (translated from Spanish) in Parliament that might implicate ex-PM and GERB leader Boyko Borissov in money laundering. Last week, Mr Geshev asked for Mr Borissov's parliamentary immunity over this investigation.
Just as with Mr Borissov's case, it is strange why Mr Petkov is being investigated exactly now - the two didn't have parliamentary immunity until a month ago, which means that Mr Geshev is preparing his final stand, using the favorite instrument of his institution - opening up cold cases at crucial moments.
3. Economy:Bulgaria's GDP expands 2.3% in Q1, but consumption and exports grow more slowly
The Bulgarian economy grew slightly more than expected in the first quarter of the year, according to revised data from the national statistics (NSI). The country's gross domestic product grew by 2.3% in real terms year-on-year instead of 2%, which was the NSI's earlier flash estimate, while the results for the last few quarters were also marginally revised upwards. Paradoxically, however, all major components - consumption, exports and investment - appear to be growing more slowly than in the old data. After the revision, it is difficult to talk about a slowdown in the Bulgarian economy, at least in January-March, as it continues to expand at roughly the same pace as at the end of last year. However, the result remains one of the weakest of the last decade, excluding the decline at the start of the pandemic in 2020.
Figures:39.9 billion BGN
The Q1 GDP growth in nominal terms at current prices, according to preliminary NSI data. The per capita value of the indicator is BGN 6,201.
The German engineering and technology group increased its sales on the Bulgarian market by 57% last year, reaching a turnover of EUR 295 million (BGN 576 million). The company continues to expand its team in Bulgaria, hiring nearly a quarter more employees last year - to 850.
Plovdiv-based bicycle manufacturer Maxcom invested 60 million BGN in expanding its production. First, in 2022, it will start increasing the area of the existing factory by about 4,500 sqm, and this year it will start building its own logistics center of about 20 thousand sqm.
The Bulgarian manufacturer of electric water heaters and home heaters has launched the construction of a plant for thermodynamic water heaters in Shumen. The investment in the company's fifth production facility is worth more than BGN 50 million, including the equipment.
5. Energy:Energy companies: profits on the rise (but not by much for Kozloduy NPP)
This week the financial results of the Bulgarian energy companies for 2022 were released. The National Electricity Company (NEK) reported a huge profit last year thanks to high prices of the exchange electricity and the production of the hydropower plants it manages. The company's annual report shows that the positive financial result before taxes increased by 71.5% to BGN 1.18 billion. The company's net profit stood at BGN 1.08 billion compared to BGN 650 million a year earlier. At the same time, the Kozloduy nuclear power plant (NPP) reported significantly lower profits last year, despite having sold its energy at a price two-and-a-half times higher in 2022 and having record revenues topping BGN 6 billion. The NPP reports a profit margin of BGN 730 million (down from BGN 890 million the year before). The reason for this paradox is the payments of almost BGN 3.4 billion that the NPP has made to provide funds to compensate businesses for high electricity prices.
6. Watch out for:Place: Skopje
Another Balkan country seeks to pass constitutional amendments - to include Bulgarians as a recognized minority - so that it can unfreeze the EU integration process, but lacks a constitutional majority. Next week, the SDSM-DUI government will try to find the needed votes to break the deadlock.
Bulgaria is supposed to be in charge of the organization and hosting of the 29th UN Climate Conference (known as COP29). However, very little has been done so far.
Сицилиевата долина (Not the Silicon Valley)
Ex-PM and WCC co-chair Kiril Petkov is known for two other things: his fascination with technologies and passion for innovation, as well as his frequent lapses when he speaks publicly. The two merged perfectly together during Monday's parliamentary debates regarding the Denkov-Gabriel cabinet, when Mr Petkov begun talking about the US tech hub in California (the Silicon Valley), but mispronounced the word for Silicon in Bulgarian, "Силициева," and instead said "Сицилиева", which sounds like a butchered version of the word for the island of Sicily. Unsurprisingly, this caused quite some laughter in and out of the Chamber.