The week: Bulgaria's coal reckoning - this is not the 80's

First, you can't blame the people for the fact that in the past 5 years no one from the political establishment has had the balls to go and tell them what is planned and then work to resolve the issues. Those are the same people - Borissov and co - who are holding the governing coalition together and are acting all innocent and pragmatic, while also refusing to accept their share of blame.

Second, there were ways to deal with that way before reaching a dead end. For example, closing the most polluting private plants of Kovachki could have happened at any time in the past 10 years when he was breaking all sorts of rules. Yet it didn't because politicians and regulators love him and his support (in various forms). People will call out hypocrisy when they see it.

Third, Denkov is no Thatcher and Bulgaria is not in the same situation as 1980s UK. He and his party don't command nearly as much popular support to afford alienating one group after the other, especially when their inability to control the narrative means that not only Vazhrazhdane and Borissov, but even Peevski, manages to look better and more competent.

And last, but not least - you might like Thatcher for her uncompromising stance and the desire to modernize Britain, but her legacy is dubious in the mining communities, where scars haven't healed decades on. Bulgaria needs action over the coal industry and will do so inevitably in the next 10 years or so, yet the last thing it needs is a smoldering ruin at its heart and a devastated Stara Zagora. People are rightly worried - they have been lied to time and again by politicians. Denkov and co must convince them the future will be shared, instead of forcing it on them.

They have all the tools to do that: billions of euros from the EU, plenty of time, an economy that needs labor, Greece and Romania's examples, market that turns greener, war that makes it less pressing. It's their job not to mess it up, and from what I've seen it is far more likely they will.

So while I understand that they are eager to get this done, a little bit more humility and a lot more attention to detail will help.

This newsletter is helped by:

Martin Dimitrov and Monika Varbanova

1. Politics this week:

3 of 6: Constitutional reform kicks off to rough start

Another of the six reform commitments that justified the coalition between WCC-DB and GERB, as well as the endorsement of MRF as an unofficial partner - revamping the constitution - finally gained steam, but to little applause.

Lecturers, representatives of professional organizations, part of the judiciary, various NGOs, the bar and the President's legal team heavily criticized the constitutional draft, submitted by the three parties last week. You can read more about it in KInsights' overview from earlier this week.

Fathers of the constitution...

A meeting of the parliamentary constitutional reform committee took place earlier this week, taking the shape of something in between a public discussion of the texts and a first reading for their adoption. This meeting turned into a multi-hour conversation about legal illiteracy, or rather - the absence thereof - of the people who submitted the draft.

...are unknown

During this time, the MPs did not speak once and did not utter a single word to defend their project and it is unknown who exactly proposed each of the amendments. Many were declared anti-constitutional by top legal professionals. The role of defending the changes was assigned to the Minister of Justice Atanas Slavov, who is not even among the project's sponsors. The overall feeling was that the draft is jammed with many additional amendments, the purpose of which is to compromise the whole idea of constitutional reform and especially the meaningful proposals that attempt to remove the judiciary from the territory of the captured state.

The secret services? Not now.

Another of the six key reforms that WCC-DB committed to when negotiating the Denkov-Gabrielle cabinet got watered down by its initiators over the weekend. The idea to merge the military and civilian intelligence into one was dropped.

Instead, the parties limited their proposals to curtailing the powers of the head of state to appoint the heads of the special services and give them to the parliament and the prime minister instead. It seems, however, that even these limited goals are doomed to falter after GERB and MRF announced they would not support them.

Borissov wants his money back

GERB leader Boyko Borissov threatened from Haskovo that every minister who "has not done his job" will be replaced when the cabinet's rotation falls due next March, adding that there are 7-8 ministries where "nothing has been happening" and ministers have not been doing their job.The only name that the GERB leader mentioned specifically was that of the Minister of Sport Dimitar Iliev. "Where are the infrastructure projects in sport - stadiums, halls, gyms, playgrounds, where is the funding for the sport federations?" Borissov asked, adding that people do not know the name of the minister because he does not work.Then, listing the other sectors in which he said nothing was happening, he hinted at other ministries needing personnel changes - the ministry of innovation and growth, whose holder is Milena Stoycheva, the Ministry of Economy and Industry, headed by Bogdan Bogdanov, the Ministry of Transport, headed by Georgi Gvozdeykov and the Ministry of Regional Development and Public Works with Minister Andrei Tsekov. Curiously, those are also the ministries with largest EU funding provided.

2. Economy:

Housing market getting red

House prices in the eurozone are falling for the first time in nearly a decade under pressure from rising interest rates and still high inflation. In the second quarter of this year they fell by 1.7% compared to the same period in 2022, Eurostat reports. Meanwhile, housing prices in Bulgaria continue to rise, and at one of the fastest rates in Europe - 10.7% over the same period.

This is happening despite weakening activity in property transactions. For the period April - June their number decreased by 15% year-on-year, which is the fourth consecutive quarter of decline. The reasons for the continued growth are many, but the main one can be found in the still lower interest rates in Bulgaria compared to other places in Europe. They are keeping lending activity high, with the volume of home loans growing by a record 18.7% in August.

Figures:

780 million leva

Is the deficit in September - the first month in which the state finances went significantly into the red. Assen Vassilev's ministry said that in the remaining three months until the end of the year the budget balance is expected to reach the planned deficit of 2.5% of GDP or BGN 4.6 billion.

933 levs

Will almost certainly be the minimum wage from next

3. Business:

Startup

LANGaware

Bulgarian fund Eleven invested 1.5 million euro in Greece's Alzheimer's prediction startup LANGaware, which uses artificial intelligence to predict and monitor cognitive and mental health conditions.

Automotive

WITTE Automotive

Ruse-based locking systems manufacturer WITTE Automotive Bulgaria, which is part of the German WITTE group, has acquired a majority stake in its supplier Forez BG in Ruse.

Retail

Pepco

The largest clothing chain in Bulgaria, the Polish Pepco, now has 150 stores. It will open at least six new stores in the country by the end of the year and 20 more next year. Four years after opening its first store in Bulgaria, the company's revenues of over 218 million BGN put it on top of the ranking of clothing chains in the country for the second time.

Debt collecting

SG Group

The largest debt collectors in Bulgaria has acquired the second biggest - Agency for debt collecting. Norway's B2Holding, who owned ADC, announced it has sold its business here for 48.4 million euro.

4. Brussels:

#Bulgaria saves rose oil (for now) - By a large majority, MEPs supported the Bulgarian position to delete the problematic article that includes rose and other essential oils in the Classification, Labelling and Packaging of Chemicals (CLP) Regulation. In addition, the European Commission is to submit a report on the impact of essential oils of natural origin no earlier than six years (instead of four) after the entry into force of the amendments to the Regulation. Furthermore, the Commission will not have the sole right to take a legislative initiative to re-include these essential oils in the scope of the Regulation.

#Media Freedom Act- In response to growing threats to media freedom and the viability of the industry, MEPs voted this week in Strasbourg on their position to strengthen the transparency and independence of the EU media. Among the measures adopted are: A ban on the use of spying programs against journalists, transparency of all media in terms of ownership and a fair distribution of state advertising. Negotiations with the Council follow.

5. Energy:

#Migration Deal- EU diplomats reached a framework agreement on managing immigration crises that gives countries facing an influx of third-country nationals more flexibility in dealing with them. 5. Energy: A cap on household costs instead of regulated electricity prices from 1 July 2024

The state formally abolishes the regulated electricity prices for households from 1 July 2024, which also abolishes the role of the National Electric Company (NEK) as a public energy supplier. In reality, however, households will have their costs capped and receive compensation similar to that paid to businesses since last year. The aim is to avoid the risk of exchange prices, but at the same time to meet the requirements for market liberalization so as to unblock payments under the Recovery Plan - Bulgaria is waiting for BGN 1.5 billion by the end of the year and a similar amount next year.

Fewer batteries in the new Plan

The 6,000 MWh battery project that was the pinnacle of the first draft of Bulgaria's Resilience and Recovery plan during the time of the Kiril Petkov cabinet remains in its revised draft, defying speculation that the project would be abandoned as part of the 18 projects that affected by the revision of the proposal in connection with the reduced budget from the EC. Instead of 6000 MWh, however, the project will only be limited to funding batteries for up to 3000 MWh and the grant scheme is dropped. The budget is also cut by 50% - from BGN 1.5 billion to BGN 750 million.

6. Watch out for:

People:

Stefanie Stancheva

Bulgaria-born French economist and Harvard professor Stefanie Stancheva won the Bright Mind Award, granted by the Berlin Social Science Center, which recognizes younger academics who make important contributions to political and economic reforms. Ms Stancheva is renowned for her studies of the long-term effects of tax policy on fields like education and innovation and her work on improving taxation systems for greater public benefit.

Zdravko Dimitrov

The mayor of Plovdiv who got ousted from GERB very publicly, is getting strange support at all state levels for his new schemes. First, a deal to buy a piece of land from a private developer for 35 million levs was not opposed by the regional governor, and then a very inflated procurement for yet another stadium in Plovdiv passed through the Competition Commission in record time - less than a month. One would almost say someone on top is very eager to see Dimitrov signing all those lucrative contracts before leaving office.

Place:

Photographer: Rosina Pencheva

Gabrovo

The cultural center in Gabrovo, named after the city-born visionary Hristo Yavashev-Christo (1935 - 2020) and his co-author Jeanne-Claude (1935 - 2009) will open its doors for a series of events between 6 and 9 October. This will be an opportunity to peer into the building's past and how it gradually transformed into the Christo and Jeanne-Claude Centre. Find out more here.

Date:

4 April 2024

Professor Brian Cox, the British physicist with superstar status for his work in science outreach, will visit Sofia in April 2024 with his "Horizons - A 21st Century Space Odyssey" live tour. Tickets are already on sale on his website.