site.btaMedia Review: December 6

DOMESTIC POLITICS

On Bulgarian National Radio (BNR) Wednesday morning, political scientist Georgi Kiryakov commented on the latest scandals rocking the parties in the pro-government majority. He attributed these developments to the fierce resistance by GERB and the Movement for Rights and Freedoms (MRF) to the endeavours of Continue the Change - Democratic Bulgaria (CC-DB) to achieve their objectives within the framework of this coalition. "One theory is that pretexts are simply being sought to change nothing, to prevent a redistribution of the substantial power resources provided by the State, even at the level of hospital director, to say nothing of appointments at ministries, agencies and key positions in the so-called 'independent' regulators, where the political quotas are clearly visible," the interviewee pointed out. He specified that the resources in question are both financial and human, because human resources generate both financial and electoral dividends. Kiryakov noted the obvious existence of a certain strategic relationship between GERB-UDF and the MRF, enabling them to put more serious pressure on CC-DB about the latter's strategic goal: amending the Constitution according to their model. The political scientist believes that President Rumen Radev stands to gain from this situation but will not try to cash in on his growing approval for a political project of his own.

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Trud leads on an article titled "Beginning of End of Assemblage" (a word that has become a household name for an informal power-sharing scheme between CC-DB and GERB-UDF). GERB-UDF Floor Leader Desislava Atanasova is quoted as saying that her party will boycott the Cabinet following Health Minister Hristo Hinkov's decision to dismiss Sofia's Pirogov Emergency Hospital Director Valentin Dimitrov on Tuesday. Atanasova said that GERB will not support a single bill proposed by the Council of Ministers until a decision-making mechanism is adopted whereby the Cabinet (of mostly CC-DB-appointed members) would consult GERB as they make decisions. The Floor Leader added that GERB-UDF MPs will only attend parliamentary sittings on the adoption of amendments to the Bulgarian Constitution.

Commenting in Trud on GERB-UDF's response, political scientist Yurii Aslanov said that GERB-UDF is putting on a show and described the situation as political histrionics and a form of blackmail. "This is not the beginning of the end of the assemblage", Aslanov said, adding that the assemblage would not experience anything dramatic at least until the results of the 2024 European elections become known, and in case these results are really surprising. Social anthropologist Haralan Aleksandrov said that the assemblage was doomed from its very beginning, adding that internal support for the government is near zero. "This is a government that has to ensure that Bulgaria follows Euro-Atlantic priorities, which are to be understood as dedicated support for Ukraine in the war," Aleksandrov said.

Also in Trud, political scientist Tatyana Burudzhieva is quoted as saying: "We are witnessing yet another event that shows the lack of communication in the so-called assemblage". She sees the GERB-UDF's boycott as an indication that there is no chance of another cabinet being formed with the current Parliament.

BULGARIA - UKRAINE

www.dnevnik.bg has interviewed Ukraine's Ambassador to Bulgaria Olesya Ilashchuk, who says that since her arrival in Sofia she keeps being impressed by the depth of Ukrainian-Bulgarian links: thousands of years of traditions in mutual relations, spiritual and religious relations, the role of Ukrainians during Bulgaria's liberation from Ottoman rule, the diplomatic relations established between the Kingdom of Bulgaria and the Ukrainian People's Republic 105 years ago, and the close cultural, literature and artistic contacts despite the war. The diplomat says that the political dialogue between the two countries has been significantly invigorated over the last period, and the active interaction at the expert interdepartmental level has been resumed. To-the-point plans have been coordinated for pursuit of the inter-parliamentary dialogue. Ilashchuk sincerely thanks Bulgaria's political elite, all Bulgarian institutions, NGO representatives and each and every ordinary Bulgarian for actively sharing in the process of support and assistance to Ukraine and highly appreciates the warmth and attention, effective cooperation and human attitude. She acknowledges the important decisions concerning help for strengthening her country's defence capabilities because this implies saving Ukrainian lives. The interviewee appreciates the political decisions backing pro-Ukrainian initiatives such as the International Crimea Platform and the Ukrainian Peace Formula, and for support for the Grain from Ukraine initiative, among other priority international initiatives. Replying to a question, the Ambassador says that Ukraine needs financial, defence, political and humanitarian support, including assistance in the recovery of deoccupied territories and destroyed important industrial or social infrastructure facilities. "We actively cooperate with the Government of Bulgaria on all these matters," Ilashchuk says in her interview.

CONSTITUTIONAL AMENDMENTS

In an analysis contributed to 24 Chasa, Valeri Naydenov argues that the draft constitutional amendments that are currently on Parliament's agenda have been prompted, yet again, by thirst for more power. The author notes that the impatient movers did not consult in advance the Constitutional Court on the rushed reform, and the Court may axe it, according to legal experts outside the pro-government majority.

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Duma covers a nationally representative survey, according to which some 48% of Bulgarians have only a vague idea of the amendments to the Constitution tabled as a joint bill by GERB-UDF, CC-DB and the MRF in July. 47% of respondents know nothing about the changes. The poll was taken by Global Metrics among 1,000 people between November 10 and 21. Nearly 35% of respondents said that only partial changes to the basic law are needed, and almost 32% did not know or were unable to determine. The survey found that 14.4% do not think that the Constitution needs to be revised, and 18.7% want an entirely new basic law. Most respondents would like the amendments to address problems in the judiciary and create conditions for oversight of the prosecutor general. A little less than 68% of respondents prefer more rigorous standards for electing independent regulators' management. As many as 74.6% of respondents do not support the proposed change of Bulgaria's national day to May 24, the Day of Slav Letters and Bulgarian Culture, from March 3, the day of signing the Treaty of San Stefano ending the Russo-Turkish War (1877-78).

CHILD PROTECTION

24 Chasa runs a two-page interview with State Agency for Child Protection Chairperson Teodora Ivanova, who says that Bulgaria is one of the last countries in Europe without a children's rights strategy. In a bid to ensure a safe and secure online experience for children, the Agency has polled 4,000 pupils in Varna and Sofia and has found that more than log into social media at least five times daily. Quite a few of the respondents have been catfished and/or have been offered gifts by strangers. About a third did not tell anybody that they had been victims of cyber bullying. Replying to a question, Ivanova says that most calls from children on the 116 111 national helpline are about problems in communications with their peers. Others seek help about conflicts with parents or report physical and mental violence or risk of abandonment. Access to the helpline has been eased by the launch of a chat app.

LUKOIL NEFTOCHIM BURGAS UP FOR SALE?

On Wednesday morning, BNR interviewed former economy and industry minister and former Lukoil Supervisory Board member Rumen Ovcharov, who says that Lukoil will not tolerate "most primitive racketeers  making a mockery of its business in Bulgaria and Balkanwide". "Lukoil Neftochim Burgas is capable of processing any oil, including non-Russian, but why do it when the Bulgarian State has enabled it to use Russian crude and profit on this, paying larger taxes in Bulgaria and selling us Bulgarian consumers cheaper fuel at the pump," Ovcharov told the radio station. He warned that as a result of the "politically and economically motivated blackmail", Bulgaria will lose the 60% profits tax that Lukoil is paying. The interviewee believes that the underlying reason why the Russian company should be expelled from Burgas is the idea to build a US base on the seaside, which can only be done near the Rosenets oil terminal. "The State may nationalize Lukoil, may appoint a special business administrator, but the ownership remains in Lukoil's hands and it is up to it to keep it or sell it," Ovcharov explained. The veto power of the representative of the State on the Supervisory Board is limited to decisions on closure of product lines or on the liquidation of the entire enterprise. But even if the ownership changes hands, he does not see any reason why the refinery should cease operations.

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Economist Evgenii Kanev believes that the State Oil Company of the Republic of Azerbaijan (SOCAR) will be the "highly probable" buyer of Lukoil's assets in Bulgaria and, "knowing the Russian approach to such type of operations," he does not expect any complications. Interviewed on Nova TV Tuesday evening, Kanev said it was normal for Lukoil to contemplate divestment of the refinery because when Russian oil import is banned, half of the company would become unnecessary. "It remains to be seen what will happen to the filling stations and the depots through which Lukoil exerted excessive market influence and monopoly power," the expert specified. In his opinion, Lukoil undoubtedly gained the most from the derogation from the EU embargo on Russian oil: the company amassed profits on the margin between the Russian oil price and may have profited, too, from exporting petroleum products.

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Former energy minister Alexander Nikolov said on Nova TV Wednesday evening that it is crucial that the refinery should continue to operate because even a brief suspension would enormously stress the local fuel market. "The company has a sufficiently large number of employees to give rise to artificial pressure. Over the years, the owners of the refinery have generated huge financial resources by which they can very easily cause stressful situations in a poor country like Bulgaria," Nikolov argued. 

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Duma and Trud round up comments on the news that Lukoil Group is considering the sale of its refinery in the Black Sea city of Burgas.

Bulgarian Socialist Party MP Rumen Gechev said that what matters is not who owns the refinery but to protect the Bulgarian interest. His concern is that the refinery operates normally and offers fuels on the Bulgarian market at affordable prices.

According to economist Grigor Sariiski, Lukoil enjoys a monopoly on fuel supply because it controls a good part of the tax warehouses. Ó[The refinery's] changing hands will result in more of the same. There can only be a difference if the monopoly is broken up, but I doubt this will happen because the change of ownership of the company as it is should be part of the deal. And no one would want to buy a company which will be disintegrated afterwards," the economist added. "This will provide a pretext for an adjustment of prices because a company shift is always an occasion to do something for a bigger financial gain," Sariiski said.
 
Energy expert Yavor Kuyumdziev also fears a possible increase in fuel prices. "Whoever the buyer is will not affect the amount of taxes the company pays in Bulgaria," he said, adding that the refinery cannot generate higher taxes but the selling price of a  company worth EUR 2-3 billion will have to be offset by higher fuel prices.

SHADOW ECONOMY

Duma quotes Bulgarian Industrial Capital Association (BICA) Executive Director Dobrin Ivanov as saying that the trend of Bulgarian shadow economy receding was timidly resumed in 2022. He added that in the years of economic crises the economy followed the opposite trend, moving from formal to informal. These are some of the findings of a survey conducted by BICA and the Economy of Light National Centre. In 2022, the Economy of Light composite index was 78.58, up from 78.40 in 2021. "This is the highest value recorded since 2010, when the survey was first conducted," Ivanov said, adding that for 13 years the Bulgarian economy has come to light by 15 percentage points. The employment index, which measures gray practices on the Bulgarian labour market, was 81.69 in 2022, down from 82.08 in 2021. No change was observed in the ranking of sectors with the highest proportion of shadow economy activities: food and accommodation services, tourism, construction, and agriculture. According to the survey, the share of the shadow economy in Bulgaria is still high compared to the EU northern Member States and close to the average levels in the EU southern Member States.   

FINANCE

Bulgarian National Bank (BNB) Governor Dimitar Radev says in a 24 Chasa interview that he sees realistic chances of Bulgaria joining the eurozone within his second six-year term in office to which he was elected in July. Radev argues that the nominal abolition of the currency board arrangement will not affect the stability of the currency because Bulgaria will adopt its present reserve currency as its national currency. "The state of our public finance remains is solid, and it is a question of political wisdom to prevent its deterioration," the central bank governor says. In his opinion, a downward trend in the level of the budget deficit must be achieved over the next three years. He criticizes the insufficient synchronization of monetary and fiscal policy as a way to get inflation under control. The interviewee says that there are no explicit attempts at political interference with the operation of the BNB, and the bank ignores the implicit attempts. Radev is adamant that the central bank and the banking sector will be fully ready for the euro chanegover far ahead of the deadline.

Interviewed in the same daily, ProCredit Bank Bulgaria Supervisory Board Chair Petar Slavov says that Bulgaria, somewhat later than the rest of Europe, is already entering a period of zero or negative economic growth. The next one, two or three years will see relatively high inflation, recession, or negative or zero economic growths. Paradoxically, stagflation in this country does not result in job losses, the banker points out. Rising labour costs in this situation push up inflation. Slavov advises business entities to prioritize the human factor.

A third banker with an interview in Wednesday's 24 Chasa, PostBank CEO and Management Board Chair Petya Dimitrova, who is also Chair of the Executive Board of the Association of Banks in Bulgaria, says that the banking sector is among the best prepared ones for joining the eurozone, possibly on January 1, 2025. Banks should continue to improve their cost effectiveness and refocus their business models to sustainability and longer-term value generation, the interviewee says. The slowing global economy will be a challenge to the banking industry in 2024. In Bulgaria, lending rates are rising at a far slower pace and on a much more limited scale than in Western Europe mainly because the Bulgarian banking system is highly liquid and the deposit prices remain low, Dimitrova notes. With mortgage rates of approximately 2.6%, unchanged for the last two years, Bulgaria is among the countries where this type of loans are the cheapest to take out. Mortgage loans have hit another record: BGN 2.5 billion-plus since the beginning of 2023, or 17% up, year on year.

In a two-page interview in Telegraph, former deputy prime minister and finance minister Simeon Djankov says that incumbent Finance Minister Assen Vassilev is not prepared for his job because he wants to share out rather than collect revenues. According to Djankov, this type of populist thinking leads economies sooner or later to what happened in Greece, Spain and Portugal. He believes that Vassilev's pro-inflationary policies will definitely not allow Bulgaria to join the eurozone in 2025. Djankov says that in all three annual budgets reflecting the Finance Minister's thinking, a whopping amount is set for investments in infrastructure, after which only a third of it is actually spent, and these savings reduce the budget deficit. This does not make sense because investing public finance in infrastructure creates jobs and results in higher wages, stimulating domestic consumption.

QUICK LOANS

Trud reports the results of a survey commissioned by the Association for Responsible Non-Bank Lending, which found that one in four Bulgarians aged over 18 has used a quick loan to buy appliances (38%), do home improvements (36%), pay for food and utility bills (27%), or go on a holiday (21%). Other reasons include healthcare services (16%), refinancing another debt (13%), arranging weddings, graduation proms, and christenings (13%). A small part of the loans is spent on gambling, and even smaller one are working capital loans. Young people tend to take out quick loans for travel. 

HOUSING BUBBLE

www.mediapool.bg runs an article on an ongoing debate on whether a housing bubble is taking shape in Sofia, and if so, how dangerous it is. It quotes economist Georgi Angelov of the Open Society Institute, who believes that there are risks and that the Bulgarian National Bank turns a blind eye to the matter. "Mortgage loans are growing by 19.2%, which is the highest growth rate in over 14 years. This should be a red flag for the regulator. The high mortgage growth a decade and a half ago did not end well Ö the mortgage boom was followed by a bad loan boom," Angelov warns. In his words, a too high credit growth could become a new source of inflation. He recalls that inflation in Bulgaria was extremely high in 2007-2008, while it was low in the euro area. Angelov notes that it was the rapid credit expansion in Bulgaria that has pushed inflation up. He also points out that lending is not evenly distributed now: loans to businesses have grown by only about 7%, consumer loans have increased by nearly 11%, and mortgage loans have risen by 19.2%. "Banks are prioritizing households and lending less to the real economy. In this way, consumption is pumped in the short term and investments are left behind," Angelov added.

ELECTRIC CARS

The number of electric cars in Bulgaria has doubled within less than a year, from 4,477 by December 1, 2022 (registered since spring 2011) to 10,951 by December 1, 2023, or 144% more, www.dnevnik.bg reports, citing Traffic Police figures. Of the 6,464 EVs registered in this country over the last year, some 2,000 were new, and the rest were second hand. Nevertheless, electric cars represent just 2.6% of all 248,000 new and old ICE vehicles registered during the year. Various factors contribute to the surge in popularity of EVs: saving on fuel, catching the latest technological trends, parking privileges, environmental awareness, etc. The State practically does not share in the credit, unlike manufacturers who place new models on the market, promote electric mobility and offer various incentives like free electricity or a charging station. Not much has been done by powerholders over the last 12 years despite declaring this as their priority. Deputy Innovation and Growth Minister Martin Gikov said recently that a draft Electric Mobility Promotion Act, due to be submitted to public consultation before the end of the year, targets that Bulgaria will have at least 30,000 electric cars and at least 10,000 charging points by 2026. This implies trebling the number of vehicles and sextupling the number of public charging points from just 1,574 now.

WIND POWER

24 Chasa reports that a bill tabled by MPs of CC-DB, GERB and the MRF envisages 30-year concessions for offshore areas for the construction of wind farms. The movers argue that at least EUR 2.3 billion can be invested in this sector by 2035 and another EUR 4.5 billion by 2040. Power industry sources say that major companies from Northern Europe show interest in such projects which have not been implemented so far in the Black Sea. The installed offshore wind power capacity can reach 1.5 GW by 2035, compared to 2 GW for the two units of the Kozloduy N-Plant. According to the bill, the price of electricity generated by such wind farms is capped at BGN 160/MWh.