site.btaMedia Review: March 13

GOVERNMENT ROTATION 

Speaking on Nova News, former finance minister Simeon Djankov said that the government should not interfere in the economy if it is not about energy and military industry. In defence, Bulgaria can produce much more. A new minister is needed, as the current one is not up to the job. Under Kornelia Ninova [economy minister in Kiril Petkov’s cabinet], about 40% more military production was exported than under Todor Tagarev. This is a sector that can add 2-3% to GDP. In the energy sector, too, there should be a new minister to introduce new policies. "If Finance Minister Assen Vassilev is not part of the new cabinet, it will look different not only in terms of financial policies, but also in the political construction. However, after various disputes, I think he will remain in his post. It is speculated that such a change will delay eurozone entry, but this is not true. The main role for this is of the European Parliament and the finance committee, as well as the Bulgarian National Bank," he said.

In his words, stability in the sphere of finance requires that there should be no rotation in the ministry. "The real deficit is BGN 300 million for the first two months of the year. The government has judged to show good results because of the course of eurozone entry. The merger of the National Revenue Agency and the Customs Agency is a very good idea. I tried to do it years ago. However, the capital programme will not be implemented. It was a good idea to sign off project by project and municipality by municipality, but so far no funds have been received. It is imperative to allocate 3% for defence, but then we have to cut spending from elsewhere or the National Revenue Agency and the Customs Agency should collect more," Djankov explained.

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24 Chasa writes that Continue the Change (CC) co-leader Kiril Petkov has told his fellow party members that the two coalitions, Continue the Change-Democratic Bulgaria and GERB-UDF are already discussing the ministers in the government rotation who have to be approved by the two formations. The talks are constructive and the two formations have agreed on a mechanism for regulators, and judicial reform, according to Petkov’s memo, which did not give details, except that ministers will not be replaced if there is no agreement on both sides.

The CC-DB insist that after the rotation there should be no change of ministers. GERB first criticized some ministers, then Boyko Borissov demanded a 50:50 split. Party members are convinced that keeping finance minister Assen Vassilev after the rotation will be a red line for the negotiations. The removal of the finance minister was demanded by Borissov at the end of last week, but then he clarified that the final decision would be Mariya Gabriel's. 

Knowledgeable sources said that CC-DB members are concerned that they do not really know what was agreed, since GERB leader Boyko Borissov is not personally involved in the negotiations. Therefore, they are waiting for the resumption of the talks to see what will be the position of Gabriel and GERB’s team after they have already reported to the leader and received new instructions.

Mariya Gabriel asked President Rumen Radev for more time before handing over the first mandate. "Talks are going on and are constructive," said Kiril Petkov before last night's meeting of the parliamentary group of CC-DB.

MIGRANTS, SECURITY

In the wake of anti-migrant protests over the weekend 24 Chasa has interviewed former MP and international security expert Dimitar Gardev. 

Gardev said that all EU and UN forecasts show the migrant pressure will intensify and we will witness such waves perhaps for decades. Therefore, current measures that are being implemented are incident related, and this does not solve the problem in any way. Bulgaria will continue to receive new batches of migrants, but now from two sides. One is through its southern borders, and the other is the result of an ill-judged and hastily signed declaration with Austria, which gives it grounds under the Dublin Regulation to send the migrants it does not want in its country. 

“Not a single country in the EU, not even Germany and France, has the capacity and capabilities to deal with this migrant pressure alone. That is why we absolutely and categorically need to look for Europe-wide solutions, and in several aspects. For example, by strengthening border controls, by stopping illegal border crossings, by refusing to accept people who are not refugees but economic migrants. Another solution is to enter into an agreement with third countries - such as the one with Turkey in 2016, which we saw that it is effective. We can definitely say that this was a successful agreement for Bulgaria. Separately, agreements can and should be made to set up camps, funded by the EU, in the non-EU countries where the migrants come from. Bulgaria must not be allowed to be unable to control this intense pressure of migrants, and this while we are fully implementing the Dublin Regulation and other requirements of certain European countries - I am referring to Austria specifically,” he added.

On 31 March and the readmissions of unwanted migrants from Austria will be much more. The tripartite declaration between Bulgaria, Romania and Austria is not a part of the European Council protocol, Gardev stresses. 

He argues that Bulgaria should join forces with all affected countries on the front line as more than 60% of migrants go via the central Mediterranean route, then France and Spain, and only then comes Greece and the Balkan route. Therefore, the blame for these migrants does not lie with Bulgaria, and Bulgarian diplomacy must now have a completely different approach. “We need to have our own proposals, just as Austria has put forward its demands and almost taken them out as a separate country from the EU institutions. Austria could have written into the protocol that, if these conditions were met, it would undertake to lift the veto on Bulgaria for Schengen. Over the years, the abuse of Bulgaria by the Netherlands and Austria has been purely and simply of a domestic political nature. “We cannot be hostage to Austria's domestic political intrigues,” he says.

Also, Gardev comments on France’s move to build an alliance of countries open to its plan to potentially send Western troops to Ukraine. French Foreign Minister Stephane Sejourne recently visited Lithuania, where he met with his Baltic and Ukrainian counterparts specifically about the idea of foreign troops helping Ukraine. 

Gardev said: “If he comes to Bulgaria with such a proposal, we should have a position. My opinion is that Bulgaria should follow the common policy of the alliances in which we participate - NATO and the EU. I stress, the common policy. Because then Bulgaria will be able to rely on the full-scale defence and military capabilities of these alliances. Any participation in individual initiatives puts us in a vulnerable situation in which we can rely solely on these few countries, even with France leading the way. These initiatives risk not being recognized by the bloc.”

ECONOMY

TrudNews has reproduced an analysis published on glasove.com capped “Assen Vassilev's budget deficit turned out to be illegal”.

The gross domestic product in 2023 is estimated at BGN 183.7 billion, according to preliminary estimates of the National Statistical Institute. Economic growth, on the other hand, is 1.8% compared to 2022. The figure is close to conservative forecasts and is BGN 8 billion less than the estimates of Finance Minister Assen Vassilev. It also turns out that the reported budget deficit of BGN 5.6 billion exceeds the eligibility threshold in the Public Finance Act, which is fixed at 3% of GDP. The excess is minimal and is only according to the national measurement methodology, not the European one, which is relevant for the introduction of the euro.

But it is a fact, and it should be taken seriously for several reasons, most of all because it compromises the growth forecast for 2024 and therefore the revenue expectation in this year's budget. For a third year of Vassilev's budgets, the deficit has gone beyond 3%. 

Moreover, the budget balance is far from being the result of subtracting expenditures from revenues, as it should be. After so many actions manipulating the final figure, including delaying VAT, delaying payments to suppliers, drawing extraordinary dividends and emptying funds, the result does not reflect what it did in 2022. Its very distortion has caused difficulties for the private sector and vice versa. Without the manipulations, the deficit would be at least BGN 4 billion more, which translates to 5% of GDP by both the national and European methodologies. The result exposes Assen Vassilev's approach of making up convenient forecasts as harmful. 

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Capital Daily reports that last year Bulgaria exported goods worth a total of BGN 86.5 billion. This is 6.9% less than the previous year, as Bulgarian exports performed poorly for most of 2023. The reasons are lower prices for most commodities, especially oil and grain, declining electricity and fuel supplies and stagnant economic activity in Europe.

However, the largest commodity group in Bulgarian exports is machinery, parts and equipment, as it recorded an annual growth of over 7% to over BGN 20 billion. There is growth in sales of various finished products, and these are the two commodity groups with the highest added value for the economy.

Sales of goods to EU countries last year amounted to just over BGN 55.1 billion. This is a decrease of 9% compared to the same period of 2022. The biggest declines were in exports of fats and oils (down almost 64%), fuels and oils (down almost 50%) and chemicals (down -22%). In all three commodity groups, prices last year were down on the previous year. Separately, electricity exports also began to decline last year, both in volume and price. 

Bulgaria's main trading partners are Germany, Romania, Italy, Greece and France, which account for two-thirds of exports to EU member states.

In December alone, exports to the EU decreased by 7.8% year-on-year to BGN 3.9 billion.

The goods exported to third countries last year amounted to almost BGN 31.4 billion, which is a drop of almost 3%. This is similar to the EU data - here the declines are mainly due to fuels and oils, where prices are down, and for a wide variety of items classified by type of material.

Bulgaria’s top 3 largest trading partners outside the EU are Turkey, the US and China, followed by Serbia and Ukraine. In all of them there is a decline compared to the record year 2022, except for China, where the statistics show a 30% increase in sales. 

FOREIGN AFFAIRS

24 Chasa quotes an EU official as saying that Russia could crash the global financial system if its frozen assets are seized.

"Russian assets frozen in the European Union after Moscow's invasion of Ukraine are likely to generate between EUR 15 and 20 billion in after-tax profits by 2027," a senior EU official said. 

Russian assets, frozen in the European Union after Moscow's invasion of Ukraine, are likely to generate between 15 billion and 20 billion euros in after-tax profits until 2027, depending on the evolution of global interest rates, a senior EU official said. 

Part of the profits, as well the tax on the gross amount, is likely to be transferred from the EU to Kyiv on a regular basis, but some of the money will have to stay in the West to build a buffer against the expected Russian retaliation which could destabilize the global financial system, the official said, quoted by Reuters. 

Some 70% of all Russian assets immobilized in the West is held in the Belgian central securities depository Euroclear, which has the equivalent of EUR 190 billion worth of various Russian central bank securities and cash. 

"We want to help Ukraine, but we will also have to ensure that there is no breach of financial stability," said the EU official, who is close to negotiations on the use of the assets. 

"The moment the war ends and all settlements can be made, all the money that was provisionally retained will also be transferred to Ukraine. But we need a significant amount in Euroclear...because Euroclear will face a lot of claims," the official said. 

The claims are to come from the Russian central bank which, through Russian courts that do not recognize Western sanctions, is likely to put its hands on the 33 billion euros of Euroclear money in the national securities depository in Moscow. 

Russia could also take legal action to seize Euroclear cash in securities depositories in Hong Kong and Dubai. 

"That's the mechanism how Euroclear could be totally emptied, basically," the senior EU official said. 

If Euroclear were to run out of capital, the Belgian central bank would have to withdraw its licence, likely causing a global financial crisis because Euroclear has assets in custody of EUR 37 trillion, the official said.