SOFIA–The drama unfolding in Greece is beginning to resemble a classic tragedy. A practically bankrupt Athens is facing some of its most severe austerity measures, violent protests across the country are threatening civil order, and continued negotiations between Greece and its European partners produce only last-minute stop-gap agreements. How did all of this come about? While it is easy to blame the problems squarely on Greece’s mismanagement, the fault is equally that of Brussels.

After its European Economic Community accession in 1981, Greece was considered a model for Europe’s development and modernization agenda as an effective democracy and a successful recipient of cohesion funds, worth billions of dollars. But Brussels’ efforts at monitoring Greece’s progress were rather clumsy. Officials I spoke to in Crete in the late 1990s revealed that the local economy was largely dependent on EU agricultural subsidies (“They pay us very good money not to breed goats,” I was told; of course, the rocky Cretan mountains are appropriate only for goat-breeding). The curtain was lifted on Greece’s statistical fraud and frequent rule violations in 2009, when €300 billion in Greek debt to mostly private creditors was uncovered. Soon, the German and Dutch publics learned, to their astonishment, that Greek workers retired at age 51 and earned pensions equal to 90 percent of their last salaries. Competition proved nonexistent in many sectors and the affluent Greek middle class managed to successfully evade taxes on a massive scale.

Many of these problems were only aggravated by the introduction of EU cohesion funds, which bred a classic patronage system, with a large, parasitic political oligarchy dominating much of Greece’s political and administrative hierarchy. While modernization advanced on the surface as Greece developed into a wealthy and stable European country, patronage politics and a pervasive oligarchic system prevented the country from developing modern public institutions. It appears that postmodern Europe was guilty of wishful thinking: as long as the reports out of Athens were satisfactory, the reality didn’t matter. The fact is that the EU failed to modernize Greece or spur development, and this harsh reality has implications well beyond the present Greek crisis.

The example of Greece should therefore serve as a wake-up call for Brussels, the EU’s newest members, and for applicant countries. From 2004 to 2007, 12 new members joined the European Union, most of them post-communist countries. Two of them, Romania and Bulgaria, are subject to monitoring procedures, with a progress report being produced every six months. But these reports are masterpieces of administrative art and after receiving brief attention upon being issued, they fail to produce an impact on Bucharest or Sofia’s institutional performance. Now, six more applicant countries from the western Balkans are eager to join the EU, promising more such complications. Clearly, the EU has to make its strategies for modernization and development more substantive and flexible for specific environments. Furthermore, potential members should not be under the illusion that the EU is solely responsible for transforming their ex-communist, oligarchic, and less developed societies. Adequate national strategies for development and strong public policy initiatives have to be devised in order to cope with pressing problems.

The €130 billion bailout and the €100 billion debt cut for Greece agreed to on February 20 suggest that the Greek crisis could possibly have a long-term solution. Yet those deals cannot guarantee the most important prerequisite for such a solution: a Greek public consensus on financial and institutional reforms. Public unrest continues with no sign of abating, while austerity measures hamper the possibility of Greece’s economy recovering from its collapse. Can Greece’s democratic institutions advance rational financial and economic policies in the face of angry protesters? This is the question Greece will be forced to answer in the months to come.

Ognyan Minchev is a non-resident fellow with the Balkan Trust for Democracy at the German Marshall Fund of the United States. 

SOFIA — Bulgarian Prime Minister Boyko Borisov announced last Friday that his government cancelled the Burgas–Alexandroupolis oil pipeline project and suspended the Belene nuclear power plant construction. That statement was linked by local and international observers to the recent visit to Sofia of CIA Director Leon Panetta and to strategic energy security concerns of the United States in the region. Both projects have been planned as Russian-dominated initiatives, and their implementation would seriously extend Moscow’s energy monopoly in Bulgaria and in the wider Balkan region. We don’t know what Mr. Borisov and Mr. Panetta talked about, yet the decision to stop or postpone two big projects in the energy field was considered a “tilt” of official Sofia from partnership with Moscow to closer strategic cooperation with the United States. (Stratfor, June 13)

All those considerations are on the borderline between reality and conspiracy theory that often happens in analyzing Balkan or Russian-related events. What we know for sure about those two Russian energy projects in Bulgaria is that they are generally unsustainable, both economically and environmentally. The oil pipeline between Black Sea port of Burgas and the Greek Aegean port Alexandroupolis was planned in the early 1990s, yet it was often deserted for a simple reason — Russia did not have enough oil to fill in the pipe. The project was revived in 2007 with President Putin’s visit to Athens, where he signed preliminary protocols with Bulgaria’s President Parvanov and Greek Premier Karamanlis. The Russian side kept the ownership of 51 percent of the project, informally compensating Athens for its minority share with an informal promise to employ the Greek tankers’ fleet to ship the oil through the Black Sea and the Mediterranean. Bulgaria was not compensated in any way for providing its territory, except for the presumed benefit of maintaining a historical friendship with Russia. At the end of the day, Sofia was to invest about $330 million in the pipeline construction and expect about $35 million annually in transit fees. The pipeline, designed to bypass the Turkish Straits, was to cut across a natural reserve in southeast Bulgaria, causing significant damage by logging and exterminating the habitats of Red Book endangered species.

However, the biggest threat to the environment could be posed by tankers discharging oil to buoys in the open bay of Burgas given the unpredictable weather in the area. An oil spill in the Black Sea from a facility from which Bulgaria profits only peanuts may easily spoil the tourist season along the Bulgarian Black Sea coast, which is estimated to generate at least $500-700 million annually. The only reasonable explanation for why Bulgaria joined this project in the first place is that it was the result of vested interests of previous governments’ officials who acted against the national interest.

The Belene nuclear power plant project was launched in 1980, was deserted in the fall of communism, and was revived following the premature closure of four Bulgarian nuclear reactor units at the existing Kozludui power plant. The closure was enforced by Brussels as a precondition for the country’s accession into the EU. Manipulated auction procedures made Russian AtomStroyExport the predetermined winner to construct the new Belene power plant, while clear investment plans, electricity market assessments and cost-benefit analyses were absent. The initial cost of the project was estimated at four to six billion euros, leaving wide twilight zones for unlimited growth of that figure in the future by means of addition of contract annexes. Public debate on the project was silenced by Bulgaria’s nuclear lobby in partnership with the ex-communist Socialist government of 2005-2009. However, the arguments against Belene were quite reasonable. The power plant would extend Russian energy monopoly over Bulgaria for decades ahead. Belene would be the first nuclear project of Russia on EU soil after 1990, and the economic consequences for local markets would prove quite unfavorable. The project’s size would contribute to a monopoly over the energy system nationwide and prevent the development of an open energy market.

The global financial crisis has hampered the Bulgarian government’s plans to invest into the Belene project as a majority shareholder. The Russian government offered to make the investment instead, but that would further strengthen its monopoly over the project and within the energy system in general. The government of Prime Minister Borisov declined the offer, insisting on attracting a reliable package of European and international funds into the power plant investment scheme. Unless such funds are made available, the project will remain frozen.

Here we come to the arguments of political and strategic implications of the Russian-owned projects in Bulgaria. The Belene project, the Burgas–Alexandroupolis pipeline, and the Gazprom South Stream gas pipeline project — designed to span the Balkans as an alternative to the Western-sponsored Nabucco gas pipeline — extend the Russian energy monopoly in Bulgaria and in the entire region. Moscow never treats energy as a commercial asset only — trading with energy serves the long-term strategic plans of Russia’s resurgence as a regional superpower in Eastern Europe. Bulgaria does not need to “tilt” to Washington or Brussels in giving up non-beneficial energy projects with Russia. The country is part of the EU and NATO and, therefore, a member of Western security and economic alliances. Russian energy monopoly over the Bulgarian economy could peacefully co-exist with the country’s alliance in the Western institutions in an environment of improving relations between Moscow, Brussels, and Washington. Yet we have no insurance of such improvement of relations for the future. A period of revived tensions between East and West would tear Bulgaria between its loyalties to NATO and the EU and its vulnerability to Russian strategic pressure.

The Friday statement of Prime Minister Borisov to cancel or suspend unfavorable energy projects on Bulgarian soil is a clear “tilt” to the Bulgarian national interest: the same interest which had been obviously neglected by previous senior power holders in favor of “gray-zone” vested interests. Does that decision serve the interests of the West? Probably, yes, to the extent that partners and allies tend to have common interests.

Ognyan Minchev is the Executive Director of the Institute for Regional and International Studies in Sofia. The views are his own.

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(Note: Dr. Ognyan Minchev is the Executive Director of the Institute for Regional and International Studies in Sofia, Bulgaria.)

SOFIA — Elitist socialists and liberal intellectuals look down upon GERB leader Boyko Borisov with ill contained condescension or even derisive contempt. The Sofia mayor demonstrates a folksy style of unpretentious vanity, which could be compared to a Jesse Ventura populist appeal. While socialist elites graduated from the Moscow diplomatic school and collected several Harvard/Oxford-level scholarship diplomas, Borisov came out of the fire brigade section of the police academy and later on made a career with his private security business, guarding celebrities like the ex-communist leader Todor Zhivkov and the ex-king Simeon Saxe-Coburg-Gotha. He probably watched his clients carefully and learned a lot from them about the informal side of politics.

It was just Borisov’s folksy style and populist charisma that helped him on July 5 to beat soundly the stuck-up offsprings of socialist and ex-communist aristocracy like ex-PM Stanishev. The governments of the last decade were ideologically indifferent and based entirely on elitist consensus of vested interests. People viewed this consensus as highly cynical. They wanted to elect someone like them, and the leader of GERB was the best offer for an ordinary guy. Borisov is a populist not because of an affectionate charisma, but because he seems to represent the ordinary guys against corrupt and sterile elites at the post-communist top of society.

What could we expect from the government of “an ordinary guy” like PM elect Boyko Borisov? Events — more than values and interests — will shape the activities of the new GERB government in its first year in office. The world financial crisis is just rushing upon Bulgaria, having swept the United States and the West of Europe. The most optimistic prediction for economic decline is 3.5 percent for 2009, and the most pessimistic is between 7 and 10 percent. The economic team of GERB is composed of inspired neo-liberals and free marketers willing to reduce public spending and support business with the lowest possible taxes. Some key figures in local business management and prominent international experts (like Simeon Djankov of the World Bank) will be included in the GERB team at high executive positions. The country already has the lowest flat income tax rate of 10 percent, and currency board restrictions have been observed successfully for 12 years after 1997.

Yet neo-liberal orthodoxy will not prove enough to pull the country out from the crisis. On the one hand, Bulgaria is among the countries with lowest living standards in Europe (its GDP in PPS is only 40.1% of the European average), and additional factors like unemployment growth, welfare restrictions and reduction of wages will further endanger fragile balances of society — mass scale emigration of young people may resume, public education and healthcare could worsen even below their poor present status. On the other hand, Bulgaria’s economic system suffers primarily from a general inefficiency of institutions, both public and private, which is the key structural issue of economic and social improvement. The challenge of institutional inefficiency does not come from an alleged complexity of institutional reform, but from the vicious circle of oligarchic control upon the public institutions.

Like most post-communist countries, Bulgaria performed tough simultaneous political and economic transformation, in which major economic assets were appropriated by the networks of ex-communist regime officials. After integration in NATO and the EU, a specific social contract was signed between Eastern European nations and their ex-communist and new capitalist elites. Citizens will not ask about the shadow origin of the new wealth possessed by the old guard apparatchiks. The new business elites, based on old regime power resources will observe law and order, the rules of democratic Europe.   This is a social contract that the majority of Bulgarian new and old elites refused to sign.

Strong networks of vested interests — semi-legitimate by origin and semi-criminal by their activities — have established full-scale control upon the public institutions, and their business is focused entirely upon illegal draining of public resources in private hands. This is a system that has no reference to market or to competition. This is a system of criminal corporate control over state and society. This is a system of structural corruption at all levels, a system of power and wealth, which has to be disintegrated, in order to achieve decent environment within public institutions.

Will the GERB leader — and the GERB government — have enough determination, political will, and resources to clash with the corrupt system of corporate oligarchy, which jeopardizes Bulgaria’s chances of decent membership in the community of democratic nations? We don’t know yet. We could presume two basic options of governmental strategy in dealing with the issue of institutional reform. The first option means nothing less than a war against organized crime, which springs out of the institutions of the state. It requires punctual investigations, merciless transparency, and an efficient justice system against criminal vested interests behind the public scene. This war we cannot avoid if we opt for decent and high standards of institutional performance, which are obligatory within the EU membership. If we need to restore the trust of our partners, to open the gates for EU funding, to achieve acceptable levels of affluence and security €“ we have to open and win this war.

Yet it is a risky endeavor for anyone’s political career to embark upon such a tough ticket — to oppose the real seat of wealth and power in post-communist Bulgaria. This is why the GERB government might go for a second option — to a campaign of imitated justice restoration, in which some key political figures or shadow dealers might be really prosecuted with great publicity while the real infrastructure of illegitimate oligarchic power is left untouched. This is a risk, which also involves the authoritarian temptation to substitute real institutional reform with a public manifestation of a”strong hand,” which ordinary people can endorse in their search for security and justice.

The span and the depth of institutional transformation will be the key indicator for the GERB government success in office. The other basic tasks of this incoming government might be enlisted as follows. First, concentrated effort in developing national infrastructure could not be postponed any longer. Bulgaria has probably the worst road system in Europe, and the funds — both national and European — for road construction were either misappropriated by previous governments, or simply not utilized on purpose. B. Borisov has already declared highway construction as a basic priority for his government, yet the list of infrastructure emergencies goes well beyond highways only. Urban traffic, urban plumbing, water systems, and resources — those are only the first points in the list.

Another urgent concern is Bulgaria’s energy strategy. The previous government — heavily assisted by Bulgaria’s president Georgi Parvanov — has adopted a number of energy projects, putting the energy system of the country entirely in the hands of Russia’s Gazprom. A nuclear power plant in Belene should be constructed by Russian Atom-Export-Story, employing Russian nuclear technology, Russian fuel, and Russian investment. The single big oil refinery of Bulgaria, Neftochim Bourgas, is owned by Russia’s Lukoil company. Bulgaria signed two major contracts with Gazprom — one for the South Stream project and another one — for a 35-year period of gas supplies and gas transiting through Bulgarian soil. Bulgaria joined as minority shareholder to the oil pipeline project Bourgas-Alexandroupolis, designed to transfer Russian oil to the Aegean coast. Taken together, all those projects put the country into almost 100 percent energy dependency from this single source — Russia. It’s a position of vulnerability for a country like Bulgaria — to be member of NATO and the Euroatlantic security community, to be part of the EU as an economic, political, and values-based community, and to sustain this full dependence upon energy from Russia. A government, respectful to Bulgarian national interest should opt urgently for diversification of the national energy portfolio. Bulgaria has to maintain a strong partnership with Russia while insisting on its independence and membership into the community of Western nations.

The new government has to go for an active and pragmatic foreign policy. The legacy, which GERB receives from the Triple Coalition, is unenviable. Bulgaria is a relatively small country, which could hardly make a difference in a global scope, or even within the larger European context. The Balkans and the Black Sea region are both dimensions of Bulgarian foreign policy activities, a position that could really place the country as a valuable partner in international community. Both the Balkan and the Black Sea dimensions were in effect deserted by the outgoing government — partly for an absent strategic capacity, partly for ill-considered concerns about potential discords between Sofia and the major regional powers — Moscow and Ankara. As a Balkan and Black Sea country, Bulgaria has to initiate strategic proposals for both regions for the EU strategy-making process.

Finally, the preference of partner(s) by GERB in governing the country may make a significant difference. GERB has 116 MPs, which is close to, but short of, a parliamentary majority. The format of the incoming government is an open issue. The first option could be a minority government of GERB, supported by smaller center-right fractions like the Blue Coalition and Order, Law, and Justice (OLJ) Party, and by the radicals of  ”Ataka” Party. The minority government would provide a coherent start, but it takes serious risks in the longer run. If the smaller parties are not involved in power-sharing from the very beginning, their situational interest may easily depart from the GERB government activities, in particular in periods of real hardships and tough challenges.

A second option for government is the coalition in the European People’s Party format — GERB plus the Blue Coalition. This option involves minimal power-sharing, but it is subject to an uneasy personal relationship between both leaders — GERB leader Borisov and the ex-PM Ivan Kostov, heading the Blue Coalition. Bringing a third party — the OLJ populist leader Yane Yanev — into the formula could widen political support, yet add to unpredictability of political balance within the coalition.

Borisov has a very strong personal control over the decision-making process of GERB, which adds stability to the expected government performance, but also brings the risks of identification of personal failures with the complete failure of the party in government. Both GERB and its leader are quite inexperienced in political process at national level, which opens the door for unexpected opportunities and for dangerous risks. Partnerships with the parties, sharing closer identities, might help in bringing better stability to the government process.

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(Note: Dr. Ognyan Minchev is the Executive Director of the Institute for Regional and International Studies in Sofia, Bulgaria.)

SOFIA — An unexpectedly high turnout of more than 60 percent has swept away the governing”Triple Coalition” of ex-communist socialists and liberals at the general elections in Bulgaria of July 5. The victory of the center-right populist GERB Party was expected, yet not in such a landslide, which actually brought the GERB leader — charismatic Sofia mayor Boyko Borisov — to the threshold of absolute parliamentary majority.

GERB, which in effect is a personal political project of the former police general, fire brigade psychologist, and national karate coach Borisov, scored almost 40 percent of the total vote. The party gets 116 out of 240 seats at the National Assembly, leaving the second-in-line Socialists far behind with less than 18 percent of the vote and with 40 seats. The second partner of the governing socialists — the Movement for Rights and Freedoms (MRF), supported mostly by ethnic Turks and Muslims, received 14.5 percent of the votes, which amounts to an unprecedented high of 610,000 voters. The Movement of ex-king Simeon — the third member of the governing coalition — has practically left the political scene with just 3.2 percent of the vote, which left the party below the 4 percent threshold for representation required by Bulgarian electoral system.

Two small fractions of the once glorious democratic movement — the UDF of the 1990s — this time united efforts in the center-right Blue Coalition and got close to 7 percent of the vote — enough to survive as a parliamentary force and probably to assist GERB in achieving absolute majority in parliament. Both GERB and the Blue Coalition hold membership in the European People’s Party — the Christian Democratic family of Europe, which makes them natural allies despite their mutual partisan suspicions on a personal basis. Another fraction of hard-line conservative populists — the Law, Order and Justice Party — also made it to the Parliament with just 4.13 per cent of the vote, thus opening an additional partnership choice for the GERB leadership. Last but not least, hard nationalist and populist Ataka (“Attack”) Party took almost 9.5 percent of the vote on a ticket of radical anti-Turkish and anti-corruption populist campaigning.

We could hardly assess this”cocktail” of electoral results without departing from the basic division lines of Bulgarian politics of the last four years. The governing coalition of socialists, ethnic Turks, and ex-king loyalists, which emerged from the general elections of 2005 defined itself as an instrument of compromise among parties of diverse platforms in favor of Bulgaria’s successful joining of the EU on January 1, 2007. The country was facing significant difficulties in convincing Brussels of its preparedness to join European institutional standards after the controversial record of the 2001-2005 government headed by the ex-king Simeon and the MRF leader Ahmet Dogan. High levels of institutional corruption (both political and administrative), a poor-performing justice system, and administrative inefficiency were among the key concerns among European decision-makers in assessing Bulgaria’s membership application. The Triple Coalition, headed by the socialist leader Sergey Stanishev as prime minister, was designed to pass the country through the narrow doors of the EU in reforming the ailing Bulgarian institutional system.

It was sooner the wish of Brussels to consider Bulgaria reformed enough, rather than the performance in institutional reform of the Triple Coalition, which navigated the country successfully to the EU membership in 2007. Once the membership was a fact, the legitimacy basis for the Triple Coalition government expired — particularly provided its modest success record. Yet coalition members decided to complete their four-year term. This decision was wrong. The government had neither integrity nor real institutional potential to make hard decisions in favor of national interest. The Triple Coalition was constructed as a corporate entity with three parties €“ shareholders in common business. Political positions and institutional benefits were shared in the proportion of 8:5:3 in favor of socialists, ex-king loyalists, and ethnic Turks. Each party guarded its feuds, sucking out the maximum benefits of control over ministries and other national institutions. Common government priorities were left largely in the hands of the prime minister, whose power was seriously impeded by the informal design of power-sharing both within his own Socialist Party and among the three party leaders in the coalition.

After achieving EU membership, the reformist potential of the Triple Coalition declined decisively. The second half of the mandate was marked with growing corruption at the highest political level, expansion of organized crime, helplessness of the judiciary, and impotence of the public administrative system, sinking into self-sufficient helplessness. Growing claims on behalf of Brussels against basic inadequacy of Bulgaria’s public institutional system to EU standards mounted to blockades of EU credit lines — both pre-accession and membership (structural and cohesion) funds — for Bulgaria. The public was discovering that the Triple Coalition was in effect jeopardizing Bulgaria’s EU status.

Institutional inadequacy came hand in hand with growing arrogance in the public performance of party leaders and major executive figures of the government. This arrogance extended to unprecedented violation of institutional rules and democratic procedures in preparing for the upcoming general elections in 2009. Bulgarian electoral standards have worsened throughout the decade after 2000. Instead of keeping and strengthening the country’s positive legacy of free and fair elections throughout the 1990s, both political factors and vested interests insistently eroded the legitimacy of the electoral process in the last 7-8 years. Systems of mass scale buying of votes expanded to cover marginal groups and rural parts of the country. Practices of organized pressure on behalf of corporate business, political parties, and local criminal groups developed to levels of seriously endangering the representation process.

Civil society groups initiated a public campaign against the practices of buying votes and exercising pressure upon voters, offering an”Integrity Pact” to the political parties for joining their efforts in favor of restoring a free and fair electoral process. Most parties signed the Pact, yet the parties of government considered their signatures largely nominal. The governmental majority in Parliament passed highly controversial amendments into the electoral law at the last moment possible in order to deprive both opposition and public opinion the right to debate and oppose the changes. Those changes were considered potentially favorable for the government parties’ performance at the ballot box, which did not prove the case at the end. The security services of the state (in particular the State Agency for National Security €“ DANS) were misused by the government in order to support puppet political fractions, considered potent to drain support from the government political opponents. The court system was misused — together with the government-dominated Central Electoral Commission — in rejecting legitimate registration of particular political parties (UDF for example) for the elections.

The elections for European Parliament on June 7 were considered a rehearsal to the general elections a month later. GERB won a moderate majority of 6 percent ahead of the Socialists after an expected relatively low turnout of 38 percent. GERB is a young party with small inner nucleus of hard core supporters and a large periphery of potential voters. On the other hand, the Socialists enjoy relatively wide hard-core support and almost no potential in the periphery. Low turnout grants privileges to the Socialists’ electoral record. The results of the European elections were considered promising for the Triple Coalition’s chances to remain in office in a redesigned formula of power sharing: GERB would be a moderate winner at the general elections again and would need the support of at least 2 or 3 more parties in order to govern. Why not GERB with the Socialist Party and, maybe, the ethnic Turks’ Party?

All those calculations, made in public, produced widespread despair among a growing number of citizens, heavily disappointed by the Triple Coalition’s government record. Expected electoral cheating and fraud, widely organized buying of votes, and pressure on voters, together with governing parties’ arrogance in re-claiming another mandate, enraged significant sections of Bulgarian society, in particular the urban middle class, which suffered most from widespread corruption and institutional inefficiency. There was only one option to counter the Socialists’ strategy to crawl back to power – a high turnout. Quite powerful awareness-raising campaigns by NGOs and oppositional parties made voting desirable and necessary for a growing number of citizens who felt disenfranchised with political disgust and despair after a number of disappointing electoral choices in the past. A wave of 2/3 of actual voters (the electoral lists are wider than the real number of voters in the country) swept away the triple formula of cheating the voters in favor of a small corporate structure — political minority at the top, organized around the status quo ex-Communist elites, both socialist and liberal.

This is why the impressive electoral score of GERB on July 5 is composed of two parts: first, supporters of GERB Party and its leader Borisov, and, second, newly enfranchised pessimists who voted for the most obvious alternative against the Triple Coalition status quo. This composition of electoral support for GERB unfolds both opportunities and strength, as well as potential weaknesses of this party in government. GERB holds a clear mandate for change and reform in the country. Yet the winners around Boyko Borisov will have to face severe challenges and limitations. First, the world financial crisis, which is just rushing on Bulgaria after having swept Europe’s west and north. Second, the government of GERB will have to face an urgent priority of reforming Bulgaria’s institutional system before regaining the benefits of the EU funds for the country. Third, B. Borisov and his team will have to deal with their relative inexperience of government in a time when urgent and punctual decisions will need to be made.

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