What is the political context of the Eurozone crisis period in Bulgaria? Have there been changes in government, elections, referenda or other major political events during the period of 2008-present?
The political context in Bulgaria since 2008 has seen many changes. While in the beginning of the Euro crisis the political situation was relatively stable, since the beginning of 2013 it has been very volatile. It has involved the resignation of two Governments and the respective appointment of two Caretaker Governments, two minority Governments, a recent bank crisis and raging protests for the bigger part of this, less than biannual, period.
The 40th National Assembly was elected on 25 June 2005 and its mandate ended on 25 June 2009. The 86th Government was formed on the basis of a three-party coalition between the three biggest parliamentary groups represented in the 40th National Assembly. These were, out of 240, (1) Coalition for Bulgaria with 82; (2) National Movement Simeon the Second (known by its Bulgarian abbreviation – NDSV) with 53; (3) Movement for Rights and Freedoms (known by its Bulgarian abbreviation – DPS) with 34. The 86th Government governed Bulgaria from 17 August 2005 till 27 July 2009 with Sergei Stanishev as Prime Minister. Sergei Stanishev was the leader of the Bulgarian Socialist Party (BSP), which was the biggest and predominant party in the Coalition for Bulgaria. For now, he is also the President of the Party of European Socialist (PES).
The 41st National Assembly was elected on 5 July 2009 and it was dissolved on 14 March 2013. The 87th Government was a minority Government formed by Citizens for the European Development of Bulgaria (known by its Bulgarian abbreviation – GERB). GERB obtained 117 seats in the National Assembly and needed further parliamentary support in order to form the Government. GERB found such initial support in three small parties ATAKA, the Blue Coalition and Order Law and Justice (known by its Bulgarian abbreviation – RZS), which were against the parties that were part of the three-party coalition, which hitherto governed Bulgaria. With the vote in the National Assembly on 27 July 2009 the 87th Government with GERB’s leader – Boyko Borissov – as Prime Minster started governing Bulgaria. In the autumn of 2011 the Presidential and local elections took place together. The first ballot for both took place on 23 October and the second on 30 October. The Presidential elections were won by Rosen Plevneliev who was supported by GERB. These elections were challenged by the opposition (Coalition for Bulgaria), which was held by one of the Bulgarian MEPs to be unprecedented in Bulgaria’s history since the democratic changes. The Bulgarian Constitutional Court (BCC) admitted the case but eventually did not annul the elections. GERB was also very successful during the local elections. As it can be seen from the answer to Question III.2, these elections played an important role in the discussions of the proposed constitutional amendment.
The political situation was stable during the biggest part of the mandate of the Borissov Government. However, in the end of 2012 certain level of public discontent turned into sporadic protests. In the beginning of 2013 the protests unified around the discontent against the monopoles of the electricity distributers and the high energy prices, later evolving into protests against the Government’s policies in general. A few people even set themselves on fire, which some parts of the public saw as connected to the protests. Amidst the protests, on 27 January 2013 a referendum, which was politically initiated by Sergei Stanishev, took place with a question that read “Should nuclear power in Bulgaria be developed through the building of a new power plant?”. While the results were 60.6% ‘yes’ and 37.9% ‘no’ (the rest to 100% were void bulletins), the referendum failed due to low turnout. These protests eventually led to the resignation of Boyko Borissov on 21 February 2013, a few months before the end of the four-year mandate. His Government stayed in power until 13 March 2013 when, after all major parties declined to try to form a Government, a Caretaker Government was appointed by the President.
The 42nd National Assembly was elected on 12 May 2013 and was also prematurely dissolved on 6 August 2014 by the President. Despite the protests and the resignation that followed in February, GERB won the elections with 30.5%, followed closely by Coalition for Bulgaria with 26.6%. The third and the fourth in the elections were DPS with 11.3% and ATAKA with 7.2%. The turnout was a record low for National Assembly elections – just 51.33%. These elections were also challenged. Interestingly, the elections were challenged by the national representatives from GERB – the party that won the elections. The BCC again did not annul the elections. Eventually, the mandate of the Caretaker Government was ended with the formation of the 89th Government on 29 May 2013. The 89th Government was formed by Coalition for Bulgaria and DPS, which together had 120 national representatives (exactly half of the total 240). On 29 May it was Volen Siderov (ATAKA’s leader) who registered in order to provide the quorum for the Government to be formed, which created much controversy. While Volen Siderov stated that his party will not support this Government, the national representatives of GERB accused ATAKA of participating in a covert three-party coalition. The accusations were based on the fact that registering to secure quorum and then not voting against the, formally, two-party coalition, ATAKA de facto allowed for the new Government to be formed. This highly controversial start of the new Government brought up many legitimacy concerns and accusations of backdoor dealings.
On 28 May 2013 – a day before the formation of the 89th Government, the leaders of Coalition for Bulgaria and DPS submitted a draft law to the National Assembly for the amendment of the Law on the State Agency for National Security (known by its Bulgarian abbreviation – DANS). One of the proposed amendments was to strip the President from his (not constitutional) power to appoint the President of that Agency on a proposal from the Council of Ministers and to give that power to the National Assembly after a proposal of the Prime Minister. The draft law was quickly adopted on 7 June 2013 and in accordance with its last provision it was to enter into force on the day of its promulgation in the State Gazette (SG). The Law was promulgated on 14 June 2013. On 14 June 2013 the plenary session of the National Assembly started in its very beginning with a request to include in its agenda a proposal by the Prime Minister – Plamen Oresharski – on the President of DANS. It was approved and the session started with proposal by the Prime Minister. His first words were that on the basis of Article 8(1) of the abovementioned law he was proposing Delyan Peevski (DPS). The National Assembly adopted a Decision shortly after the proposal with which it appointed Mr Peevski as a President of DANS.
Due to the background of Mr Peevski, his appointment quickly created unprecedented outburst in the society and was held by some to have been the beginning of the end of the Oresharski Government. In a matter of hours thousands of people went on the streets in protests against the appointment, which caught the attention of the international media. The enormous outcry against the appointment led to a statement by Mr Peevski on the very next day, expressing his willingness to step down. On 19 June 2013 the National Assembly with a first point in the agenda adopted a Decision repealing its Decision from 14 June. Lyutvi Mestan (DPS), who presented the annulment Decision stated, with respect to the explanations of the annulment Decision, that
“The politically responsible reading of the situation requires as an obvious necessity that the Decision of 14 June 2013 for the election of the President of DANS to be urgently annulled in order to give the Prime Minister an opportunity to propose a new President of DANS which after the necessary consultations to be discussed and adopted in accordance with the applicable parliamentary procedure.”
However, the protests were gathering force and the protesters were not satisfied with this reversal and started asking for the resignation of the Government, less than a month after it was formed. This appointment and its swift reversal led also to wave of constitutional litigation on the status of Mr Peevski as a national representative considering the failed appointment. This litigation eventually ended on 14 January 2014 with the BCC upholding the status of Mr Peevski as a national representative. After its first, largely unpopular, Decision in these cases the BCC was demoralised when it was mockingly put for sale on Ebay. After 140 days of protests, further impetus was given to them in the autumn of 2013 when, following the BCC Decision in one of the Peevski cases, the students of the Sofia University occupied the main lecture hall during a lecture of one of the BCC judges, which led to a months-long occupation of the whole University. The protests have been widely covered in the media and this Report will not go in further detail. Since the political situation was hugely affected by these protests it was necessary to give this overview, which does not claim to be exhaustive and to necessarily be giving the complete picture. Thus, this author invites the reader to further examine the situation in order to fully comprehend the situation.
In times of continuing, but much less active, protests, another important turning point during the 89th Government came about – the European Parliament elections. In December 2013 Lyutvi Mestan (DPS) saw the forthcoming European Parliament elections as an opportunity for the Government to show that it has legitimacy. The elections took place on 25 May 2014 and were again won by GERB with 30.4%, followed by Coalition for Bulgaria with 18.9%, DPS with 17.2%, the newly formed (and soon after dissolved) coalition of Bulgaria Without Censorship (BWC) with 10% and another newly formed coalition – the Reformist Bloc, with 6.4% (see infra an introduction of the last two). These results fuelled even more the feeling of illegitimacy among the general public with respect to the Government in power and gave further impetus to the continuing, for almost a year at that time, protests. The legality of the elections was challenged before the BCC, as it was the case in the previous two National Assembly and Presidential elections. The BCC this time rejected the request for declaring the elections unlawful, citing lack of powers to do this with respect to the whole of the European Parliament elections in Bulgaria. The BCC considered itself having the power to declare unlawful only the election of particular MEPs but not the elections as a whole due to the provisions of the Elections Code.
Yet another crucial issue that destabilised the political situation in Bulgaria was the 2014 banking crisis. Before giving a short overview of the banking crisis, it is worth quoting one statement, made about three years before the crisis, by Qnaki Stoilov (Coalition for Bulgaria) during the 15 June 2011 discussions in the National Assembly on the amendments of the Law for the Planning of the State Budget (LPSB). Mr Stoilov stated:
“While here it is being talked about the stability of the banking system in Bulgaria, I would like to focus your attention to one risk. I am not going to discuss anything concrete because this is a sensitive matter and we should not create disturbances in it. Let a report be made and you ask for it Mr [Finance] Minister from the management of the Bulgarian National Bank, on how many of the commercial banks in Bulgaria dare to credit their own enterprises, that is, the same people participating in the ownership and the management of the commercial banks to collect resources from the public and then invest them in their own enterprises. I could not call this in any other way than draining of the financial capital for corporate and self-serving goals. If these are going to be the fundamentals of this stability [that the LPSB is trying to ensure] they can come out to be very shaky.”
The crisis started with an alleged assassination attempt against Delyan Peevski in the beginning of June 2014, which was rumoured to be ordered by the majority shareholder of Corporate Commercial Bank (CCB) – Tsvetan Vasilev. The Prosecution Office in Bulgaria responded with searches in different corporate enterprises, including CCB’s office building. However, it was not clear whether or not these searches were connected with a signal made to the Prosecution Office in the beginning of 2014 by activists from “Protest Network” concerning alleged illegal activities of financial nature of Delyan Peevski, Tsvetan Vasilev and Nikolai Barekov – BWC’s initial leader. In the public space rumours followed that Mr Peevski was removing large amounts of his own funds from CCB. A bank run followed, which enormously damaged the liquidity of CCB and another, recently acquired by CCB, bank. Soon after this, the Bulgarian National Bank (BNB) announced nationalisation of CCB and its recent acquisition, suspended operations at both and stated that it will recapitalise it out of the deposit guarantee fund.
The crisis deepened when a bank run on another, unrelated to CCB, bank – First Investment Bank (FIB) took place on 27 June 2014, which led the President of Bulgaria to make a public statement saying to the depositors that their funds were safe. The president also announced that the National Assembly was planned to be dissolved in late July and that new elections were to take place in the beginning of October. The bank run on FIB later became clear to have been separately plotted to deliberately destabilise the banking system by using e-mails and SMSes. The plot did not completely succeed and FIB’s situation quickly stabilised a few days later and depositors’ trust was regained. Support for this was also given by the favourable position of the Commission on the credit line for the banking system.
The situation with CCB, unfortunately, worsened. An audit of the CCB by the BNB found credit records missing for more than €1.7 billion (while CCB’s credits in total amounted to €2.7 billion). According to BNB, the credit records that were missing were relating to debtors in close relationship with Tsvetan Vasilev. This shows the relevance of the statement of Qnaki Stoilov that was quoted above. Even more, in the day before CCB was put under special supervision, more than €100 million were drained in cash, allegedly, under the command of Mr Vasilev. At certain point Mr Vasilev was also put on Interpol’s list. At the moment Mr Vasilev is in Serbia and court proceedings for his extradition are undergoing. On 12 March 2015, during a visit of the Bulgarian President in Serbia, the Serbian President, in answering a question on his relationship with Mr Vasilev, while saying that Mr Vasilev was not friend of his did say that his investments in Serbia were excellent.
For Bulgaria, covering the costs over CCB meant increasing its sovereign debt, which also increased its budgetary deficit from about 1.8% to almost 3%. With this the budget also had to be updated, which furthered the political spats. Eventually, the BNB put CCB in insolvency proceedings. This short overview shows how controversial and politically relevant this banking crisis really was and still is. Further detail on this point will be spared for now. It must be noted, however, that the CCB issue and the recovery of the deposits was decided to be a political question and was left to be solved for after the elections.
Eventually, with the decline in the, initially low, public support for the Government and the retraction by DPS of its political support the Prime Minister was forced to submit his resignation and he did so on 23 July 2014. The resignation was accepted by the National Assembly the next day with 180 votes in favour and 8 against. The President dissolved the National Assembly and appointed a Caretaker Government on 6 August 2014. This Caretaker Government had as a Prime Minister Georgi Bliznashki – a former senior member of the BSP up until earlier that year, when he was expelled from the party for openly supporting the anti-Government student-occupation protests.
This political situation, leading to the elections for the 43rd National Assembly, also caused a major rearrangement and restructuring of the political background, where new parties and coalitions appeared on their own, other parties appeared after splitting form already existing ones and others went through a leadership change. All of these changes can probably be the object of separate political science research project and cannot be examined in detail here. However, a very basic overview will be provided here as it is needed to understand the election results for the 43rd National Assembly and the political developments that followed.
A little earlier, in the beginning of 2013 an attempted assassination (that later seemed to be just a hoax) of DPS’s leader – Ahmed Dogan, happened right before his resignation from the leadership position and his nomination of Lyutvi Mestan as his successor. Later in 2013, one of the new coalitions was formed – the Reformist Bloc. It was cofounded by Democrats for Strong Bulgaria, the Union of Democratic Forces (both of which formed the core of the former Blue Coalition), Bulgaria for Citizens (led by Meglena Kuneva), as well as the Freedom and Dignity People’s Party (led by Kasim Dal), and the Bulgarian Agrarian People’s Union. Another new party which also created a coalition was BWC. It made a coalition with three small parties and together they got two MEP places. Soon after the European Parliament elections the coalition dissolved. In preparation for the new elections BWC entered in another coalition with LIDER (a small party that has existed since 2007 but never had elected representatives). Another new coalition was formed in August 2014 – the Patriotic Front. It combined the National Front for the Salvation of Bulgaria (NFSB) and VMRO, one of the earlier coalition partners of BWC.
Yet another new party that was created in the meantime, in January 2014, was Alternative for Bulgarian Renaissance (known by its Bulgarian abbreviation – ABV). ABV is a reanimated project from 2010 of the former President – Georgi Parvanov (2001-2012) leader of BSP until he stepped in office. The new party was created in anticipation of the European Parliament elections and attracted major figures from the BSP, leading to its major political split. These recent developments for the BSP reflected heavily on its leader Sergei Stanishev who eventually stepped down from the leadership position on 27 July 2014 when Mihail Mikov was chosen as the new leader. With the change in leadership, the coalition in which BSP hitherto participated also changed its name. From Coalition for Bulgaria it became BSP – left Bulgaria. Not long after this leadership change, Mr Stanishev’s leadership position in PES also came under attack. With this major political reshuffle for a relative small amount of time Bulgaria prepared for a new round of National Assembly elections.
The 43rd National Assembly was elected on 5 October 2014. The election was won by GERB with 32.7%, followed by BSP with 15.4%, DPS with 14.8%, the Reformist Bloc with 8.9%, Patriotic Front with 7.3%, BWC with 5.7%, ATAKA with 4.5%, and ABV with 4.15%. The lack of majority for any one party led to long and difficult negotiations, which culminated in the formation of a coalition Government on 7 November 2014. The 91st Government was formally formed by GERB and the Reformist Bloc with the parliamentary support of ABV and the Patriotic Front.
Since the formation of the 91st Government the political situation achieved some balance but it is still by far not stable. Some of the main issues, relevant for this Report, that have frequented the public discussion have been (1) the continuous CCB crisis, (2) the diversification of the gas supplies, and (3) accruing new sovereign debt of 16 billion leva (about €8 billion).
The CCB crisis saw new developments from the European Union (EU) level. In particular, the Commission (1) found Bulgaria to be “in a situation of excessive imbalances requiring decisive policy action and specific monitoring”, largely due to the CCB situation and (2) initiated infringement proceedings against Bulgaria. The infringement proceedings relate to the way Bulgaria handled the CCB guaranteed deposits. In particular, the Commission brought proceedings for a failure to correctly transpose the Deposit Guarantee Scheme Directive and a violation of the free movement of capital under Article 63 TFEU. This has put even further pressure for the swift solution of the CCB crisis. CCB is currently in insolvency proceedings but a liquidator is not yet appointed due to appeals by the shareholders of CCB against the Decision to revoke CCB’s licence. On 11 March 2015 Prime Minister Borissov warned that CCB’s property is being plundered and said to the National Assembly that the Government will make a proposal for such a liquidator. With respect to the economic impact of CCB on the Bulgarian budget, it must be noted that the budget deficit for 2014 ended up rocketed as high as 3.7% of the Gross Domestic Product (GDP) (almost 2% increase since before the beginning of the crisis).
With respect to the gas supplies the political developments have been closely related to the Ukraine crisis and have evolved around the status (and possible revival) of South Stream, Nabuko and other pipeline projects going through Turkey. The insecurity created around these projects weighs heavily on the political situation in Bulgaria because of the full dependence on Russian gas, on the one hand, and the economic importance of these projects for Bulgaria in terms of transition fees, on the other hand. In light of the banking crisis such questions have become even more politically charged.
Most recently the National Assembly approved the accruing of new sovereign debt amounting to 16 billion leva (about €8 billion). The debates for this debt sparked a lot of controversies and its approval by the National Assembly was not certain up until the actual vote. The controversies evolved mainly around the amount of the debt and if it really was necessary to be as big. The stakes were very high with respect to the debt because the Prime Minister suggested a possible resignation of the Government if it was not approved by the National Assembly. The debt also got the support of the President.
Since the elections for the 43rd National Assembly, some of the newly formed parties also went through leadership changes. BWC went through structural changes including a change in its name (to Bulgarian Democratic Centre) and its leadership. Also, the leadership of ABV fell into uncertainty when its leader – Georgi Purvanov resigned as a sign of protest against the support of ABV’s national representatives for the new sovereign debt. However, he will remain the leader at least until 25 April 2015 when ABV’s national council will convene. Last but not least, on 9 March the European Parliament Committee on Legal Affairs unanimously decided to recommend to the European Parliament to waive the parliamentary immunity of Sergei Stanishev, in light of the request by the Chief Public Prosecutor of the Republic of Bulgaria on 24 November 2014.