Economic Policy Review ISSN 1313 - 0544

The Price of Hiding the Truth

Author: Mihail Andreev / 11.05.2011
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There were already numerous discussions on the topic of the creation of Euro Plus Pact, the European Stability Mechanism (ESM) and the covered in mystery Bulgarian position. Fully expected, the debate focused on direct, measurable effects for the country, when and how Bulgaria will pay for an eventual rescue of unconscientiously acting European governments. As often happens in matters related to Brussels, some of the details became clear after the fact, but it seems that some details are still kept from the public.

The government behavior confirmed a number of troubling concerns about the European perspective for Bulgaria. Serious risk stems from the double standard applied in making decisions regarding the EU membership and in those with purely national importance. The fact is that the latter are subjected to wide public and media debate, although they are in most cases unnecessary (irrational decisions are made despite public disapproval) while communication with Brussels is shrouded in mystery. Moreover, in many cases, Brussels is the only source of information on topics for which Bulgaria is silent. The support for the Pact and ESM is a clear example of this. European leaders have come to the terms of the Pact during the European Council of March 24 and March 25. But that decision was reached after lengthy negotiations between the parties, including bilateral.

 

Bulgaria’s support is not news

Immediately on December 17 Bulgaria declared its support for the creation of ESM. But since then there are only occasional speeches on the topic on the behalf of the government. Throughout this period all of the affected countries negotiated their future financial commitments. Moreover, the governments of countries outside the euro area have used those three months for debate at the national level in order to decide for or against the Pact. The idea is that they can participate at their own will, while members of the eurozone have no choice.

The reasons to have a debate are simple. The Euro Plus Pact aims at greater coordination of economic policies of the countries participating in it. Measures will affect everyone in an economy which requires the widest possible public approval, at least at the level of social partners. Furthermore, participation in ESM suggests specific financial obligations for countries which will significantly affect the treasury. Such debate did not take place in Bulgaria. Subsequently it became clear that the Ministry of Finance and the Bulgarian National Bank have expressed reservations about the pact, but it never became clear when and how the decision was taken.

 

Deal or no deal?

We can only guess what would be the benefits for Bulgaria from this political act, since some of the measures implemented by the pact rather limit competitiveness and economic growth in poor countries like Bulgaria. Everyone should know that in the process of decision making in the EU each country seeks to "deal" with its position on an issue. Naturally, there is no way to know what the small political arrangements were, but it is not devoid of sense to seek support for Schengen. After all, Franco-German "union" initiated the establishment of the pact, the same two countries which in December said 'no' to joining the Schengen countries. If they toned down in the coming months, this means that there is a deal, but it is bad! The result would be the following: Bulgaria receives political support at the expense of some economic restrictions, and together with that the government will cover up its own inability to cope with reforms in the fight against corruption and organized crime.

 

The real test for the government is yet to come…

This government is the first in Bulgarian history, which will take real part in the negotiation process in the formation of the EU financial perspectives. Based on this document, the EU allocates financial resources for seven years. We remember the loudly advertised 11 billion Euros, which are “due” to Bulgaria after joining in 2007. They were stipulated in the current perspective 2007-2013. The framework was formally adopted on 17 May 2006, after long and prolonged financial disputes between Britain and France.

In practice, the informal talks for the next financial perspective 2014-2020 are already in progress. The European Commission will present its proposal at the latest in July 2011. At this stage it is clear that so-called cohesion policy will undergo significant changes. The framework is expected to be approved at EU level 27 at the end of 2012. Bulgaria has declared part of its ambitions to finance with European funds the construction of road and rail infrastructure to the value of 4-5 billion by 2020. For comparison, the current OP Transport 2007-2013, a major donor for such projects, provides for a total of a little over 2 billion. It remains to be seen how the government will be able to obtain more than twice the amount of the funds, provided that until now their use is extremely slow (only 6.8% actually paid to the beneficiaries under contracts at March 15, 2011).

Undoubtedly, Bulgaria should seek the support of other countries on the issues defined as national priorities in the negotiation process, which would mean that compromises should be made. But before Bulgaria have to make any compromises, the ministers, members of national and European parliaments owe the citizens ​​an explanation of their true cost before deciding anything. If the application of double standards with regard to decisions for the Bulgarian and European affairs is a consequence of total disinterest of the Bulgarian citizens, the most important task of government is to change that as soon as possible.