THE CRISIS IN FIGURES

by Dimana Trankova

The Bulgarians are optimistic about their economic future - for political reasons

The crisis was already a fact in Bulgaria at the beginning of 2009, but the owner of an accountancy firm in Gorna Oryahovitsa would deny it even more vehemently than then Prime Minister Sergey Stanishev. "I can't understand what crisis they're talking about. I have enough work, clients are paying their bills and the mince in the shop is cheaper," he said. A journalist from Varna shared his opinion: "I am earning more than ever. If this is a crunch, I hope it goes on forever." A laboratory assistant was a bit more restrained: "I don't feel the crisis, probably because I have a state-paid job. My salary is small, about 400 leva a month, but I receive it regularly."

All three of them hoped, rather naively, that if the crisis turned out to be real, the banks that had given them loans would go bankrupt. The series of "planned" insolvencies of banks in the mid-1990s in Bulgaria, which robbed millions of people of their savings and wiped out the debts of creditors, gave many citizens the wrong idea that such things often happen in democratic countries.

A year later, it is only the laboratory assistant who has not experienced the crisis personally. The accountant does have clients, but they pay their bills increasingly infrequently because of their own financial difficulties. The Varna journalist is unemployed.

Strangely enough, this grim picture is at odds with the results of the regular Macro Watch poll from the Open Society Institute. In October 2009, Bulgarians were more optimistic about their economic development than they had been a year earlier, when Stanishev's government had declared the country "an island of stability." The optimists had increased three-fold compared to March 2009, when only 11 percent believed that the economic situation would change. In October 2008, pessimists amounted to 50 percent, compared to 60 percent in March 2009 and about 40 percent in October 2009.

At the same time, 14 percent of those interviewed in October 2009 were unemployed. A year earlier, unemployment amounted to 8 percent, and in March 2009 – to 10 percent. The people who were most affected by the crisis were in the 46-60 age group (over 60 percent) and the 31 to 45 age group (54 percent), while pensioners suffered from its effects the least (26 percent). The most severely affected social group was that of the unemployed: 75 percent, compared to only 26 percent of the retired pensioners.

Why are the Bulgarians optimists? "Many of them view the economic crisis as a political one," says Georgi Stoychev, executive director of the Open Society Institute. "The parliamentary election and the formation of the new government in the summer generated expectations of an improvement in the general economic situation." According to the survey, the supporters of GERB, or Citizens for European Development of Bulgaria, are the most optimistic (40 percent). Just 9 percent of the BSP, or Bulgarian Socialist Party, voters and 10 percent of the DPS, or Movement for Rights and Freedoms, two of the participants in the previous tripartite government, share their opinion.

"However, Bulgarians have much more cautious expectations regarding their household finances. In October 2009, the optimists were 16 percent, which is half the number of optimists regarding the economy as a whole," Stoychev says.

Traditionally, at times of crises, winter is the hardest season. Heating bills become the main topic of conversation and those Bulgarians who have relatives in the provinces begin hoarding zimnina, or winter supplies, such as potatoes, preserves, pickles, wine and rakiya, as early as the summer. Bulgarians even have special idioms reflecting the fear of the approaching winter. "To take hold of the green" means "to survive." It refers to the time when the first fresh salads and spinach appear in the gardens and it becomes clear that the severe winter is over. "Lukanov's Winter" (1990-1991) and "Videnov's Winter" (1996-1997), named after the Socialist prime ministers who governed the country during those periods, and the dearth of basic goods available then, have become synonymous with disaster.

Will this winter have an effect on this unexpected Bulgarian optimism? "I expect that pessimism will go up again, and not only due to the season," Stoychev says. "In winter, the crisis will move on from the wider economy to the public finances. In 2009, it was mainly businesses and those in active employment who suffered. In 2010, the crisis will also affect those whose income comes from the state budget, including pensioners and university students."

The 2010 budget will be tougher. Healthcare and education will be reduced by 240 million leva and only infrastructure projects, tourism and pensioners will see an increase.

Public trust in the executive branch increased from 16 percent in February 2008 (when, for Bulgarians, the crisis was something happening to other people) to nearly 30 percent in October 2009. Therefore, for Boyko Borisov's government, "crisis" may actually become synonymous "opportunity" – the opportunity to carry out stringent reforms while retaining public trust.

On the other hand, the government is a minority one. "Its stability is due to its popularity, so I don't expect it will carry out reforms at any cost," Stoychev says. "Boyko Borisov will probably carry out reforms at an acceptable political cost. This increases the risk of postponing or abandoning many reforms halfway if they provoke negative public reactions."

"The government has to move from a policy of anti-crisis measures to a policy of structural reforms," Stoychev claims. The aim of the anti-crisis measures or 'stimulating packages' that we have seen in Bulgaria and in the rest of the world means that we continue living as we have been so far. The aim of the structural reforms is that we begin living in a different way. In the first case, we are trying to survive the crisis and, in the second, to make use of it."

Where are reforms most pressing? "Even without the crisis, the main sectors that are in need of restructuring are healthcare, education and justice," Stoychev says. "The crisis can be used as a justification for reforms – or as an excuse not to make them. In a perfect scenario, Bulgaria will have popular reformists who make unpopular reforms. In the worst case, it will be ruled by unpopular reformists who make only popular reforms."

However, the government of Boyko Borisov, seen by many Bulgarians as very charismatic, can't compare with the banking system in terms of public trust. In October 2009, nearly 45 percent of the Bulgarians who took part in the Open Society poll expressed confidence in it. A year earlier, only 27 percent had. What did the banking sector do to deserve it? "It has been completely reformed over the past 10 years and is now largely part of the EU banking system," Stoychev says. "Bulgarian banks are European banks, so the measures to protect the EU banking system had a positive effect on the Bulgarian one too. The stability of the currency board and the trust in the fixed rate of the leva to the euro has added to this trust. This is why Bulgaria has avoided the fluctuations and instability that other countries in Central and Eastern Europe experienced in 2009."

Not all comparisons with the situation in other EU countries are so positive though. According to Eurobarometer, Bulgarians find it more difficult to meet their expenses than other EU countries. "Only 18 percent have no problem paying their bills and loans, compared to 80 percent in Denmark, 47 percent in the UK and an average of 45 percent in the EU," Stoychev says. Eurobarometer confirms the optimistic views reported by the Open Society: 18 percent of Bulgarians are optimistic, compared to an average of 16 percent in the EU. 38 percent of Bulgarians do not expect to see any changes, while the EU average is 55 percent. Pessimism grows when Bulgarians are asked about their family budget expectations: 35 percent of them are pessimists, compared to an EU average of 26 percent.

Has the crisis influenced the attitude of Bulgarians to the EU? According to the Open Society poll, the answer tends to be a no. "Bulgarians traditionally trust European institutions three times more than the domestic ones. Neither the crisis nor the new government have changed this," Stoychev says. "The picture is relatively steady regarding the adoption of the euro – about 50 percent are for introducing the euro, in one way or another, while about 30 percent are against it. The crisis has not created pressure for an urgent change in the monetary regime. As a whole, the public prefers to enter the Eurozone via the official way, by meeting the membership criteria, and not by unilateral euroisation," Stoychev adds.

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