Cause and Effect in European Politics and Law

The EU froze $1.56 bn of funding for Bulgaria, according to the WSJ

Adelina Marini, September 7, 2009

The government of the Bulgarian prime minister Boyko Borisov won the parliamentary elections in July with a sweeping majority on a promise to ease the recession and bear down on levels of corruption that prompted the European Union to freeze $1.56 billion in aid funding. This is what the journalist Joe Parkinson writes in a short article in the "Wall street Journal" today. According to the newspaper, the lack of funds aggravated the economic pain for the EU's newest and poorest member, where real-estate and steel-industry booms propelled by a wave of foreign capital have been replaced by shuttered factories, sending budget deficits higher.

According to Joe Parkinson, the new deputy prime minister and minister of finance, a former World Bank economist Simeon Dyankov with his first actions has managed to save $450 mn after the government froze government wages and pensions, mothballed costly state investment projects. The result is an 81% reduction in Bulgaria's budget deficit to $76.5 million in August from $412 million in July. Amid those measures, the government has earned accolades from Western economists and drawn the highest approval ratings at home since the fall of communism two decades ago. Recent Gallup polls put the government's approval at 64%.

"Wall street Journal" also quotes the chairman of industry group the Confederation of Bulgarian Employers and Industrialists Ivo Prokopiev by saying: "The crisis has given the new government a unique mandate - every single unpopular decision could be explained -- and the public are more likely to support the policy."

The rest of the article is dedicated to minister Dyankov, his biography and his first steps as a minister of finance. In the meantime, the newspaper quotes economic analysts who create extremely high expectations for the new government and its fiscal policy. For example, the emerging markets analyst at RCM Capital Markets Nigel Rendell says: "Just a few months ago Bulgaria was a problem child... It was one of the region's worst offenders but it seems to have turned around and given everyone a lesson". "The election clearly showed that people are fed up with corruption and bad governance, but once good things start happening then you get some positive spillover -- and we're determined to make the most of that", added Neil Shearing, an economist at London-based Capital Economics.