Special Report: Investing in Bulgaria
German-style ‘grand’ coalition looks unlikely in Bulgaria
A period of political uncertainty is looming in Bulgaria after the presidential election victory on November 13 of Rumen Radev, a former commander of the nation’s air force, who was supported by the opposition Socialist party. Mr Radev’s triumph prompted the resignation of the centre-right government, which had held power for two years, and opened the door to early parliamentary elections, probably to be held in spring 2017.
These elections will be the third since May 2013. Like the previous two, they appear likely to produce a fragmented legislature. Opinion polls indicate that no party will come close to achieving an outright majority in the 240-seat chamber. Delicate and possibly lengthy negotiations to form a coalition government may follow.
Although such a scenario is less than ideal for Bulgaria’s investment climate, benign economic conditions offer some protection. The outgoing government of prime minister Boyko Borisov had a respectable record of steady economic growth, rising exports, low inflation, prudently managed public finances, more efficient tax collection and currency stability.
Mainstream politicians need no reminding, however, that the next government must be built to last. Bulgaria will take over the EU’s six-month rotating presidency in January 2018. It would not be the best advertisement for the nation, which joined the EU in 2007, if the government were to fall in the middle of carrying out its duties on the European stage.
In everyone’s mind is the long spell of instability that plagued Bulgaria in 2013, when street protests erupted over high electricity prices and controversy surrounded the appointment of a new head of the state security agency.
“People have vivid memories of the mass demonstrations and political chaos of 2013,” says Kancho Stoychev of the pollsters Gallup International.
“It is true that the present situation has few parallels with 2013, but, still, we need to be careful,” says Daniel Smilov of the Centre for Liberal Strategies, a Sofia think-tank. “A new cycle of parliamentary elections creates a lot of noise in the whole system.”
For this reason, some political commentators say the most desirable outcome of the elections would be a German-style “grand coalition” between the main centre-right and centre-left parties. These are Gerb (Citizens for the European Development of Bulgaria), the party led by Mr Borisov, who submitted his resignation after Mr Radev’s victory, and the Socialist party.
Some investors are hopeful that a grand coalition would deliver positive surprises, for instance a deal to sort out the future of the problematic Belene nuclear plant project in northern Bulgaria. “We’ll see what happens with Belene after we get clarity on the politics. I wouldn’t exclude the two main parties reaching some agreement,” says Alexander Bebov, managing partner at Balkan Advisory Company, which specialises in the energy market.
New parliamentary elections create a lot of noise in the whole system
However, the path to a grand coalition may be rocky. In the first place, the margin by which Mr Radev crushed Tsetska Tsacheva, his centre-right opponent, was so emphatic — he won by 59.4 per cent to 36.2 per cent — that the result was a clear personal defeat for Mr Borisov. Ms Tsacheva, the speaker of parliament, was Mr Borisov’s handpicked candidate. There is a sense in Sofia that the curtains are falling on Bulgaria’s Borisov era, which dates back a decade.
Second, Bulgaria has little experience of grand coalitions. Gerb and the Socialists are avowed rivals. Since the end of communism and the first democratic multi-party elections in 1990, there has been only one grand coalition, formed in 2005 to smooth Bulgaria’s entry into the EU.
Last, there is no guarantee that Gerb and the Socialists will win enough seats to form a coalition with a solid parliamentary majority. Gerb won 84 of parliament’s 240 seats in 2014, but this was down from 97 in 2013. Mr Stoychev says the party will struggle to pick up more than 70 to 75 seats in the forthcoming elections. As for the Socialists, who are descended from Bulgaria’s former Soviet-backed communist party, they may win only 50 to 55 seats, Mr Stoychev says. While this would be an improvement on the 39 seats that a Socialist-led leftist electoral alliance won in 2014, it would hardly represent a thundering endorsement.
An additional risk is that, as in other European countries, a power-sharing arrangement between the centre-right and centre-left would strengthen support for anti-establishment populist movements.
In Bulgaria’s case, the main anti-establishment threat comes from the ultranationalist right, which has also attracted support by whipping up public unease over irregular migration from Muslim countries. A radical rightist candidate came third in the presidential contest’s first round, with 15 per cent of the vote. An alliance of ultranationalists is expected to perform similarly well in the parliamentary elections.
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