It makes no difference whether the prime minister is addressed "Your Majesty", "Your Excellency", "Mister" or some other way. As predicted, the worst possibility for the new cabinet constellation, i.e. that Simeon II is not at the top of the executive supported by the political movement named after him, is over. With him in the chair of the Prime minister, the cabinet has a fair chance of coordinated teamwork and resilience to servility and bribing temptations. Backgrounds The average age of cabinet members, except the prime minister, is around 45 years. The age of the deputy prime ministers is under 40. The ministers responsible for important executive fields like economy, finance, environment, labor market and regional development, are the even younger. As knowledge and expertise it exceeds the first Ivan Kostov's cabinet and is similar to his second crew that become in charge in 1999 and made a difference, compared to all predecessors since 1989. Even against this background, Simeon Saxe-Coburg-Gotha's has considerable advantages. Cabinet members represent a generation with no political history. Voters wanted somebody with no background in the messy Bulgarian transition and they were elected as soon as they emerged on the horizon. All cabinet members speak foreign languages more or less fluently. This is a precedent in the recent history. Before recently, Bulgaria was the only EU accession country, which most statesmen rarely spoke any but their mother tongue. This was not the case even with Balkan neighbors. Many high-rankers have launched their CV's studying or working abroad and know the things may look different. This is no exception, but the the combination is unique given the old-timer king in the company of non-partisan new commers against the sclerotic, nomenclature-nourished political party habits of previous establishments. The ministers of economy, finance, communications, labor have the advantage of knowing the country in a comperative perspective due to their previous careers. The presumed parliament support by respective parliament committees also looks equiped with needed competence. The understanding of market reforms seems to be there as well. Key economic ministers do not need to learn economics ABC's the hard way, garnishing costs to the public and the robust but still rather provintial Bulgaria business sector. For the first time the minister of labour is a bussiness person - not one with bureaucratic or trades unionist background. If she manages to contribute to greater mobility of the labour market, this would be an important part of the job to boost economic growth. Political Undercurrents Taken for granted, the above mentioned merits do not dimish the task now to turn those advatages into a good for the country. There is a background predisposition against useless economic experiments and towards greater pragmatism. This, however, may be turned into opportunism if the undercurrents of Bulgarian politics are unskillfully addressed. Redistribution Many of the failures of previous cabinets stem from the fact that there always was relatively weak right wing, pro-market reform opposition. The current situation resembles that of mid-1997: the incumbent government is perceived as right of the center while the opposition is opportunistic and populist, the cabinet lack criticism from the right point of view and increasingly pays a tribute to redistribution philosophy of public governance, believing that thus pleases the electorate. Last year Geogi Ganev of the Center for Liberal Strategies proved in a representative survey that the both Bulgarian businesses and the public borrow their success recipe from the famous aphorism of Frederic Bastiat that the state is a fiction entity through which everybody seek to live at the expense of anyone else. Mr. Ganev find out that 40% of adult Bulgarians believe that they would be better off if and only if the government gives them what it takes from the others. Our own 2000 representative survey of business community found that protection and privileges granted by the government are considered normal by 63% of the businessmen. We think the motivation was and still is the fear of competition since 41.4% fully or partially agreed, "the Bulgarian business environment should be protected from foreign competition". Political friends and sponsors The major failure of Socialist and Democratic processors was to fall victims of these expectations. Socialist could not close loss-making industries because they did not dare to fire 700 board members of state owned enterprises (SOE's). For the general public they reserved social welfare policies through price controls. Eventually, the system exploded. Democrats believed that everybody would benefit from restored stability but did not resist the temptation to benefit own political affiliates (e.g. the appointees at the managing boards of SOE's) more than anybody else. The electoral ticket of NMSII was issued by the bitter feeling of unfairness: many believed that they should gain at the expense of others but most of them harvested just the reforms' costs not the opportunities. An evidence of this mood was the anti-corruption rhetoric of the lection campaign, as well paradise-on-the-earth promises on behalf of most political contesters, particularly NMSII. An early indication of the same was the inflation of ideas how after the elections the new cabinet should protect the "national interest". Between March and May 2001, leading employers associations issued long, detailed but incomprehensive laundry lists of protectionist measures and promised support to anyone who endeavors to implement them. As usual, trade unions were prompter and before the elections successfully lobbied amendments to labor regulations, which increased mandatory vacation leaves by 30% (BGN 63 million - roughly 0.24% of 2001 GDP - additional costs to private employers per annum) and strengthened the bargaining power of the unions. After the elections, there is an avalanche of similar requests: Bulgarian Industrial Association insists on 10% tax on banks' investment abroad; Employers' Union hope the cabinet would enact preferential treatment of domestic companies in public procurement; trade unions - reminding pre-election promises - talk on 30% increase of wages of government employees; meat producers want an exemption of their products from VAT, so do tour-operators; tobacco growers (most of them Muslims, a constituency of the junior NMSII coalition partner, the Movement for Rights and Freedom - MRF) lobby on 50% higher price of row tobacco; wineries want the government to buy their produce since domestic and international market does not take it; tourism industry hopes for 5 times higher government subsidy to advertise the country; software companies are deeply motivated to advocate VAT refunds under unclear checks and balances; there is a campaign in the press central heating monopolies not to collect debts, to reintroduce price controls (since prices "raise on purpose") and against scheduled 10% electricity price adjustment - the list might be significantly enlarged. Businesses who claim they financed NMSII election campaign modestly proposed that domestic companies and the government perpetuate exclusive rights on: electricity and gas distribution, in agriculture and tourism. There is a Bulgarian saying: what you call is what you get. "Non excuses, mon patron" Whatever the media and political rhetoric, Bulgarians do not think their economy is in jeopardy: they save more (savings grew three times on annual basis); buy more cars and home appliances (5% more than in the first half of 2000), and eat more. Between March and June 2001, the unemployment rate dropped from 21.6 to 19.4 % and further but slow downgrade is likely. In July YOY inflation is 5.9%. Mortgage rates went down in the first half of 2001 by roughly 2% to 8-9%. Obviously, these are average figures household situation is worse for those who were and are anyhow desperate and would not even think of residential loans, fridges or cars. Since there is no evidence of economic catastrophe, in comparison with any previous governmental transition there is less tolerance to the first steps of the newly elected cabinet. Additional factor to inflate hopes for government privileges is that, as a political movement, NMSII and its cabinet are yet quite shapeless. It is basically unknown, especially to the larger public, what are the value systems behind, what is possible to ask, and what to expect. Naturally, the public tastes the water. The risk for the economy (and for the prosperity of the society) is in the possibility that the government may give way to the temptation to favor ones at others expense. Then a non-party one would replace predecessors' party clientelism, but not necessarily more transparent one if party hypocrisy is coverted into non-party hypocrisy. However, the task of outplaying unrealistic expectations could be easier that one would think: people might be rent-seekers but not idiots. But it requires better teamwork and thinking in the same direction - better market based solutions to problems the economy is facing. The prime minister so far demonstrated useful skills to kick out past would be friendships. But his background of a king and the relevant aura of a miracle-maker desperate and rent-seeking voter assign to him is of little help in rational economic policy. Instead of attempting a consolidation of economic concepts of the cabinet the prime minister seems motivated to ask economic ministers to work out application of promises to give everybody USD 2,500 rate free loans. Coalition partner(s) MRF is a tricky coalition partner. It is in itself a coalition with liberals around ex-president Zhelev. In value terms MRF and liberal are rather to the left. In administrative terms, they are pushy to cash in the fact they are the only official partners. Strategy-wise the communication is fairly simple: give us more quotas, seats in the government and subsidies to semi-mountainous regions. In 2001, Simeon Saxe-Coburg-Gota has repeated the mistake Filip Dimitrov made in 1991: the coalition agreement with MRF is not quite public; the opinion is not in a position to be an ally in limiting MRF ambitions. Meanwhile, deriving "lessons" from Kosovo and Macedonia experience some MRF leaders, e.g. Remsi Osman, have become rather radical (though yet quiet) in philosophizing constitutional changes in Muslim minority status quo. Economics and anti-economics Responding to economic needs and public expectations, there are different moods in the cabinet. Inevitably, of course, we speak mainly of intentions and new speak, not actions. On one level, we have a common blame of predecessors, which still feeds the above-mentioned feeling of unfairness. Deputy Prime Minister Vassilev speak about "the broken ship of the Bulgarian economy", according to Velchev, the mister of finance, "there are huge halls in the budget", and others claim there is "chaos in the customs". All these statements must be taken with a pinch of salt; they feather the ears of revenge-seekers left unpleased with the policies of the previous government, freeze useful convictions from before the elections and would serve as handy excuse in the future. Since many pre-election promises cannot be fulfilled, this rhetoric will help to change the interpretation. On a deeper level there is a difference in the economic visions of the economic ministers and those responsible for other sectors. The minister of environment remains silent on how she would manage environmental costs of EU accession, which amounts to 60-80% of the current foreign debt, but is very talkative on how to ban wood exports. The minister of regional development flashed out two ideas that have nothing to do with the economic realities of the countries. First, he suggested government housing program and government guarantees for residential mortgage loans while 91% of the houses and flats in the country are private property and housing construction is 100% private, currently working considerably under its capacity. On the buyer side, residential mortgages are farley long term (with an average maturity of 11 years) and with an interest rate of 8-9% per annum. Second, he suggests 10 year moratorium on foreigners buying arable land. After 11 years of the disinvestments in agriculture (90% less inputs in irrigation and melioration and 70% lesser use of fertilizers) and fairly beneficial terms of leasing land, the net price of profitable investment in Bulgarian arble land would be prohibitably high for any buyer. An inexperienced in financial matters person like the minister of transport and communications thinks of streamlining telecommunications monopoly on frequencies and Internet wholesale. Obviously no change is possible in this sector over night. However, contemporarily sporadic attempts of the Bulgarian software and Internet provider companies to compete internationally are farely frustrated by both the execution of state monopoly rights and the lack of information what is the vision of the government. These and other public messages leave the impression that cabinet members met by accident, didn't have time to agree upon what is important or what is not and that, for the time being everybody is sharing his or her own world picture. It would be difficult to reconcile non-market visions with the needs to maintain fiscal discipline, limit government discretion and foster economic growth. |
