6. Obstacles and challenges related to EU accession Major obstacle The EU regulatory zeal coincides with that of Bulgarian authorities. They “tick boxes”, do not implement rules and have been less “monitored” that 2004 members. When implementing the aqcuis the more costly patterns are applied. The EU accession is often the only but abstract justification to regulate. Eventually the process increased costs but omits benefits. Other countries have compensated for those costs by reducing taxes. Challenges Bulgaria finalized negotiation with EU. European commission report 2003 (1) is the latest holistic documents that summarizes the economic progress and can be use to summarize the comments of respondents on the EU accession challenges and needs. The table below attempts to put a meaning to different estimates of the used indicators for a functioning market economy. The key challenge is not to have “functioning market economy” but well-functioning market economy. EU Economic Criteria EU Assessment Challenges for the development of the private sector A) Support for economic reforms and EU accession Continues EU is viewed as “cash cow”, a “substitute for the Soviet Union” B) GDP Growth Sustained at somewhat lower rate There is room to desire more provided incentive are treated right C) Current Account Deteriorates but FDI grows It is investment driven D) Unemployment Decreasing But shortage of competitive work force is increasing and there is little done to resolve the problem; government employment programs are inefficient E) Consumer prices and inflation Decreases significantly What remains is driven by administered prices F) Adherence to currency board arrangement Continues Under-surface political pressures for government sponsored project (e.g. Belene NPS) may jeopardize stability G) Fiscal policy Continues to be tight The government redistribution remains high (41% of GDP), sustaining higher than needed taxes H) Macro-economic policy mix Adequate No improvement of the management of the budget sector I) Price liberalization Progressing but not complete Liberalization in some sectors (e.g. power) is slow and impedes investment opportunities J) Private ownership Progressed further The government remains major player in key sectors and have advantages before the law K) Privatization program Advances more slowly than expected Some deal have become “a joke”, blocked by interest groups and wrong mindsets L) Market entry and exit Not yet working smoothly, but new measures promise improvement; exit is a problem; insolvency remains slow Policies remain on paper; courts malfunction M) Enforcement of property rights Remains difficult in some areas, courts discourage taking cases to courts; costs on property transfers are high Remains difficult in many areas N) Bank intermediation Increasing, interest spreads decrease Growth impact is positive Î) Non-banking financial sector Still rudimentary, pension funds assets grow State pension scheme (NOI) is a prime concern: has advantages vis-a-vie private funds, while their profitability is 11% P) Supervision Has been strengthened Supervisory authority lacks knowledge;   ------- (1) See: 2003 Regular Report on Bulgaria’s progress towards accession, p. 31-36.