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Power Prices Bring Down Bulgarian Government

By Jen Alic | Mon, 25 February 2013 22:46 | 0

Fuel prices can bring down a government, as the Bulgarian elite are now learning, and it doesn’t stop there.

As tens of thousands of people hit the streets in Bulgaria and engage in bloody clashes with the police over rising power bills and corruption, the government’s resignation isn’t enough and the streets are still seething, with at least 25 people wounded in the clashes.

Late last week, the Bulgarian government thought the mass protests-turned-riots would dissolve when the Parliament accepted the resignation of Prime Minister Boiko Borisov and his cabinet. Not so—the protests are economic, not political (at least, they have not visibly been hijacked by political opposition figures—YET). 

This week, President Rosen Plevneliev will appoint an interim government, but the protests continue unabated. The public is prepared to keep up the pressure until new elections can be held in April or May—and until they see decisive movement first and foremost against foreign-owned electricity distributors. 

Related article: How Low Wages can Lead to High Oil Prices

Bulgarians were not seeking a regime change, per se, they were demanding that something be done about rising power bills, wages and government corruption. 

To put this into context, protests on this violent scale are unprecedented in post-Communist Bulgaria, and there is fear that the sentiment could spread to other countries in Eastern and Southeastern Europe.

Among other things, Bulgarians would like to see an end to monopolies like that over electricity distribution, which they see as the root cause of increasing power bills.

Not only is the capital, Sofia, overrun with protesters, but the Black Sea city of Varna has seen daily rallies for the past 15 days. The largest protest was on Sunday, after the government’s resignation. As many as 40,000 protesters demanded the resignation of Varna Mayor Kiril Yordanov, whom they accuse of running the local economy with the Mafia. Thousands of protesters gathered outside Varna’s utility monopoly, Czech Energo-Pro (CEZ), on Sunday.  Protests against the Czech power distributor occurred in other cities as well.

Borisov had already promised to cut electricity bills by 8% beginning in March and to revoke CEZ’s license, but it was not enough to stop the protests. Bulgaria’s energy regulator earlier this month began the process of stripping CEZ of its licenses, saying it had evaded public procurement law, among other abuses.

Related article: Why is the Washington Post Surprised at High Gas Prices?

Since then, however, authorities have said that prices could not be cut before April—at the earliest—and that CEZ’s license would not be revoked, but some other compromise would be sought.

Of course, the Czech Republic will fight to keep any of this from happening. CEZ has vowed to defend its licenses by all legal means, and insists that only a full liberalization of the electricity market will help to lower high prices.

Bulgaria is the poorest country in the European Union, and rising power bills have come along with a freeze of public wages that is exacerbating the situation. The average monthly salary in Bulgaria is about $534. The country’s standard of living is only about 45% of that in other EU countries.

Protesters countrywide are calling for an end to electricity monopolies, an end to the value-added tax (VAT) on electricity and a review of all energy privatization contracts.

While economic in nature, the protests will necessarily be political, and the Socialists are likely to be the biggest winners in fresh elections that are just around the corner now. After all, the main point of the protests is that the public wants electricity distribution to be renationalized, which will not go down well in the Czech Republic, home of CEZ, or in Austria, which owns another key distributor in Bulgaria, EVN.

By. Jen Alic of Oilprice.com

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Jen Alic
Company: ISA Intel

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