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Charles Kennedy

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Get Ready for More Energy Unrest in Bulgaria

Protests over high energy prices brought down the Bulgarian government in February, and elections last week have brought back essentially the same government so we can expect continued protests and instability here.

In February, the force of tens of thousands of protesters clashing with police over rising power bills and corruption led to the resignation of the government led by Prime Minister Boiko Borisov as the only avenue for quelling the violence.

On 12 May, new parliamentary elections were held, ushering into office Borisov’s own center-right GERB (Citizens for European Development of Bulgaria) party, but with only 30.5% of the vote against the Socialist BSP’s 26%.

Both parties are discredited: GERB for the recent economic woes, and the Socialist BSP for misappropriating EU funds during its 2005-2009 leadership.

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Not only will this do little to appease protesters, but it will also make it very difficult to form a coalition government. While talks with the winning political parties are set to begin on Friday, results are likely to be forthcoming very quickly.

The protests—largely fueled by, well … fuel—were unprecedented in Bulgaria, and they are likely to continue, perhaps with even greater impetus in the absence of a government that can address the key issues here: power bills, wages and corruption. Times are indeed desperate. Tragically, there were seven public self-immolations during the protests, six of them fatal.

What really rankles the Bulgarian public is the monopolies over electricity distribution, to which they attribute rising energy prices.  At issue here is the Czech power distributor, Czech Energo-Pro (CEZ) and Austrian distributor EVN.

In March, Borisov had promised to cut electricity bills by 8% and revoke CEZ’s license, but this failed to appease protesters. The price cut never happened, and while the government said it was beginning to strip CEZ of its licenses for evading public procurement laws and other abuses, it was up against a powerful force. The decision was revoked, and the government decided to seek a less enthusiastic compromise, which is of course now pending. 

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.

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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.

Officially Bulgaria hopes a new government will be in place by the end of the month, but this is overly optimistic.

In the meantime, nothing will be addressed. And that nothing is critical for Bulgaria. It includes negotiating EU funds for the next seven years, drafting the 2014 budget and addressed the pressing issues that have led to the protests.

GERB is back but even weaker than before, and public anger has certainly not subsided. Protesters had already vowed to reignite protests with renewed vigor if GERB got back into office. For investors, the political risk alarm bells should be going off in full force, which will further hit Bulgaria economically. Planned foreign investment projects will be postponed, and protesters will be further angered by what will likely be a hike in interest rates to ensure protection for banks.

By. Charles Kennedy


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