Bulgaria looks to EU for help in its fight for survival

Date: 13/03/1997

WHILE most of central and eastern Europe is pushing for early membership of the EU, Bulgaria's more immediate concern is survival.

Its people may no longer be demonstrating on the streets, but their bitter struggle for food and basic necessities continues.

When Foreign Affairs Commissioner Hans van den Broek visits the country next week, he will face strong demands for macroeconomic assistance.

Although the Union's response will depend to some degree on Bulgarian talks with the International Monetary Fund, it is looking increasingly likely that it will lend a hand.

“At present, we are ready to mobilise a negotiation team even in advance of a final agreement with the IMF,” said the head of the EU's Sofia office, Thomas O'Sullivan, recently.

O'Sullivan said that the European Commission would start talks with Bulgaria's caretaker government - in power until elections are held in April - on a “substantial loan”, although the final figure would depend on negotiations with the IMF and the G-24 group of donor countries.

Seven years of financial mismanagement and delayed reforms have left Bulgaria's economy in a shambles. The country owes 1 billion ecu in foreign debt repayments for 1997 alone, and is having severe trouble footing the bill.

Bulgaria's gross domestic product contracted significantly over 1996, as did its volume of trade. Inflation was estimated at around 100&percent; for February, while confidence in the national currency - the lev - was shattered.

And, as government debt has tripled over the last 12 months, living standards have plunged.

The world sat up and took notice when the Balkan country's population took to the streets of Sofia earlier this year, calling for general elections and immediate reform.

When the Socialist government finally acquiesced, setting elections for the end of next month, the crowds dispersed.

But their troubles remained. Not least of these was an urgent need for 100,000 tonnes of wheat (a month's consumption) and medical supplies, as Bulgaria's health service faced collapse.

Last month, EU foreign ministers met representatives from the beleaguered state in Brussels, nominally to discuss accession prospects but, in fact, to determine a way out of the crisis.

Shortly afterwards, they granted the necessary food aid and over 1-million-ecu worth of medical equipment, adding to a 20-million-ecu emergency social assistance programme already in place.

But what Bulgaria most urgently wants is balance of payments assistance, and support within the Paris Club of lending nations for a delay in the country's huge debt repayments.

Anne McGuirk of the International Monetary Fund has been in close talks with caretaker Prime Minister Stefan Sofiyanski, who has said the two sides “stand a chance of reaching agreement on all issues despite some differences”.

In return for help, the caretaker government claims it will liberalise prices (especially of grain) and initiate wide-ranging market reforms, including the privatisation of its banking sector.

A sign of general belt-tightening was its decision last week to lay off 160 embassy personnel throughout the world and close two consulates.

The reform process will be extremely painful for a population still not used to paying real prices for its goods, and commentators fear things will get worse before they get better.

The Bulgarians view Union support as crucial to avert total collapse. “The expectations of the Bulgarian people for solidarity by the EU and its member states, and timely support to relieve the social repercussions of the current situation, remain very high,” stated a paper presented to the Brussels meeting last month.

Although the levels of aid at stake may seem small by western standards, they make a big difference to a poor country of 8 million people. The 20-million-ecu social assistance programme will supplement some pensions by as much as three to four ecu a month. “That is as much as my mother gets in total,” commented one Bulgarian diplomat.