Bulgaria caught between Trade Interests and Economic Tensions

Bulgaria, 06 Aug - 19 Aug 2014
Impact of Russian food embargo on Bulgaria ++ Quo Vadis, South Stream? ++ A banking system Bulgarians can trust? Depositors in KTB organize protests. by Raycho Penchev
Impact of Russian food embargo on Bulgaria

The European Union’s sanctions on Russia seem to have had an adverse effect, since it is expected that Russia’s ban on the sale o European food produce will hit Eastern European countries, such as Bulgaria, hardest. 'This is a bad surprise! Why did they restrict the market and stop all kinds of trade?! We were counting on Russia' –farmer Stoyan Stehov told the Bulgarian Nova Television. He sells half of his produce on the Russian market.

Agricultural Minister Vasil Grudev confirmed that it would be hard for Bulgarian farmers to sell their fruit and vegetables this year. The minister also assumed that the state would carry out measures to increase producer protection. In addition, Bulgaria would also apply for EU compensation, because Russia's ban on Bulgarian agricultural produce is expected to result in indirect losses and an imbalance on the European Community market. What is more, Russian sanctions come at a time when Bulgarian agriculture has been struggling.

Many observers have pointed out that the Bulgarian market has been facing a stiffer competition recently. Cheap tomatoes from Poland, especially, make life hard for Bulgarian farmers. Furthermore, heavy floods destroyed a substantial amount of the crop earlier this summer.

Quo Vadis, South Stream?

Bulgarian Energy Holding (BEH) and Russian gas exporter Gazprom have increased the company's capital despite a ban by the Bulgarian Ministry of Economy and Energy (MEE). Both have equal ownership interest in the project company South Stream Bulgaria.

For instance, the controversial project, which would ensure that Russian gas would evade troublesome Ukraine. Instead it would come across the Black Sea to Bulgaria and onward. The project is still intensely monitored by the EU.. Hence, the European Commission demanded from Bulgaria earlier this year that South Stream should be put on hold, since the project would not comply with EU law. The Commission found that it is in violation of the ‘Third Liberalization Package’, a legislative package with the purpose of further opening up the energy market in the European Union.legislative package for an internal gas and electricity market in the European Union. Its purpose is to further open up the gas and electricity markets in the European Union.

However, the capital increase of the company came soon after the caretaker Economy and Energy Minister Vasil Shtonov ordered the suspension of all actions on the project. South Stream Bulgaria raised its capital to 397.6 million levs (203.8 million euros) from 15.588 million, as stated by the minister.

Nevertheless, the Economy and Energy Minister assumed the capital increase does not mean that the frozen project needs to be restarted. . But observers pointed out that it enables to carry out the preparatory works on the pipeline. That is why the MEE stated that it will refer the case to country’s prosecutor’s office to investigate the last moves of the company.

A banking system Bulgarians can trust? Depositors in KTB organize protests

Hundreds of customers at the Corporative Commercial Bank (KTB) organized protests across Bulgaria, demanding access to their accounts that have been blocked since the Central Bank seized control over the KTB in June.

Bulgaria’s fourth largest money lender was hit by a rush to withdraw deposits, causing what is now seen as the biggest banking crisis since the 1990s. Nevertheless, there is still no solution for the frozen deposits of the bank's clients, since the Bulgarian authorities are entitled to carry out the audit and inspections of KTB.

Furthermore, due to the restricted access to their bank accounts, customers cannot pay for their own medical, social and business necessities. 'I have financial resources of our business. We have to pay insurances, taxes, loans…' – protester Borislava Dimitrova told the Bulgarian National Television.

The protest was organized through social networks. In addition, customers at KTB have set up a Committee for Protection of Banking and Financial Stability in Sofia. The Committee shall cooperate with an expert group of employers and trade unions to rescue the KTB.

Finally, according to a recent survey by Gallup International, more than half of Bulgarians (53 %) do not trust the banking system in their country. Sentiments are fueled by reports that a European Arrest Warrant has been issued for Tsvetan Vassilev, the KTB’s main owner. He is charged with having forced for his own benefit the chief cashier and the CEO of KTB to withdraw a large amount of money. His whereabouts are unknown.

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