BULGARIA: GROWING CHALLENGE TO REFORM

• Document Type: FOIA
• Keywords: EASTERN EUROPE
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 0005657413
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 6
• Document Creation Date: June 24, 2015
• Document Release Date: July 14, 2011
• Case Number: F-2011-01070
• Publication Date: May 10, 1994

Directorate of Intelligence
Intelligence Memorandum
Office of European Ar:alysis
10 May 1994
Prime Minister Berov's 17-month-old government of technocrats appears to
be running out of steam.
? Berov's recent heart problem has renewed talk about early national
elections. His hospitalization, however, has barely affected overnment
policy, which is influenced mostly by the ex-
Communist Socialist Party (BSP), t e argest party m par Lament and
Berov's most important supporter. _
' Berov's government, despite its success in securing financial support from
international lenders, has done little to advance the economy, combat crime,
Zhelev feels he must act soon, especially because the Socialist flexed their
muscles by forcing two key officials to resign and demanding that others go.
Zhelev is trying to cobble together a strong centrist coalition to minimize
Socialist gains in any elections. No parties have yet signed on to his
scheme, however, and he faces an uphill strugg]e.
Zhelev's probable failure to stem Socialist gains suggests a further
slowdown in reforms and reorientation of Sofia's foreign and security policy
 Prime Minister Berov's government of technocrats came to power in
December 1992 following the collapse of the Dimitrov-led Union of Democratic
Forces coalition government that October. It represented parliament's last chance
to form a new government or else Bold new national elections--a prospect no party
favored. Dependent on an odd assortment of votes from ex-Communists, ethnic
Turks, and centrists to stay afloat in parliament, Berov is faced with a hostile
opposition that leas tabled five unsuccessful motions of no-confidence against him.
His hospitalization for heart trouble in mid-March raised political tension and has
spurred talk of an early election.
' Berov's absence has hardly affected policy, however, since the ex-
Communist Socialist Party runs the government from behind the
scenes.
' He returned to work on 25 April amidst growing pressure from his
backers for cabinet changes in return for continued support. After
two key government officials resigned under pressure from the
Socialists, the BSP is demanding that the Industry and Defense
1`linisters be replaced, according to press reports.
Although Berov can claim success with international financial institutions,
the public perceives that he has made little progress on other pressing economic and
social problems.
A public opinion poll early this year showed that only 27 percet.t of
the populace trusts Berov's government, with 9 out of 10 respondents
in Sofia believing that it is corrupt.
? Suppdrt for Berov may have reached a new low when President
Zhelev, the country's most popular politician according [c rece~tt
polls, announced late last month that he was withdrawing support
from the ovennnent. Zhelev said the government had failed to
Stagnant Eronomy, Languishing Reform, Rising Crime
Bulgaria remains mired in recession that has led to growing unemployment
and falling real wages. Scan: progress on privatiza[ic:t or restructuring has left
Communist-era enterprises large!}~ intact and deeply in debt, underminin eff~ orts at
This mcmora ndum w? c ? v , ~ Ollice or Eurn can Analysis. Comments :md
queries are urokoirc
 Unemployment rose to 16.5 percent in March as indebted state
enterprises responded to a 9 percent drop in sales last year by laying
off workers, according to the Bulgarian National Statistical Institute.
Banks lost $278 million in 1993 and currently are carrying another
$1.3 billion in bad loans. Overdue debts account for more than 50
percent of outstandin loans according to officials of the Bulgarian
National Bank.
The dramatic rise in crime--both street crime and organized criminal
activity--and corruption is causin man ~ Bul arians to ues[ion whether democracy
has improved their lives The National Police chief
admitted to the press in February that he could not guarantee the public's safety.
Even Zhelev chastised the government publicly for failing to control organized
The lack of Western financing and investment, the EU's delay in ratifying
its association agreement with Bulgaria, NATO's refusal to provide explicit security
guarantees in case of a wider Balkan a~ar, and other factors are fueling Bulgaria's
perceptions that the West is losing interest.
Politicians of all stripes have blamed the lev's sharp drop on the
West's failure to disburse promised balance-of-payments support,
according to press.
sanctions against neighboring Serbia, at least in part, reflects
Bulgarian leaders' frustration with the lack of Western compensation.
Berov is especially dependent on support from th~ Socialist Party--the
largest in the legislature. The ex-Communists are using their expanding clout to
place political allies in key government ositions, slow market-oriented reform, and
reduce the country's pro-Western tilt,
Last month the Socialists forced the resignation of pro-NATO
Deputy Defense Minister Noev followin the heated debate over
transit of the UNPROFOR convoy, The
press reports that the BSP plans to nominate Dimitir Pavlov, an ex-
 Communist hardliner less inclined toward the West, as Noev's
replacement.
Press) (reporting indicates that Trade Minister
Karabasltev s resic,nation late last month also resulted from Socialist
pressure.
President Zhelev is increasingly worried that Bulgaria's nascent political
system and economy are adrift and fears that his influence over the govcrnment is
waning A leading dissident-turned-President
helev is especially anxious to
avoa~octaltst-led government emerging from the next le islative
election, which must be held by October 1995.
Zhelev probably hopes he can use his office to time the elections to
minimize BSP gains. He has said publicly that the country should go to the polls
H ithin six months, or no later [han autumn. However, he would have to com~ince
either the Socialists, or more likely, both the ethnic Turkish party (MRF) and the
centrist National Union for Democracy (NUD) to vote against the government to
precipitate new elections.
Zhelev) (plans to convince the
parties to agree to a fall election and a provisional government to
bring the country to the polls.
In a probable attempt to preempt Zhelev, the Socialists declared that
they would give Berov 45 days to resolve the country's fiscal crisis
and threatened to withdraw their support and precipitate new
Zhelev's ultimate goal appears to be to cobble together a broad centrist
coalition s[rong enough to push reforms through parliament.
In recent weeks, he has met with leasers of the country's centrist
parties, moderate factions of the ex-Communists and rightist
opposition, and extraparliamentary parties to discuss a new coalition,
 that he cannot construct an anti-BSP/center coalition without the former
center-right UDF, and Ite has begun talking to some of its more pragmatic leaders,
according to the press. As long as former prime minister Filip Dimitrov is UDF
chairman, however, he and his far right, hardline allies seem almost certain to
block an}~ kind of arrangement with moderate center groups.
Zhelev recently failed to convince UDF moderate Stefan Savov--
leader of one of the UDF's larger groups--to abandon the party for
this new grouping, according to the press. However, Zhelev may
have approached Savov again in early .April and offered him the
premiership, accordin?, to the press, but information about their talks
Movement for Riehts and Freedom (MRFI. Zhelev and the mainly ethnic
Turkish party chairman, Ahmed Do an discussed a centrist coalition Burin talks
last January, according to the press,
New Union for Democracv (NUD). NUD chairman and former UDF
member Dimitur Ludzhev offered to throw his center-right party's support behind a
bid b ~ Zhelev to siren then the Presidency during talks in late January
However, the Bulgarian press reported in April that NUD
representa[ives declined to sign on to a November election and re ected a coalition
with the current crop of parliamentary parties. ~~
member Aleksandur Tomov's GOR, according to the press, bu[ we have seen little
else about these discussions. Although Tomov has announced publicly several
times that the defection of a large block of moderates from the BSP is imminent, he
s
c? ~~
 Most of the extraparliamentary parties probably believe that their chances of
crossing the 4 percent electoral threshold on their own are slim, and several,
according to the press, are engaged in coalition talks. For example, late last month
Zhelev probably sees the general drift of the country, especially the growing
influence of the ex-Communise, as approaching a critical point and believes that lie
must act soon. However, he faces an uphill battle in building a centrist coalition
strong enough to minimize Socialist gains in new elections.
' Barring an unlikely split among the Socialise, the are almost certain
to be the big electoral winner. the BSP
will win 40 percent of the votes rimaril because of iu well-
organized electoral machine. the UDF,
plagued by internal divisions and obsessed with anti-Communism,
has narrowed iu base and is likely to garner only 20 percent.
The former-ruling UDF continues to distance ieelf from mainstream
voters with iu hardline leadership and political intransigence, and
without the UDF, any centrist coalition is unlikely to garner enough
A Socialist-led government--whether more heavily influenced or outright
controlled by the Socialists--would continue to act as a drag on Western-style
reforms, especially in the economic sector. It would also ~'tift Sofi:'s foreign
policy focus away from the West and toward Russia and Serbia.
Socialists leaders have said publicly that they prefer collective
ownership of land over individual private property, extensive state
ownership of industries, and an activist industrial policy boil[ around
tax breaks, subsidies, and protectionism.
status in the region and shows a preference for: more conservative
Russian elemenu in Moscow; anti-Turkey, pro-Serbia/pro-Greece
policies; an "all-European" security s~~stem; and preference fo: "old