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Nov 6, 2014 | 10:15 GMT

4 mins read

A New Bulgarian Government Begins to Coalesce

(NIKOLAY DOYCHINOV/AFP/Getty Images)
Summary

On Nov. 5, Bulgarian President Rosen Plevneliev officially gave Boyko Borisov, the head of the center-right Citizens for European Development of Bulgaria (GERB) party, a mandate to form a new government. Last-minute talks are ongoing, but it is likely that GERB will form a coalition with several smaller right-leaning parties.

The new government will struggle to address Bulgaria's challenges, which include the possibility of renewed social unrest, an ongoing banking crisis and the difficulty of maintaining good ties with both Russia and the European Union. A coalition government under Borisov will lobby Brussels to allow for the construction of the Russia-led South Stream pipeline, but it ultimately will not risk losing EU investment and aid by proceeding with the project without EU approval.

Borisov received his mandate a month after Bulgaria's parliamentary elections gave eight different parties seats in parliament and made GERB, which won 32.67 percent of the popular vote, the biggest party in the country's legislature. Borisov has seven days to form a coalition Cabinet capable of gaining support in the country's fractious parliament.

Complex coalition talks initially led the nationalist Patriotic Front to give tentative support to a GERB-led alliance. However, later talks between Borisov's party and the Reformist Bloc — a group of right-wing factions — proved successful. GERB and the Reformist Bloc together hold only 107 seats — about 44 percent of parliament — and would need another 14 seats to have a voting majority. Late on Nov. 5, Valeri Simeonov, co-chair of the Patriotic Front, announced that the party had reached an agreement with GERB and the Reformist Bloc regarding a policy program for the next four years. The Patriotic Front's support would give the coalition another 19 seats, strengthening the future government and giving it a majority in parliament. Nevertheless, this coalition is likely to be fragile, relying on a diverse set of parties and factions with varying ideological backgrounds and priorities for support.

Challenges for the New Government

The new coalition emerges amid indications of a potential uptick in social unrest in Bulgaria. On Nov. 4, a 48-year-old Bulgarian set himself on fire in Sandanski, a border town in southwestern Bulgaria, and a day earlier a 38-year-old woman self-immolated in front of the Bulgarian president's office in Sofia. Both are alive but in critical condition. The motives for these self-immolations are unclear, but self-immolations have played an important role in Bulgarian politics recently. Borisov's previous term in office ended ahead of schedule in 2013 amid demonstrations against increasing utility and living costs, as well as corruption. Six self-immolations occurred during that period of unrest.

Since early 2013, successive governments have failed to address Bulgaria's economic troubles. The European Commission expects consumption, along with private and public investment, to drop next year. According to the European Commission's fall economic forecast, real gross domestic product growth in Bulgaria will decrease from 1.2 percent in 2014 to 0.6 percent next year.

Although the recent self-immolations have not triggered new protests, they could contribute to a renewed focus on the economic difficulties Bulgarians face in everyday life, thus raising public demand for economic growth and reforms. Rising economic expectations will significantly challenge the new government, whose factions will disagree on some aspects of economic policy. Failure to meet demands for economic change could undermine the new government's credibility.

Another hurdle for Bulgaria's new government is the country's ongoing banking crisis. The government will have to restore confidence in the banking sector after a run on the Corporate Commercial Bank in June led to the Bulgarian central bank's decision to take control of the bank and freeze access to accounts. The bank run, coupled with the ongoing uncertainty surrounding the future of the Corporate Commercial Bank's deposits, undermined much of the public's confidence in the country's banking system.

The South Stream Issue

As it deals with potential social unrest and ongoing financial problems, the new government also will have to make a decision regarding the South Stream project. The interim government suspended work on the pipeline in mid-August over concerns that the project violates EU rules. During his previous term as prime minister, Borisov supported South Stream, but in the lead-up to the Oct. 5 parliamentary elections, he pledged not to go ahead with the project without EU approval.

South Stream would bring in revenue for Bulgaria by providing construction jobs — the Bulgarian stretch of the pipeline is expected to cost Russian state-owned energy firm Gazprom a total of $4.8 billion — and through an annual dividend of about $890 million once the pipeline is operational. However, delays relating to EU regulations could affect the project's timeline, and Bulgaria may not be able to count on this dividend until the pipeline's expected completion in 2018.

The European Union, on the other hand, is expected to provide Bulgaria with aid and investment in excess of $12 billion between 2014 and 2020. Should Bulgaria choose to go ahead with South Stream construction despite the European Union's objections, some of this funding could be jeopardized. The new GERB-led coalition will aim to proceed with the South Stream project and maintain close relations with Russia, but it will not risk losing some of its EU funding and thus will delay the South Stream project while it awaits EU approval.

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