Mr. Stanishev: You are in Brussels for the Party of European Socialists' (PES) summit ahead of the European Council. Which topics do you think socialist leaders will discuss?
There are two major topics. The first is a short-term issue that is very much in the public eye across Europe: the financial situation in Greece and how to support them. The second is a more long-term strategic issue: the vision of the PES about the recently-unveiled 'Europe 2020' strategy, which requires a lot of debate and discussion. It is important that the socialist family comes out with a very clear strategic vision, something that I do not see in the European Commissions proposal. A coherent and visible strategy with clear goals is needed.
You recently met with PES leader Martin Schulz and both of you said that the Europe 2020 strategy is not ambitious enough…
Yes, I would like to see much clearer indicative goals for the EU in 2020. The Lisbon Strategy was the first attempt to come up with a European plan for becoming more competitive and more cohesive and, speaking objectively, it has not been successfully implemented.
Now, a more ambitious strategy is needed if we are to see a stronger, more cohesive and more social Europe that corresponds to people's expectations in 2020. In order to achieve this, you need a lot of ambition and strong coherence across different policy areas, because I see many good intentions but no clear outline for how to achieve these goals.
Would you like to cohesion to be one of the Europe 2020 targets?
I think that it is important, because in reality there are two Europes: that of the well-developed, rich countries and that of the newcomers. One of the general ideas of EU enlargement is to have a united Europe: one that will help the countries lagging behind in terms of economic, social and regional development to come up to the level of the others.
But it is not only about this. I would like to see much clearer goals for research and development, because Europe is lagging behind the United States and many other countries. It is therefore very important to have common policies.
Looking at social policy, we have a common market, debates on a new financial regulatory system and discussions about a possible European Monetary Fund, which are all important but an institutionally weak EU social dimension. There are good intentions at European level, but it is only really a matter of national policies.
Maybe the newcomers need to convince the older member states that cohesion does not mean the West giving money to the East. Many projects in Eastern countries are actually run by Western companies, and entire regions of the older members make a good living from cohesion policies with their neighbours…
Definitely, yes. A very substantial part of money from EU funds for infrastructure projects is going back to companies in the older member states.
Do you think that Europeans are aware of this? Aren't they being manipulated by populists?
There is misunderstanding about EU funds in both Western countries and in Central and Eastern Europe. In the older member states, they say: we are subsidising and giving our taxpayers money to these newcomers, but they don't know how to use it correctly and we have problems of our own. On the other hand, the perception in the new member states, particularly in Bulgaria, is that money will simply be poured into the country to be spent any way people want.
I would say there is a cultural misunderstanding in many ways, but gradually people, municipalities and businesses are starting to understand how to work with EU money, which is a very tough procedure with lots of technicalities and requirements. It is a process of learning for the new member states.
Coming back to Europe 2020, I think it is very important to have much stronger coordination on macroeconomic and financial policies and priorities in several areas.
When you look at the mainstream press in Bulgaria, you do not find many articles about the Europe 2020 strategy. The same applies to government statements. Do you think the new government sees Europe 2020 as a priority?
I don't think that the new government has any serious strategic priorities. As written in a recent Reuters analysis, it is acting like a fire command centre, simply trying to extinguish fires in different sectors of society.
The fact is, the government wasted its first eight months - the honeymoon period for any government - without coming up with any real ideas about what kind of reforms and policies it will conduct in order to soften the effects of the global economic crisis, solve the current domestic problems and lead Bulgaria into the future. A strategy is needed.
The finance minister, who is considered the ideologist of the government, declared seven reforms, including ones for health care, the public sector and the pension system. They are all fiscal, old-fashioned reforms.
Can growth be achieved in Bulgaria by belt-tightening?
No. I think that the current policy is distancing Bulgaria from what is happening in the rest of Europe. The previous government had a very sober macroeconomic and financial policy and this is why the financial crisis did not actually hit Bulgaria the way it did in many other countries.
Bulgaria was affected by the economic crisis and now has a social crisis as a consequence, but there are two options under these circumstances: a government can either stay idle and focus on a balanced budget and fiscal policies, or it can try to be proactive. The policy of the previous government was to be proactive, because you cannot generate revenues with a stagnating economy and you cannot conduct social policies without good revenues. We had financial stability and left the new government huge fiscal reserves: four billion euros.
The new cabinet denies this. It says that your government overspent.
That is nonsense. I'll give you the figures: Greece is now the case, and everybody knows what heritage George Papandreou received. Greece's new government inherited a 13% budgetary deficit and a public debt of 120% of GDP, and has many problems. The new government in Bulgaria inherited a public debt of 14% of GDP, which is comparable to Greece. However, up to mid-2009, the balance had a surplus and fiscal reserves doubled to four billion. Today, it is much lower, as the new government seems to have spent around one billion to balance the budget, because the fiscal reserves are now much lower.
The new government says that we spent too much in 2008. But in that year, public spending was the lowest it has been in the last 15 years, less than 38% of GDP, and there was enough money for everything: pensions, infrastructure, hospital equipment, etc. Now, public spending is 42% of GDP, an increase of 4%.
During a crisis, if you spend reasonably and focus on jobs and social protection, this is a good policy. You cannot only focus on balancing the budget, because this does not have a positive impact on peoples' lives but this is what the current government is doing. They are creating a vicious circle: to balance the budget, they are not paying government debts to companies or they are not refunding the VAT tax to the business community on time. Therefore, companies have no cash and consequently cannot generate revenues.
According to some estimates, the budgetary deficit in the government's first two months was almost 700 million. The government is starting to panic: one day they come out with new initiatives, the next day they go back on them. The main problem is that there is no predictability, no credibility. The prime minister recently said that Bulgaria is heading towards a Greek-style scenario.
Could such statements destabilise the markets?
Of course, statements by high-level politicians have a real impact on the economy and the markets. You cannot say in January that we will conduct a policy of VAT reduction and then two months latter announce an immediate 2% increase in VAT, which is now 22%.
You are criticising the new prime minister. But surely you cannot deny that he is a good communicator?
He is an excellent communicator, this is his strongest asset, but you cannot govern a country only through communication. If you do not address the real issues, in the end it will be a failure. If you announce reforms on education or healthcare, you have to be confident that they are the right moves.
There were protests about the government's new healthcare policy, so it was simply postponed for a while. Similarly, they initiated a very controversial pension reform and when there was a negative public reaction it was withdrawn, so what is actually happening?
By reading the press it is obvious that there is discontent, but Prime Minister Boyko Borissov is returning the ball to the Bulgarian Socialist Party's court by saying there were huge cases of funding abuse during your government, such as construction works on the site of the future Belene nuclear power plant and land swaps. How would you react to these accusations?
This week, the Bulgarian parliament is discussing the anti-Stanishev report. The national assembly established a special commission to look into wrongdoings by the previous cabinet. In fact, the 130-page document actually defends many of the policies we conducted.
Lying is a practice for this government and the new government's party [GERB]. They have no scruples, no obstacles in their thinking to lie on everything. If there were cases of wrongdoing or corruption, there are law courts for this. But the fact is, this government is using the Ministry of the Interior and putting pressure on the Prosecutor's Office in order to achieve their political goals. Everything they are doing is leading us towards a Polizeistaat.
Even the last case against the president is a clear demonstration that anyone, from the politicians, through to the media, through to business, to every citizen, can be pressed and destroyed if they dare to oppose this government. This crazy idea about impeaching the president, on the basis that President [Georgi Parvanov] published a record from his official meeting with the minister of finance [Simeon Djankov], is absurd. It's a message to the people that even the president can be smashed.
Does this remind you of communism?
This reminds me, I would say, not even of communism, but a certain period of communism, which is called Stalinism.