BULGARIAN REFORMERS UNDER FIRE AS AUSTERITY BITES

Views on BG | February 26, 2002, Tuesday // 00:00

Reuters

By Anna Mudeva

Bulgaria's government economic reformers are under fire at home as public discontent rises over austerity measures and Western analysts are nervously watching for signs of cracks in cabinet unity.

Foreign analysts, who until recently heaped praise on the government's economic policy, have turned unusually cautious on Bulgaria's outlook with some investors not ruling out a government reshuffle in coming months to defuse tensions. The government of Prime Minister Simeon Saxe-Coburg has seen its popularity plunge as economic hardship contrasts with promises of quick improvement in living standards when it came to power last June.

Analysts say the government's attempts to fulfil election promises have been stymied by the worsening global environment as well as a tight fiscal policy agreed with the International Monetary Fund in return for a two-year, $300 million deal.

Public protests followed a series of measures including electricity and heating price hikes as well as a rise in property tax, higher excise duties on cigarettes, coffee, propane and butane and more costly individual trader licences.

"The government has been quite reformist and drew a lot of anger. And that's quite a dangerous situation," said Carline Doyle, Oxford Economic Forecasting analyst.

The Socialist Party, which has two ministers including a deputy prime minister in the government despite regarding itself as an opposition party, said it might also seek a no-confidence motion over the cabinet's economic policy.

Earlier this month, the government easily survived its first parliamentary no-confidence vote, over the introduction of value-added tax on Bulgarian-made medicines, as it was backed only by its initiators, the formerly ruling UDF party.

GOVERNMENT RESHUFFLE POSSIBLE

Analysts said the coalition of the ruling National Movement for Simeon II and an ethnic Turks' party, which holds 140 out of 240 seats in parliament, should cope with any fresh no-confidence motion, but ministerial changes could lie ahead. "We might go through a period of a little instability with perhaps some ministerial reshuffles. The economic team is most likely to undergo some changes as the economic policy is the one mostly under fire," said Deutsche Bank's senior economist Marco Annunziata.

He added: "I don't expect it to create changes in the general policy direction of the government though it might create some delays in planned measures."

Prime Minister Saxe-Coburg replaced a deputy economy minister and a deputy finance minister last week, which analysts said was in response to increasing public discontent.

But opinion polls showed the cabinet's popularity continued to plunge with Economy Minister Nikolai Vassilev's and Finance Minister Milen Velchev's ratings suffering most.

Unlike falling approval at home, the cabinet's economic team has until now won respect abroad for efforts to speed up reforms in one of the poorest European Union aspirants, sell remaining state assets transparently, spur growth and root out corruption.

But Annunziata said the fact that Velchev and Vassilev were outsiders in the political system also made them most vulnarable. They both are political novices who used to work for major Western banks.

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