POLITICAL IMPASSE IN Caretaker takes office ahead of snap parliamentary elections scheduled for July 11th

24 May 2021

Bulgaria has been plunged into a major political impasse after the country’s much-anticipated parliamentary elections on April 4 failed to produce a stable government with a clear mandate. The multi-directional political rivalry between traditional Bulgarian parties and political newcomers has led to the dissolution of the parliament and the formation of a Caretaker Government led by former Defense Minister , ahead of snap parliamentary elections scheduled for July 11; the latest attempt to solve the political deadlock.

With Bulgarian politics becoming increasingly unstable, we take a detailed look at the aftermath of the parliamentary elections, the newly installed Caretaker Government and what it could mean for the country, as well as at the likely political scenarios for the upcoming elections.

POST-ELECTION STANDOFF

Bulgaria’s parliamentary elections on April 4 resulted in a six-party Parliament, with three new parties entering the country’s legislature1. The election results and the low turnout dealt a major blow to longtime (and now former) Bulgarian Prime Minister Boyko Borissov: his incumbent GERB party remained the leading parliamentary force but garnered only 26% of the vote. The Bulgarian Socialist Party (BSP), a traditional rival to GERB and a former governing party, has also been seriously weakened, falling to third place in Parliament, while the ethnic Turkish Movement for Rights and Freedoms (DPS) – also considered an establishment party – received 10.5%.

The elections saw three new anti-establishment parties enter Parliament:

the populist There Is Such a People movement (ITN), led by singer and TV personality Stanislav Trifonov, which made a surprisingly strong entrance into Bulgarian politics and is now the second strongest parliamentary formation;

the liberal Democratic Bulgaria, an electoral alliance of three parties (Yes, Bulgaria!, Democrats for a Strong Bulgaria and the Greens), which was a driving force in last year’s anti-corruption protests;

1 Please click here for our April memo on the election results

and finally, the fellow populist Stand Up! Thugs Out! movement of former BSP MP Maya Manolova, also known for its anti-corruption platform.

The results signaled a clear new divide between mainstream political formations and those belonging to and opposing the political establishment. Given the fragmented landscape, it was inevitable that forming a functioning coalition proved impossible, with the elections followed by one failed (by GERB) and two returned attempts (by ITN and BSP) to do so. GERB has consistently ruled out any alliance with multiple parties, including longtime rival BSP, while the Trifonov-led ITN rejected both sides of the (mainstream) political aisle. Lacking crucial alliances, BSP also returned its mandate. In accordance with Bulgaria’s constitution, three failed attempts to form a governing coalition allowed Bulgarian President (a BSP-supported independent and a longtime rival of Borissov) to dissolve Parliament and schedule snap parliamentary elections for July 11.

ELECTION RESULTS AND OPINION POLLING

Party Popular Vote (April Number Post-Election 2021) of MPs Polling

Citizens for the European 26.2 75 22.8 Development of Bulgaria – GERB-SDS (centre-right)

There Is Such a People – ITN (big-tent, 17.7 51 20.1 populist)

Bulgarian Socialist Party – BSP 15 43 16.1 (centre-left)

Movement for Rights and Freedoms – 10.5 30 11.2 DPS (ethnic Turkish, centrist)

Democratic Bulgaria – DB (Liberal, 9.5 27 11.6 anti-corruption, three-party coalition)

Stand Up! Thugs Out! – Stand Up BG 4.7 14 5.6 (populist, anti-corruption)

Bulgarian National Movement – 3.6 0 N/I VMRO (ultra-nationalist) – to run in the Bulgarian Patriots coalition in July with fellow nationalist parties (Source: Central Election Commission of Bulgaria/Gallup)

THE CARETAKER GOVERNMENT AND ITS PRIORITIES

On May 12, parallel to calling for snap parliamentary elections, President Radev installed a Caretaker Government with a two-month mandate, with Stefan Yanev installed as Caretaker Prime Minister. Previously Secretary of Security of Defence in the Presidential Administration, Yanev also has brief governmental experience, having been appointed as acting Deputy PM and Defence Minister in the Caretaker Government of Ognyan Gerdzhikov (27 Jan 2017 – 4 May 2017). The Caretaker PM is also known in Washington from his time as Defence Attaché in the Bulgarian Embassy to the US.

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The Yanev Cabinet has three deputy PMs: Labour Minister Galab Donev, Interior Minister Boyko Rashkov and EU Funds Manager Atanas Pekanov. Among further key members of the Cabinet are Finance Minister Assen Vassilev, Economy Minister Kiril Petkov, Health Minister Stoycho Katsarov and Foreign Minister Svetlan Stoyev. For the full composition and description of the Yanev Government, please see page 5 or click here.

The Caretaker Government is positioning itself as one stepping in solely to manage a smooth transition, transparent snap elections and the economic/public health recovery. In this regard, the vast political and corporate experience held by senior acting cabinet members is a reassuring signal for businesses. However, the appointment of the chief presidential security advisor as Caretaker PM has led to speculation that President Radev is seizing the opportunity to further impede GERB’s electoral chances, by putting emphasis on corruption probes into the previous government.2

Immediately after its appointment, the Yanev Cabinet prioritized3 an investigation into a GERB-linked corruption scandal that is likely to fuel explosive allegations against former PM Borissov and a group of his associates and which looks set to dominate the run-up to the July elections. This move was widely supported by GERB’s opponents across the but seen as underhand electioneering by Borissov and his party. The former PM has been repeatedly accused of corruption scandals, with last year’s anti-corruption (and anti-GERB) protests having proved to be a defining factor in shaping today’s party preferences and GERB’s electoral loss.

Below we outline some policy directions of the Yanev Government for the period leading up to the snap parliamentary elections:

Officially, the Caretaker Government’s clear priority is to ensure that the July snap elections are transparent. Prior to its dissolution, the new Parliament – based on the votes from the three new anti- corruption platforms and the BSP – adopted a number of changes to the country’s Electoral Code, including the transitioning to a voting machine-based system, the extension of voting stations in the EU and allowing video surveillance for the ballot-counting process. According to another adopted bill, the members of the Central Electoral Commission will be cut from 20 to 15 (parties represented in the European Parliament but lacking representation in the national legislation will lose their seats), while new CEC members will be appointed by the President following public consultations. The latter move has been criticized by GERB, which is set to challenge some of the new provisions at the Constitutional Court. Meanwhile, the integrity of the election process itself has come under scrutiny after allegations of wiretapping involving the Bulgarian secret services, which reportedly targeted the three new parliamentary parties: ITN, Stand Up! Thugs Out! and Democratic Bulgaria in the run-up to the April elections. Caretaker Interior Minister Boyko Rashkov supported the allegations and prosecutors have opened an investigation into the case.

Another key priority for the Yanev Cabinet is the correction and adjustment of the country’s National Recovery and Resilience Plan (NRRP), to use European pandemic recovery funds under the EU’s Next Generation EU (NGEU) financing facility. Bulgaria’s NRRP has so far been the loser of the political uncertainty following the April elections: as with all other EU member states, the Government was due to submit its recovery plan by April 30 but missed this deadline. Deputy PM Pekanov, in charge of EU funds, stressed that the Cabinet is now working to “save” the plan. The Caretaker Government has expressed interest in adding changes to the plan, however, as with other key policy questions, lacks the proper authority to do so. The Government is now in discussion with business organizations to update and improve the GERB-proposed version of the plan. According to Fitch Ratings4, EU transfers under the bloc’s 2021-2027 budget and the NGEU could push economic growth in the country from an estimated 3.4% to 4-5% between 2022 and 2025.

2 See here for further details 3 See here for further details 4 See here for further details

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Despite the political uncertainty, the country’s short-term macro-economic direction is unlikely to be affected. Every major political formation, including the three anti-establishment forces, appear to consider EU funding schemes beneficial for the national economy. Cross-party consensus concerning Bulgaria’s adoption of the EU’s common currency and subsequent societal support for the Euro also appear to be strong. Similarly, the Caretaker Government is not expected to introduce any major fiscal or economic policy direction change during its short mandate.

As Bulgaria hopes for a summer rebound of its economy, particularly its tourism industry, managing the public health crisis and the envisaged economic recovery are among the natural priorities of the Yanev Cabinet. The Government is expected to revisit crisis spending as the recovery continues, while proceeding with the nationwide vaccination campaign continues to pose a major challenge. Bulgaria has the lowest vaccination rate in the EU: only 10% of all eligible for a jab were vaccinated by the middle of May.

The Caretaker Cabinet is also unlikely to change course regarding the former Government’s decision to block ’s membership talks with the European Union. Foreign Minister Stoev argued that a caretaker government does not have such a mandate and referred to a framework position on the issue adopted earlier by all parliamentary parties.

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SCENARIOS FOR THE SNAP ELECTIONS AND BEYOND

With the snap parliamentary elections approaching, we expect political competition (and polarization) between the rival political groups to accelerate. The proximity of the scheduled snap vote will create both opportunities and challenges for all political parties: some, particularly the establishment parties, will struggle to repeat their election results from April, while other formations – such as the new entrants to parliament – have the potential to outperform those returns. However, a genuine lack of interest in Bulgarian society to take part in the vote for a second time could further complicate the process and contribute to rather unlikely outcomes.

In accordance with local pre-election forecasts, our baseline scenario suggests that there will be no significant changes in the vote shares for different parties. If the July snap elections produce another hung parliament and none of the leading parties succeed in forming a governing coalition, which is highly likely at this point, the role of the Yanev-led Caretaker Government as a major stakeholder will be significantly enhanced for the upcoming period. Despite focusing on the rule of law and holding transparent snap elections in its messaging to the public, the Yanev Government swung into “full governance” mode shortly after it took office on May 12, leading to some speculation that President Radev is looking to further exert political control and somehow transition the acting cabinet into a permanent one.5 In addition to favouring freedom-of-information requests to support corruption probes against the previous, GERB-led Government and working on major policy issues such as the country’s EU recovery plan, the Caretaker Government is taking major steps in reshaping the public administration. For instance, the new Cabinet has already replaced all regional governors and several heads of government agencies appointed during the Borissov era.

However, President Radev has stressed that an inconclusive vote in July would push the country further into a political and constitutional crisis, giving a clear indication of the massive fragmentation in party politics and the risks it carries for the country’s long-term stability. Consequently, another hung parliament may increase pressure on all political parties aspiring for a role in government to revisit their disagreements with each other. This could result in previously unimaginable alliances and a governing coalition of some traditional and anti-establishment parties. Following many years spent in opposition, the BSP – now running in a left-wing coalition with three small left-wing parties and struggling to keep its voter base together – is also seeking a return to government, which might be supported by the steps taken by the Caretaker Government.

Should opposition parties be willing to enter into a conditional agreement for either a or a , an ITN-led coalition or minority government is increasingly possible. The latest polls suggest GERB is struggling to maintain its leading position among the country’s political parties, while the gap between Borissov’s party and ITN is narrowing. Simultaneously, an ITN-led government poses the largest risk to our forecast since Trifonov lacks both political experience and a clear policy platform. However, ITN might also struggle to repeat and outperform its own surprising victory.

It is equally possible that July might bring a strong anti-Trifonov vote. Parliamentary parties, particularly those already part of the establishment, have informally expressed their will to prevent the ITN from being part of the future Government. Paradoxically, this means that GERB, which was severely hit in terms of public support due to last year’s anti-corruption protests, could return to power, while the ethnic Turkish DPS could be a key player in the process (either as a coalition partner or an external supporter). Nevertheless, the allegations about wiretapping and extortion scandals involving Borissov, as well as the performance of the Radev-supported Caretaker Government, will seriously test public support for GERB.

5 See here for further details

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While tectonic changes – in comparison with the April 4 elections – are unlikely, the snap elections could see a new entrant to the Bulgarian Parliament. Following its failure to pass the 4% threshold and securing only 3.6% of the popular vote, the ultra-nationalist VMRO party joined forces with the National Front for the Salvation of Bulgaria and the fellow nationalist Volya. The latter two parties ran in an alliance in April and garnered 2.3% of the popular vote. Should Bulgarian Patriots, the newly formed far-right coalition, enter the new Parliament, GERB’s chances for returning to power could potentially increase since former PM Borissov has a history of joining forces with right-wing radicals.

CONCLUDING THOUGHTS

The next six weeks will prove crucial since all political parties – both those in the mainstream and those defying the establishment – are looking to sustain their political positions. As all parties aim to avoid a vicious circle of repeat elections and a subsequent constitutional crisis, the snap elections will produce increasing pressure for all major political players to reconsider their openness to co-operate. Under such a scenario, both Trifonov’s emerging ITN party and Borissov’s weakened GERB could emerge as potential winners, however another failure to form a stable governing coalition would increase the political profile of Stefan Yanev and the Radev- appointed Caretaker Government. Foreign businesses in Bulgaria and investors eyeing an entrance or expansion in the market are advised to brace themselves for an increasing level of political instability if the rerun elections fail to produce a stable coalition. Whatever the election outcome, however, the increasing political fragmentation looks set to continue, meaning the likelihood of unstable and ruling coalitions beyond July 11 is high.

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If you would like to discuss the matter on this paper, please contact: Lilyana Zagorcheva, Country Director ( [email protected] )

Kesarev

Kesarev is the leading independent public affairs and government relations consultancy in Central & South-East Europe, Russia, Ukraine, the post-Soviet area and Turkey and Israel, covering 25 countries and specializing in government and corporate affairs, risk management and corporate reputation services. Since 2014, Kesarev consultants have been ranked by The Best Lawyers in the areas of Government Relations, Government and Regulatory Practice, including the "Best Lawyer of the Year" award. Kesarev partners were recognized among the Top-20 communications managers by the TOP-COMM rating in 2020 and 2019 and within the Top 1000 Managers of Russia rating in 2017, 2015 and 2014. www.kesarev.com

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