Over the course of 1996, economic collapse and prolonged political malfeasance seriously shook the integrity of the Bulgarian body politic. As a result, the government of the "new democratic majority," elected in April 1997, has taken a number of extraordinary measures to recapture the confidence of the population and the international community. Top priorities for the new cabinet of Ivan Kostov have been to attempt to liquidate organized crime, to rebuild the macro-economic and the state institutional frameworks, and to aid the population, which has been battered by economic decay. Public perceptions have made these tasks all the more difficult. The government has had to push for reforms before a population that for years has been exposed to the schemes of many previous "reformers."
The fight to reclaim the country from the grip of the "shadow" economy has been a hard one. The office of the attorney general recently revealed that $8 billion has been shipped out of the country. Bad credits amount to 130 billion leva. The deputy director of the national police announced that losses caused by organized crime total 75.7 billion leva.
As a first step, the government set out to dismantle the private insurance companies known as "wrestlers," whose sole purpose was extortion and racketeering. Not only did the government create a special agency to fight organized crime, but the newly-elected parliament proceeded to define the legal meaning of mafia, to provide formal grounds for the prosecution of organized crime figures. Included in these measures was the campaign to stop the flow of illegal traffic at the borders. The lack of customs control aided the shadow economy in "exporting" large amounts of raw materials, industrial products, and cash with neither record nor trace.
Bulgaria faces another imperative in the struggle to help its population. The National Statistics Institute announced recently that the country is on the verge of a demographic catastrophe. Only 6.8 million people will reside in Bulgaria in the year 2020. In other words, the population will have shrunk by almost 2 million (about 22 percent). The disastrous turn in the country's economic situation last year only aggravated worries for the future. Hyperinflation and a devaluation of the lev forced nearly 80 percent of the population below the poverty line. Retired people (who make up one-third of the population) and children suffered most. More than 50 percent of the average Bulgarian's expenses went for food, assuming any was available.
In order to stabilize the economy, the Kostov government has implemented IMF recommendations to increase the rate of tax collection, to accelerate privatization, and to align budget expenditures with revenues. A currency board was introduced as a disciplinary measure on July 1. The lev was pegged to the DM at a rate of 1,000 leva/1 DM. As a result, foreign currency reserves have tripled to almost 3.8 billion DM, and Bulgaria's current credit rating is ahead of those of Turkey, Romania, and Ukraine.
Another institution in crisis in Bulgaria is the army. In a speech before parliament, the chief of the general staff, General Miho Mihov, stated that no tactical and operational battle unit was capable of successfully defending the territorial integrity of the country. In response, the government has attempted to create an army that is compatible and interoperable with NATO's armed forces. Part of the plan is to replace conscripts with professional soldiers to create a smaller but highly mobile army, capable of rapid action and trained to handle modern technologies and devices. The army is to be reduced in size from 108,000 (in 1989) to 75,000, and the length of service has been reduced from 18 to 12 months.
Upon his visit to Sofia after the Madrid meeting, U.S. Secretary of Defense William Cohen made it clear that Bulgaria had a much stronger chance to join NATO with a professional army and civilian control of the military. Accordingly, the Bulgarian government sharply curbed the power of the chief of the general staff, who is now strictly subordinated to the minister of defense. Currently, the civilian minister has the initiative to formulate military doctrine and structure the budget and the army cadre on all levels.
Although the Bulgarian foreign ministry currently lacks leverage in the major world capitals, newly-emerging think tanks and the rapidly-increasing number of NGOs are beginning to act as independent voices on behalf of the country. Even though several have shown themselves to be loyal to certain political institutions or interests, others promise to represent Bulgaria well in the international arena. Among the most regarded are the Centre for Liberal Strategies, the Institute for Market Economy, Association Access, and the Atlantic Club.
Vladislav Todorov spoke at an EES Noon Discussion on October 22, 1997.