Democratic Backsliding in Bulgaria

Political Landscape in Bulgaria

Bulgaria joined the European Union (EU) in 2007. At the time, EU entry was viewed as a fundamental step towards stronger democratic institutions and economic growth. However, the belief that pressure for change that comes from the outside (the EU) would be sufficient for a stronger democracy in Bulgaria proved to be overly optimistic. There is no doubt the country’s EU membership created more economic opportunities and applied additional pressure for much-needed democratic reforms. Nevertheless, Bulgaria’s overall political environment remains poisoned, as the real democratic challenges persist predominantly in the domestic political scene.

The economic crisis of 2008-2009 put an end to a decade of unprecedented economic growth in the country. Higher unemployment and fiscal tightening created social pressure on the political parties and made the political environment unstable. Bulgaria entered a period of political instability in early 2013 after the governing party resigned amidst mass protests against high electricity bills. Since then, the political environment has worsened, as the public debate has shifted from economic matters to more general democratic issues, such as state capture and institutional failure. Since 2013, no government has kept power in Bulgaria for the full mandate of four years, and the country has experienced three caretaker governments (2013, 2014 and 2017).

The crisis of 2013 began when the center-left government elected a controversial media mogul and political figure, Delyan Peevski — a long-time member of Parliament and member of the Movement for Rights and Freedoms (MRF) political party — as the head of the State Agency for National Security. This caused unprecedented mass protests that continued for more than a year.¹ These protests were viewed as an “awakening of the civil society” in Bulgaria as civil society organizations (CSOs) were spurred by a shared desire to protect fundamental democratic values. This second bout of protests in 2013 was different than the rally against high electricity bills just a few months earlier. Petty household economics gave way to genuine social discontent with state capture, corruption, and political trade. Peevski resigned immediately, but the fact of his appointment changed the political landscape for years to come.

In mid-2014, just a few weeks before the ruling party officially resigned, the country’s fourth-biggest bank failed. Corporate Commercial Bank (Corpbank) was owned by Tzvetan Vassilev, who is now in exile. Vassilev was not only in business with Peevski, but had also invested in various political projects, including the purchase of several media outlets.² In June 2014, “a major conflict between Vassilev and Peevski led to a run on the bank’s deposits and a banking crisis.”³ Corpbank was viewed as the “political bank” given that a substantial portion of state-owned enterprise (SOE) holdings, state agencies, and ministry capital had been kept there. Corpbank invested mostly in politically connected companies, which ultimately ended in disaster for the bank. Bulgarian National Bank (BNB) reported⁴ that there had been extremely poor documentation for as much as 3.5 billion Bulgarian Lev (BGN) out of a total loan portfolio of 5.4 billion BGN.⁵ The rise and fall of Corpbank is a blatant example of political corruption and the interconnections of politics, business, and media in Bulgaria that undermine democratic institutions and lead to grave economic costs for the nation.⁶

The third major political event (after the mass protests in 2013 and the failure of Corpbank in 2014) happened in late 2015, when Hristo Ivanov resigned as Minister of Justice over the failed judicial reform effort. Ivanov was extremely active during the 2013 protests and came to the political scene as a caretaker Minster of Justice in 2014. The center-right government decided to keep Ivanov in the cabinet and hand him the responsibility of the much-needed judicial reform.

The judicial reform process started in 2015 but encountered significant difficulties when constitutional changes became necessary. In July 2015, a “historical compromise” was reached among the main parliamentary parties. It included text in the Constitution that provided for the splitting of the Supreme Judicial Council (SJC) into two separate colleges — one overseeing prosecutors and the other overseeing judges. The goal was to remove political influence over courts and “decrease the Prosecutor General’s perceived influence in the judiciary.”⁷

However, in December 2015, Parliament vetoed the reform’s key mandates. There was no adequate explanation for the sudden shift in the majority’s position, giving rise to speculations about pressure from the prosecution and a back-office deal with the Prosecutor General. The government proved incapable of undertaking the much-needed reform. While SJC was partly reformed (two separate colleges were formed in 2016), the new framework keeps the political influence over judges and the influence of the Prosecutor General over the entire SJC.⁸ The veto led to the immediate resignation of the Minister of Justice and a halt to the reform process. While the resignation did not lead to wide public outcry, the coalition was shaken and heavily criticized. The ruling party resigned officially at the end of 2016 following failure by the coalition in the presidential elections. The new president appointed another caretaker government at the beginning of 2017.

Limits to Prosperity

The quality of democracy in a country has a direct bearing on the quality of life and the level of prosperity of its citizens, which is why the discussion on democratic backsliding should also be framed in the context of competitiveness⁹ and economic development. The Global Competitiveness Report 2016-2017¹⁰ by the World Economic Forum (WEF) ranks Bulgaria 50th out of 138 economies. The most problematic sphere of competitiveness (out of 12 pillars) are institutions; Bulgaria ranks 97th. The country received the worst scores in the following sub-categories: wastefulness of government spending, favoritism in decisions of government officials, and public trust in politicians.

Respondents to the WEF’s Executive Opinion Survey were also asked to select the most problematic factors for doing business in their country. Corruption is by far the most challenging for Bulgaria, ranked far ahead of other factors, such as an inadequately educated workforce, poor work ethic and inadequate supply of infrastructure.¹¹ Weak institutions and corruption are the main factors that appear to undermine the competitiveness of the Bulgarian economy and limit economic growth.

Democratic Backsliding

The report by Freedom House, Nations in Transit,¹² is a compelling tool for investigating the dynamics of democratic developments in Bulgaria since joining the EU in 2007. In the report, Bulgaria is defined as a “semi-consolidated democracy,” which is similar to the evaluation of neighboring countries. Yet the country falls behind in its “democratic score” in comparison to Central European and Baltic countries that joined the EU in 2004. Hungary is the only other among this group that has underperformed in recent years.

Bulgaria’s worst results in Nations in Transit came in 2016 in the categories of corruption, independent media, and judicial framework and independence. These areas have worsened since 2007, meaning that the country’s democratic score has decreased further. The steepest decline is in the judicial system, where a negative trend continued throughout the whole period. These challenges are further exacerbated by a lack of independent media outlets — electronic media (radio and TV), print media, and internet media. Media dependence on political and business agendas can be clearly seen as rising in another Freedom House publication, Freedom of the Press 2016.¹³ Bulgarian media is classified as only “partly free,” and the main problems identified relate to political pressure, economic dependency, and concentration of the market.

These issues became especially visible after 2013¹⁴ and intensified during elections.¹⁵ The legal, political and economic environment in which the media operate feeds a cycle of political corruption and institutional failure. This is further supported by the 2016 World Press Freedom Index,¹⁶ issued by Reporters without Borders. Bulgaria ranked 113th of 181 countries — the worst standing in the entire EU — and the score has declined over the last 10 years. According to the latest issue of the Corruption Perception Index 2016 by Transparency International (TI), Bulgaria has the worst corruption perception of the entire EU.¹⁷ Bulgaria ranks far behind all the new member states in the EU (that joined after 2004) and even has a below-average score for the Balkans.

Defining the Challenges

Based on the picture presented above, the Institute for Market Economics (IME), an independent economic policy think tank in Bulgaria, has focused on defining the main challenges to democracy, investigating their roots and discussing possible solutions. In addition to its research, IME conducted two roundtables with experts,¹⁸ four focus groups¹⁹ with young people and two surveys²⁰ — one with experts that took part in the roundtables and the other with students. The general sentiment in both polls confirms that there is a perception of democratic backsliding. Forty-five percent of experts and 61 percent of students polled believe that the quality of democracy has worsened in recent years, while only 25 percent of experts and 18 percent of students have seen positive developments.

Opinions About the Change in the Quality of Life in Bulgaria in the Past 5 Years

	Survey Among Experts	Survey Among Students
Rather Improved	25%	18%
Neither Improved nor worsened	30%	21%
Rather worsened	45%	61%

Source: IME surveys to roundtable participants and students (November-December 2016)

 

The main driver of the slightly more positive view shared by the polled experts is their strong support for the civil movements and protests in recent years that are viewed as an “awakening” of Bulgarian civil society.

Causes of Democratic Backsliding

The surveys and roundtable discussions indicated that the key causes of democratic backsliding are as follows:

On the demand side (i.e. citizens):

• People are influenced by opportunism in economic policies;
• People are influenced by non-independent media, i.e. the rise of propaganda media and the (financial and political) dependence of the mainstream media;
• People are disappointed with politics, which leads to lower civic engagement. While protests in recent years are viewed as a “civil awakening,” these movements are still struggling to become influential.

On the supply side (i.e. politicians):

• Lack of punishment for corrupt politicians due to a corrupt juridical system;
• Crony capitalism, relationships between politicians and big businesses and/or the oligarchy. Political power is intertwined with economic power;
• Leading politicians undermine democratic values through anti-democratic political rhetoric, lack of political support for judicial reform, and ongoing centralization of power.

The data suggests that the positive influence on democracy comes from factors that are external to the political elite, including civil movements and protests, EU monitoring reports and pressure for reforms, and online media and social networks. On the other hand, there is a strong negative sentiment towards the scandals in the judicial system and the constitutional reform effort.

Main Challenges

There are three main challenges to democracy that are made clear by the polls and the focus groups. For the purpose of this analysis, issues relating to the judicial system and corruption are combined under the term “state capture.” State capture is systematic political corruption that covers a wide range of legislative, executive and judicial institutions.

Based on these findings, the main challenges to democracy in Bulgaria are:

• State capture — due to a lack of effective separation of powers and rule of law. There are two sub-challenges identified within state capture:
  • Judicial system — an overwhelming discontent with the lack of punishment.
  • Corruption — in the form of “crony capitalism,” meaning strong political influence over certain sectors of the economy, exercised by a small group of influencer²¹
• Dependent media — Two-thirds of the experts believe there is a serious problem with the freedom of media, and students and young people held strong negative views towards the prevalence of propaganda.
• Xenophobia and opportunistic economic policies — Both experts and young people recognize xenophobia and a rise in nationalism in reaction to the refugee and migrant crisis in Europe. The “patriotic” parties now have a much stronger role in Parliament and have managed to secure 15 percent of the vote with their joint candidate during the recent presidential election. There is also a strong correlation between those who exploit the migration crisis and those who are leaning towards lax state spending, which is one of the main factors for economic backsliding.²²

Judicial System and Corruption

The leading challenges to democracy in Bulgaria appear to be a dysfunctional judicial system and widespread political corruption. These two challenges are explored in great detail in yearly reports by the European Commission under the Cooperation and Verification Mechanism (CVM). This mechanism was established in 2007 in anticipation of Bulgaria joining the EU; its purpose is to address the shortcomings with judicial reform and the fight against corruption and organized crime. The nature of state capture is extremely difficult to tackle. There are numerous policy recommendations outlined in the CVM reports.

Here are the main directions that the policies should take based on the data and analysis of IME’s surveys and roundtable discussions:

• Create a broad coalition for judicial reform that is both political and supported by various non-governmental movements, which promotes the main ideas behind the judicial reform;
• Promote continued reform and the de-politicization of the SJC;
• Undertake broad reforms in the prosecution office, in which the Prosecutor General becomes accountable to the public through a system of checks and balances with the executive and legislative powers;
• Create an anti-corruption body, including a special anti-corruption prosecutor that is independent from the Prosecutor General;
• Promote open budgeting in the judicial system to improve poor resource management and budget practices

Dependent Media

In recent years, the Bulgarian media environment has worsened and become blatantly dependent on political agendas in various ways. According to the most recent CVM report, “the media environment is often characterized by low independence and ineffective enforcement of journalistic standards, which has a negative influence on public debate on reforms.”²³

Freedom House’s Freedom of the Press 2016 stated:

“Freedom and pluralism in the media continued to decline. A number of print outlets closed because of insolvency, new online resources of questionable quality and professional ethics emerged, and the ownership of print media remained a controversial issue.”

“While variety and competition in television and radio outlets is strong, pressure to support the politically powerful continued to be a daily phenomenon. Ironically, state-owned television and radio channels were reportedly the most likely to report in a pluralistic way.”

“Reporters continue to face pressure and intimidation aimed at protecting economic, political, and criminal interests. Journalists, commentators, and bloggers are sometimes questioned by law enforcement personnel about their activities, and prominent politicians have displayed intolerance for media criticism. Impunity for past crimes against journalists remains the norm, encouraging self-censorship.”²⁴

Additionally, the report noted that Peevski’s family-owned media outlets “launched smear campaigns against journalists and editors who produced critical reporting on the government or the media mogul.” They are seen as a rise of the purely propaganda media, which have no respect for facts and engage in political and personal attacks. Recent data shows that some of the most questionable electronic media in Bulgaria, those that deliver “fake news,” are in fact the most visited news pages.²⁵

Quite a few private newspapers issued daily are owned by the New Bulgarian Media Group (NBMG), owned by Irena Krasteva and widely believed to be controlled by her son, Delyan Peevski. The biggest media distribution company, Tabak Market, owner of the “Lafka” kiosk chain, is also extremely controversial, and the chain’s rise is connected to Vassilev and Peevski in the prime of Corpbank. The broadcasting regulatory body is subject to pressure from the government, politicians, and large corporate interests, and is “notably ineffective in addressing problems such as hate speech.” Additionally, financial considerations have led to media dependency on various government programs and subsidies. EU funds have been used to support certain media (i.e. via paid ads on funding opportunities in select, government-friendly outlets) and keep criticism to a minimum.

Recommendations

The media challenge is tough to tackle as most media companies in Bulgaria are privately owned and any regulation may be viewed as a form of censorship. It is clear that there are examples of negative forms of regulation that have actually worsened the media environment in Central Europe in recent years.²⁶ Nevertheless, some steps can be taken to improve the media environment by removing artificial dependencies, including:

• A better regulatory and legal framework that provides for greater transparency and clear ownership of media firms, newspapers, etc.;
• Clear rules for the distribution or earmarking of any public funding (especially from the EU) to media, and such transfers should be limited in volume and allocated in a competitive and transparent manner;
• Reform election campaign rules and media plans. The design of these rules is currently problematic as they encourage various schemes for diversion of public funds earmarked for political campaigns.

Xenophobia and Economic Populism

After 2013, the country’s various ruling coalitions formed with the covert support of nationalistic parties, replacing the former “kingmaker,” the MRF. MRF is a highly controversial political movement that draws its supporters primarily from the ethnic Turkish minority and has been involved in a number of high-level corruption scandals. The topics of xenophobia and opportunistic economic policies seem to be strongly interconnected, as the political parties that most aggressively exploit the refugee crisis are the same parties that promote extreme economic policies.²⁷

In this context, the Turkish and Roma minorities have been repeatedly used for political gains. The Turkish minority is exploited to secure votes for MRF in order to muster support for some of the nationalistic parties.²⁸ Because they are economically disadvantaged, representatives of the Roma minority are often involved in various forms of election fraud, including vote-selling.²⁹

The rise of Bulgarian nationalistic parties has notably tracked the increase in refugees and migrants to the EU and Bulgaria in recent years. Correspondingly, there has been a great increase in nationalist parties.³⁰ While the country’s refugee count is not a shockingly high number (in comparison to the total amount of refugees in Europe), it is sufficiently high to penetrate deeply into the media and change the political landscape. While the overall media environment may be seen as neutral, anti-migrant sentiment — fueled mostly by public fears of increased insecurity — is exploited heavily by certain media outlets,³¹ affecting public opinion.³²

Bulgaria has faced hard times in its handling of the migrant crises as there are numerous reports of violent treatment, both by officials and self-proclaimed “border guards.”³³ The riot in the country’s largest refugee camp in late 2016 was the best example of the inability of line institutions to deal with the situation. The United Nations High Commissioner for Human Rights warned that Bulgaria’s jailing and criminalization of refugees is inhumane.³⁴

Economic Policies

The rise of “patriotic” or nationalistic parties gives a broader base for the promotion of opportunistic economic ideas. If these are applied in practice, they could potentially disrupt the macroeconomic stability of the country. These ideas historically have been connected to concepts of sovereignty and protection of the “national interest” against foreigners. Recently, they have been framed as the “harmful” influence of foreign investors. The highly controversial economic measures suggested neglecting basic EU and national fiscal rules and promoting a substantial increase in government spending, mainly in forms of welfare. In 2016, Bulgaria’s budget had a surplus for the first time since 2008, which gives a fiscal incentive for such ideas. Fear of outside influence, along with the rise of nationalistic sentiments and calls for more public spending, play a central role in the promises made by the main political parties, going well beyond what is economically feasible.

Recommendations

Strategies for countering the democratic backsliding caused by xenophobia and economic populism are outlined in the recommendations below, including both practical solutions and broader suggestions:

• Build institutional capacity in relation to human rights issues, ensure that actions by government officials and administrative bodies conform to international treaties and domestic norms;
• Improve legal and institutional framework concerning refugees and migrants;
• Clarify administrative procedures, rules, rights and responsibilities, especially at the border and in regards to human rights;
• Establish greater transparency through open data to provide for a more adequate public debate on various issues;
• Set strict fiscal rules, including controls on spending, to prevent irresponsible spending;
• Improve public education by promoting better understanding of basic democratic values, citizen’s rights and economic principles;
• Strengthen the entrepreneurial environment to promote economic growth and job creation.

Conclusions

Bulgaria is facing serious democratic challenges in a turbulent political environment. Political instability has dominated the scene since mass protests in 2013 and has shaped the country’s democratic debate. Democratic backsliding undermines market values, reduces economic growth potential, and gives rise to nationalism and populism.

The leading challenge to democracy, as identified by IME surveys and roundtable discussions, is state capture. This is the catalyst for problems in the judicial system and widespread political corruption. These trends are compounded by a closing media environment that is increasingly dominated by a politically dependent media.

Moreover, the rise of nationalist parties in response to the refugee crisis has led to widespread economic populism across political parties. All of these challenges are interconnected, go beyond the purely political, and must be tackled by society at large. The role of non-political actors, such as non-governmental organizations, citizen movements, representatives of various professional groups, and the business community is crucial to reverse these trends in the years to come.

 

This article summarizes a larger analysis of the state of democracy and free enterprise in Bulgaria investigating the roots of democratic backsliding in recent years. It was conducted by the Institute for Market Economics (IME) in Bulgaria with support from the Center for International Private Enterprise (CIPE). The findings are informed by IME’s roundtables with experts, as well as surveys conducted among experts, students, and focus groups with young people. Primary author is Petar Ganev, Senior Researcher at IME.

 

Sources Cited:

¹ To understand in great detail the protests of 2013 see the book “#Protest” (2013)
² Ktbfiles.com (see interview with Tsvetan Vassilev from September 2016 and a follow-up article by Petar Ganev, IME)
³ Nations in Transit 2016, Freedom House (see here)
⁴ See BNB statement here (November 6, 2014).
⁵ 1.95583 BGN for 1 Euro (fixed exchange rate)
⁶ More on the failure of Corpbank
⁷ Nations in Transit 2016, Freedom House (see here)
⁸ European Commission For Democracy And Law Opinion On The Draft Act To Amend And Supplement The Constitution (In The Field Of Judiciary) Of Republic Of Bulgaria, 23-24 October 2015
⁹ Competitiveness is defined as “the ability of countries to provide high levels of prosperity to their citizens”
¹⁰ The Global Competitiveness Report 2016-2017, World Economic Forum (see here)
¹¹ Most Problematic Factors For Doing Business in Bulgaria, The Global Competitiveness Report 2016-2017, World Economic Forum (see here)
¹² Nations in Transit 2016, Freedom House (see here)
¹³ Freedom of the Press 2016, Freedom House (see here)
¹⁴ Interviews of Tzvetan Vassilev after the failure of Corpbank shed light on the issue (see here)
¹⁵ Some media outlets have tried to rewrite history (including the failure of Corpbank) in violation of election rules (see here)
¹⁶ 2016 World Press Freedom Index, Reporters without Borders (see here)
¹⁷ Corruption Perception Index 2016, Transparency International (see here)
¹⁸ IME’s first roundtable on the state of democracy in Bulgaria was held on the 26th of October 2016 and included twenty prominent legal and economic experts. IME’s second roundtable on the main challenges to democracy in Bulgaria, including economic populism, was held on the 1st of February 2017 and included more than 60 experts, thought leaders, and policymakers. (A first draft of this report was discussed at the event).
¹⁹ Four focus groups were conducted by Alpha Research in November and December 2016. Each focus group gathered 6-8 young people. The first two focus groups gathered mostly students, the third gathered young activists from the non-governmental sector, and the fourth focused on young entrepreneurs.
²⁰ The surveys were conducted in November and December 2016 and included twenty experts from the first roundtable and sixty-three students from various universities in Bulgaria.
²¹ Using the language of an economist, the market of influencers is oligopolistic (see more here)
²² Economic populism and anti-refugee positions go hand in hand in the rhetoric of the “patriots” – a coalition of the main nationalistic parties. As their support rises so does the popularity of their positions even among main party candidates.
²³ CVM Report on Bulgaria, European Commission, 25 January 2017 (see here)
²⁴ Freedom of the Press 2016, Freedom House (see here)
²⁵ Infographic (see here)
²⁶ For example, Hungary.
²⁷ The link between xenophobia and economic populism can be seen in the programs and rhetoric of populist left parties such as “Ataka” which is “ultra nationalist and xenophobic, particularly anti-Muslim, while also advocating left-wing economic and social policies, such as restoring state ownership of major industries and increased spending on education, welfare and healthcare.” (see here)
²⁸ A famous example is an incident from May 2011 in which Volen Siderov and supporters of his far-right Ataka party were involved in clashes with worshippers outside the landmark Banya Bashi mosque in Sofia. In 2015 the European Court of Human Rights ordered Bulgaria to pay damages, more information is available here.
²⁹ Examples of this can be found here (2015) and here (2016)
³⁰ See more data here
³¹ See here
³² For example, wide support for the so called “voluntary border patrol” (see here)
³³ Human Rights Watch report here and media coverage here
³⁴ See here