FOREIGN COMPETITION
German, Italian, Spanish and French companies are trying to push Bulgarian companies out of the big infrastructure projects because there is no enough of work in the European Union for them after the money for the improvement of infrastructure have been cut in half. Because of this, the companies from Western Europe focus on Bulgaria and other countries in Eastern Europe. Another market for them is South America but the opportunities there also decrease. Despite the suspended funding for infrastructure by the European Commission there are a few high value projects in Bulgaria: the modernization of the railway Plovdiv-Svilengrad, amounting to 340 million euros and the railway Vidin-Sofia (320 million euros), the Struma Highway (600 million euros), the Maritsa Highway (210 million euros) and E-79 Highway from Vratsa to Botevgrad (85 million euros).
STANISHEV DEMANDS ACTION
Prime Minister Sergey Stanishev has asked each minister to present urgent measures in response to the criticism from Brussels. They will be discussed at the meeting of the tri-partite coalition in Bansko this weekend. Stanishev has ordered each institution which has been critisised to work along the recommendations of Brussels.
REACTIONS
“I require expert help from Brussels for the proper management of the European funds,” said Meglena Plugchieva, Deputy Prime Minister and minister without a portfolio in charge of European funding, at a briefing at the Council of Ministers. According to her Bulgaria does not have problems with the Euro funds and the operative programmes but has asked for help. She has asked OLAF, the Anti-fraud service of the European Commission to carry out more missions in the country in order to provide transparency. Plugchieva called the reports of the European Commission “critical solidarity” and underlined that they have not been surprising for the government. The Deputy Prime Minister said the action plan about the SAPARD programme required by the Commission will be provided tomorrow and she expressed regret about the irregularities in the management of the funding provided as per the ISPA programme.
E.C. REPORTS
The European Commission suspended payment to two Bulgarian Implementing Agencies due to misuse and corruption. In two reports issued on 23 July 2008, the Commission concluded “Reform of the judiciary and law enforcement structures is necessary and long overdue,” the Commission said. “The fight against high-level corruption and organised crime is not producing results” and froze the funding of the pre-accession PHARE and ISPA programmes which amounted to 468 million euros. If the recommended measures are not implemented by the Bulgarian government, the frozen funds will amount to about 1 billion euros.
THE BULGARIAN STOCK EXCHANGE REACTS
The Bulgarian Stock Exchange has reacted to the expectation of the negative news from the report of the European Commission ahead of its publication later today. The negative tendency has started from the beginning of 2008 when the first news about possible freeze of the funding of programmes financed by the European commission appeared. One of the most affected emitions are those of infrastructure companies. It is expected that their performance will suffer if the European Union stops the funding.
SECOND UNDERGROUND LINE
The construction of the second underground line in Sofia from Nadezhda to Cherni Vruh Boulevard will be carried out by the Turkish company Dous Insaat and the Metrotrace consortium. The project will cost 471 million levs, 386 million of which have been provided by the Operative programme Transport of the European Union. Work will commence in September 2008 and the completion will be in the summer of 2012.
COMPETITION
The biggest Bulgarian legal practices have made a claim at the Commission for the Protection of the Competition against 8 foreign legal firms operating in Bulgaria. The Bulgarian legal firms are unhappy that their foreign competitors are registered only as companies but not according to the Law for the Lawyers and thus avoid many requirements. This puts the Bulgarian lawyers in a position of disadvantage. Batkov, Stoev, Botev and partners, Boyanov and Co, Georgiev, Todorov and Co, Penkov, Markov and partners insist that the commission imposes sanctions for disloyal competition on DLA Piper, CMS Cameron McKenna, CMS Reich-Rohrwig Hainz, Wolf Theiss и CHSH Cerha Hempel Spiegelfeld Hlawati. According to the foreign legal firms, this is just an attempt by their Bulgarian competition to limit their activities in the country. According to the Bulgarian lawyers this is not true, and the law is new and it complies with the EU directives. Four of the foreign legal practices with offices in Bulgaria do not carry out legal work at all which is a precedent. The commission must come with a ruling in 14 days.
PROPERTY CRISIS AND LOANS
The tendency of the recent years households in Central and Eastern Europe to take credits has made them more dependable on international economic crisis according to the report of UniCredit Group. Now they have to pay the expenses for servicing of these loans. In 2007 alone the households in Central and Eastern Europe have taken credits amounted to 100 billion Euros. The banking sectors which are most dependable on foreign funding are the Baltic states, the Ukraine, Kazakhstan and Romania. The burst of the property bubble has been most noticeable in Latvia. Property prices in Riga have fallen by 25% in the first 6 months of this year.
EU MONITORING
According to the draft of the monitoring report of the European Commission on Bulgaria (the official report will be published on 23 July 2008) the country’s progress is slow and more limited than expected. The fight against corruption is unsuccessful and Bulgaria does not demonstrate capacity for governing the European funds. The Penal Code is outdated and it is the reason for the overload of the judicial system, there are no results from the ongoing investigations, the administrative capacity of the judicial system is unsatisfactory and there are proofs of endemic corruption in the health and the education systems. Despite these, it is expected that the European Commission will not impose a safety clause on Bulgaria. However, it is expected that the commission will stop financing exceeding 1 billion Euros from the SAPARD and PHARE programs because of abuse of funds and corruption
PROPERTY MARKET
After the property boom in the last 5 years, the market has calmed down according to the big Bulgarian property agencies. The supply has exceeded the demand by 50%. At the moment more than 4 million square metres of living area is being built in Sofia alone, which in other terms means about 60 000 apartments that will be on the market in 2 years time. In the first six months of 2008 the prices of apartments have increased on average by 17% in the Bulgarian regional centres, while for Sofia this figure is 21%. Due to the increase of the interest rate and the inflation the number of the purchases has decreased after April by 10%. At the same time, banks have been trying to activate the market by keeping the interest rates low and by giving mortgages in stable but not so popular currencies like Swiss Francs. Four factors determine the development of the property market – the supply, the inflation rate and the higher price of mortgages and the more strict criteria of the banks. According to specialists, the property market in Sofia has reached its peak and a secondary market of the newly built properties has emerged. However, more serious conclusions can be drawn in the end of the year.
