It was the cradle of the Cyrillic alphabet, the origin of an important culture which contributed decisively to forming the traits of Slavism from the Balkans to Russia. Then, however, a long decline: from the dominion suffered by the Turks of the Ottoman Empire to that of the Soviet Union, which returned a country in disarray and in the throes of corruption and organized crime. From here, however, a slow renaissance began which brought back economic growth, the development of democracy and entry into the European Union. It is the historical-institutional path of Bulgaria, an Eastern European state which in recent years has been the protagonist, like the other ex-satellite republics of Moscow, of an interesting economic development which, albeit amid a thousand problems, has brought the country to make great strides forward and to attract huge investments from abroad, especially from Italy.
Sofia, like the other Eastern European countries that have recently joined the European Union and are heavily dependent on capital arriving from the West, has not survived the crisis that erupted in 2009 (and which has been worsening in recent months) unscathed. GDP growth fell sharply and started to rise again in 2011 with +1,8%. For the current year, the estimates elaborated by the "Economist" speak of a rather weak growth, not exceeding 1,5%: a positive figure but well below the objective that the Government had set itself and which the increase in GDP to 3,6% (fortunately, however, the public finances are basically in order). Practically, if the downward data were confirmed, Bulgaria would technically be in stagnation: with a per capita income that fluctuates around 5 euros (the lowest value in the whole EU), we shouldn't be too happy. The only good thing, within this very difficult economic situation for all of Europe, it is low inflation, which remained at 1,4% year-on-year in the first quarter of 2012. They are the two sides of the same coin, or rather of the same coin: the lev, local currency, is pegged to the Euro in a regime of currency board, therefore with a fixed parity (1 lev worth about 0,53 euros). This allows inflation to be controlled but on the other hand it does not allow competitive devaluations, as can instead happen in neighboring Romania (link to my previous article).
The presidential elections that took place in October 2011 saw the defeat of the Socialist Party, up until then in government, and the victory of the GERB (Citizens for European Development of Bulgaria), a centre-right formation which brought Rosen Plevneliev to the presidency. The elections took place in a rather heated climate, amidst anti-Roma propaganda from nationalist parties (following the violence that broke out in the south of the country last September) and accusations of vote-exchange episodes that raised some doubts about the outcome of the elections. The prime minister is Boiko Borisov and he has promised a merciless fight against corruption and organized crime. Indeed, the result that came out of the polls seems largely determined by the disappointment of the population with regard to the failures recorded by the Socialist Party in fighting corruption and the power of mafia groups, still rampant in the country. The high crime rate still seems to be the real "scourge" of the Balkan nation: the index elaborated by Transparency International reveals that Bulgaria is in 86th place in the world for the level of corruption, while the OECD surveys have revealed the lack of commitment on the part of the institutions in tackling these problems. Furthermore, in 2010 the European Union decided to block hundreds of millions of euros of funding from the Regional Development and Cohesion Funds as an infringement procedure for the lack of progress made in this area since 2007, when Sofia officially became a member of the EU.
Corruption and economic difficulties therefore seem to place Bulgaria in a disadvantaged position compared to other promising republics of Eastern Europe. Even the situation of foreign investments presents a chiaroscuro picture of the Balkan country. Despite a decidedly favorable tax regime (single tax rate of 10% on businesses and individuals) and very low wages (the average is 350 euros a month), factors which in recent years have attracted large flows of capital (especially in the infrastructure sector, also of funds arriving from Brussels), today we could see a slowdown in incoming FDI. The newspaper "The Sofia echo" published the results of a survey aimed at German companies investing in Bulgaria: only 12% said they were satisfied, while 35% of those interviewed said they would no longer invest in this country. The reasons? Try to guess: corruption, uncertainty of compliance with the law, bureaucratic difficulties. The fact is that the stock of German investments in 2011 decreased by 54 million euros (while the total figure amounts to 1,8 billion, according to the Bulgarian Central Bank).
And theItaly? Our country is very active in Bulgaria. Bilateral trade with Sofia has almost doubled in just two years and Italian exports concern traditionally "strong" sectors such as textiles and machinery. As for the companies active in the country, there are about 800 companies for an invested capital of about 2 billion euros, equal to 5% of the national GDP. The most interesting opportunities are offered by the infrastructure sector, on which the Government has decided to focus as a priority. The European Cohesion funds will in fact make it possible in the coming years to finance projects in roads, railways, energy networks and waste disposal. Italian companies have already obtained important contracts, such as that of Generali Costruzioni Ferroviarie for the modernization of the Plovdiv-Burgas railway, or of Black Sea Technology Company, a subsidiary of Amga which is responsible for distributing gas in a region of Bulgaria. Confindustria is active in the country with its own headquarters and also the banking sector sees Italy in first position: UniCredit Bulbank is the first credit institution in the country with over one million customers, distributed over 230 branches for total assets amounting to almost six billion euros.
In conclusion, the reflection that the waters of the Black Sea give back from Bulgaria is not entirely clear. The problems are still very big and the Balkan country confirms itself as the most backward in the European Union due to a series of systemic deficiencies which do not seem to be overcome very soon. Favorable taxation, low labor costs and the availability of community capital are important conditions for the establishment of investments, but not sufficient to ensure the arrival of projects that are intended to ensure lasting development. In fact, the Government will have to intervene energetically on the aspect of the fight against corruption and crime, as well as on the formation of qualified human capital. The challenges that await Sofia, especially in this moment of negative economic situation, will be very demanding.
