ONE YEAR AFTER ELECTIONS, STANISHEV EXCEEDING

S E C R E T SECTION 01 OF 03 SOFIA 000968 SIPDIS SIPDIS E.O. 12958: DECL: 07/10/2016 TAGS: PREL MARR ECON PGOV IZ BG SUBJECT: ONE YEAR AFTER ELECTIONS, STANISHEV EXCEEDING EXPECTATIONS REF: A. SOFIA 926 ¶B. SOFIA 827 Classified By: CDA Jeffrey Levine, reasons 1.4(b) and (d). ¶1. (C) Summary. After ten months in office, the coalition government led by Socialist (BSP) Prime Minister Sergei Stanishev has surprised observers with its consistently pro-U.S. foreign policy, conservative fiscal policy and relative internal stability. Stanishev's government quickly reversed its campaign pledge of immediate withdrawal from Iraq and then accepted our preferred follow-on mission at Camp Ashraf. It more than doubled its forces in Afghanistan to take over the operation of Kabul airport under NATO auspices. And it has squarely confronted public opinion on the issue of stationing U.S. forces in Bulgaria, taking the lead in explaining the agreement's benefits. Even in the troublesome rule-of-law area, Stanishev's government seems recently to be taking meaningful action against corruption. Were it up to the Prime Minister alone, progress against organized crime and corruption might have been even stronger, but Stanishev is burdened with a controversial Interior Minister whose influence within the BSP rivals his own. This illustrates the biggest dilemma for the 40-year old Prime Minister: despite his pro-Western views and aura of incorruptibility, Stanishev does not always have the political weight to impose his will on the sometimes-unruly cabinet. Continued support from the U.S. will strengthen Stanishev's position and pay long-term dividends on the issues we care most about. END SUMMARY. -------------- A SURPRISINGLY PREDICTABLE PARTNER -------------- ¶2. (S) The three-party coalition government that emerged from the inconclusive June 2005 elections has shown itself to be a predictable partner for the U.S. in the ten months it has been in office. In fact, the continuity of this government's policies, following on those of its predecessor, has been remarkable. Despite pre-election fears, Bulgaria's Socialist-led government is still in Iraq, it has signed and ratified a Defense Cooperation Agreement with the U.S., and Stanishev -- despite having been born in the Soviet Union and having a Russian mother -- appears no closer to Moscow than was Simeon Saxe-Coburg Gotha. Add to this a strengthened commitment in Afghanistan, a relatively robust military presence in the Western Balkans and continuing strong intelligence cooperation -- especially in the GWOT -- and the sum total is a government that has defied expectations -- and to some extent its own electoral base -- to prove itself a worthy international partner. ¶3. (C) The government's economic policies have also remained quite liberal. Stanishev's government negotiated with the IMF an extension of the Stand-By Agreement that will carry Bulgaria though its planned EU accession in January 2007. It did not scrap the Currency Board, as some had feared, leaving its monetary policy de facto in the hands of the European Central Bank. And it continues to run a budget surplus, despite squeals from the Left for more social spending. Though more dependent on Russian energy than any other post-communist state in Europe, this government recognizes, at least in principle, the need for diversification. ¶4. (C) This continuity in foreign affairs and macroeconomic policy is in part due to the presence in the current government of the former ruling party as well as its junior coalition partner. The participation of the centrist National Movement Simeon II (NMSS) and the mainly ethnic-Turkish Movement for Rights and Freedoms (MRF) has undoubtedly had a stabilizing influence on coalition policies. But the performance of the government shows clearly that the Socialist Party itself has also changed: a new generation of young technocrats has begun to replace the older generation of aparatchiks left over from the Bulgarian Communist Party. Stanishev personifies this reform-minded wing of the BSP. Especially on economic policy, the Socialists have also had to accommodate themselves to the new realities of globalization; they simply cannot afford a repeat of disastrous policies of the previous BSP government, which ten years ago led the country to the brink of economic ruin. As Stanishev told us before the election, the Socialists "cannot afford another failed government." -------------- - STANISHEV: A NEW BREED OF BULGARIAN POLITICIAN -------------- - SOFIA 00000968 002 OF 003 5 (C) Stanishev himself is unpretentious. He spent less on travel this year than any of his ministers, requesting a total reimbursement of USD 48 for meals and incidental expenses in the first quarter of 2006. His personal wealth consists of an 1800 square-foot apartment where his mother lives and "a one-sixth share of a 1986 Mazda" left by his father. His income for 2005 was approximately BGN 20,000 (USD 13,000). Even his harshest critics do not question his personal integrity or his intelligence. Stanishev's knowledge of the EU accession process and its implications for Bulgaria is encyclopedic. This familiarity with European institutions and policymakers has given him credibility in Brussels, allowing him to push back when he felt the Commission was unfairly holding Bulgaria to a higher standard than the ten previous new members. Nor should Stanishev's political skills be underestimated. He has used the accession process to bind together his three-party coalition and push needed reforms through parliament. His decision to appoint as Finance Minister Plamen Oresharski, a technocrat closely associated with the opposition Union of Democratic Forces, took political courage and showed that he was capable of putting Bulgaria's interests above the interests of his party. -------------- AREAS FOR IMPROVEMENT -------------- ¶6. (C) Organized crime and political corruption are the government's Achilles heel. Faint progress has been made against either over the last ten months. Interior Minister Rumen Petkov is often blamed for this lack of progress, in our view deservedly -- his gaffe-prone performance and weak administrative skills mark him as a provincial leader who still looks out of his league at the national level. But the problems go deeper than any one individual. Political parties are dependent for financing on unregulated cash donations. Many of the richest people in the country -- and therefore the main patrons of political parties -- made their money through organized crime or misuse of public resources. Add to this a judicial system that is inefficient and subject to corruption, and you have an "iron triangle" of corruption, criminality and judicial inefficiency that is extremely difficult to break. Chief Prosecutor Boris Velchev, who began his seven-year term in February and is independent of the government, has shown signs that he is serious about tackling the problem (ref A). Velchev, however, has his work cut out for him and will need all the support he can get from the government. ¶7. (U) Some support has already been forthcoming, though it is still to early to assess results. Responding in large measure to pressure from Brussels, the government announced in early June a series of measures aimed at combating corruption and organized crime (ref B). Draft legislation will require financial disclosure statements filed by government officials and members of the judiciary to be posted on the Internet, and political parties will be subject to stricter financial reporting requirements. Parliament on June 21 approved amendments to the money-laundering law that bring Bulgaria into compliance with international best practices and EU acquis (septel). Perhaps more significantly, the government has dismissed 53 civil servants accused of corruption, including the head of the State Reserve Agency, and has filed indictments against 24 senior officials and magistrates in the first six months of 2006. ¶8. (C) Interior Minister Petkov's apparent inability or unwillingness to reform his own agency and vigorously pursue major organized crime figures highlights another of PM Stanishev's problems: the perception that he is not fully in control of his cabinet. In fact, the Bulgarian constitution posits a consensus-based decision-making process within the Council of Ministers, making it difficult even for a strong personality to impose his or her will. Stanishev carries the additional burden of being a relative newcomer to high-stakes politics, having been plucked from near obscurity by former BSP leader Georgi Parvanov when Parvanov won the 2000 presidential election. In contrast, Petkov and Economy and Energy Minister Rumen Ovcharov -- both of whom at various times in the past were seen as coveting the premiership -- are experienced political operatives. Beyond his own party, Stanishev must also manage the competing personal and political interests of his coalition partners. -------------- COMMENT: WHAT THE FUTURE HOLDS SOFIA 00000968 003 OF 003 -------------- ¶9. (C) If we could choose the face of Bulgaria's future political leadership that would best serve U.S. interests, Sergei Stanishev would be at or near the top of the list. In spite of the burdens placed on him by his own party and a political system that seemingly can be changed only at glacial speed, Stanishev has shown himself to be a capable leader and a dedicated reformer. He has successfully kept his government focused on its top priority of early membership in the European Union, with all of the complex internal changes that goal entails. Once this is achieved, Stanishev will have more time to devote to building his government's domestic legacy. This is likely to include addressing major social issues such as education and health care, both of which are in or near crises. He will also have to work harder to keep his coalition together after the "glue" of EU accession starts to weaken. Yet the coalition is probably stable in the medium term, if for no other reason than that the two junior partners have nowhere else to go right now. In short, further USG investment in Stanishev will likely pay dividends for some time to come. His government represents stability and continuity in foreign policy, and he personally represents the young, reform-minded Bulgarian politician of the future. To the extent we are able support him and others like him, U.S. interests in Bulgaria will be strengthened. Levine