BULGARIA: PM ANGRY AND DEFENSIVE IN FACE OF EU

C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 000775

SIPDIS

C O R R E C T E D COPY (CLASSIFIED BY AND REASON LINE ADDED)

E.O. 12958: DECL: 12/08/2018
TAGS: PGOV ECON PREL BU
SUBJECT: BULGARIA: PM ANGRY AND DEFENSIVE IN FACE OF EU
CRITICISM

REF: SOFIA 750

SOFIA 00000775 001.2 OF 002


Classified by: DCM Alex Karagiannis for reasons 1.4 (b) and (d)


1. (C) Summary: Prime Minister Stanishev is showing signs
of stress from intense domestic political infighting, an
economic downturn, negative international press and sustained
EU criticism. Uncharastically angry and defensive in a
December 3 meeting with the Ambassador, he lashed out at EU
critics and spoke of turning Bulgaria into a "difficult EU
member state -- like Poland." Ambassador urged Stanishev to
focus on what still needs to be done in the areas of EU funds
management and rule of law. The international criticism will
ease only when the Bulgarians can point to concrete reforms
and successes. End Summary.

LASHING OUT AT THE COMMISSION
--------------


2. (C) Ambassador met PM Stanishev December 3 to discuss
Bulgarian reaction to the November 25 loss of 220 million
euros in EU pre-accession funds (reftel). Stanishev bitterly
asserted that the loss of EU money was the decision of one EU
bureaucrat, DG for Enlargement Michael Leigh, whom he accused
of harboring an anti-Bulgaria bias. Other European experts,
he said, had been impressed by all Bulgaria had accomplished
in the four months since the EU originally froze USD 765
million in pre-accession funds due to fraud and
mismanagement. Stanishev said these officials, who are in
Bulgaria on an almost constant basis, complemented Sofia on
the creation of a Deputy Prime Minister position in charge of
EU Funds, increases in personnel, and rapid legal and
structural reforms in the areas of funds management. In
addition, there were new laws in parliament on conflict of
interest and party financing. Therefore, DG Enlargement's
decision to suspend the PHARE pre-accession funds came a
surprise.


3. (C) Stanishev complained about the EU's approach to
Bulgaria, saying it was in violation of the principles of
solidarity and transparency. He noted that some EU countries
(Hungary in particular) had recently received direct
financial support from the European Central Bank after
"mismanaging their finances." Meanwhile, Bulgaria has
engaged in sound fiscal policies, racked up surpluses and
reserves, and maintained stricter control over its banking
sector. The decision to "save for a rainy day" was not
politically easy or popular, and many fellow EU member states
took the easy way out by spending beyond their means. The
Commission rewards these countries with "bonus EU funding"
while denying Sofia access to long-promised pre-accession
funds, he stated.


4. (C) On violations of transparency, Stanishev accused the
Commission of intentionally leaking scathing monitoring
reports on Bulgaria in July. "We read these reports in the
newspapers," he said. And he complained that Brussels is
always moving the bar. "Michael Leigh always says "What
you've done is good, but now you need to do more." Further,
Stanishev complained that the Commission and the U.S. Embassy
lobbied hard for the closure of duty free shops in Bulgaria
(which were finally closed in July 2008),only to learn that
the European Parliament (as opposed to the Commission) in
November voted in favor of duty free shops on land borders
(NB: Euro MP's from Bulgaria's ruling coalition constituted
the margin of victory). Stanishev also asserted that in a
July letter to EC President Barroso, he offered "complete
openness to EU experts." He said Barroso was unwilling to
take Bulgarian up on its offer because it would imply the
Commission was "co-responsible" for results.


5. (C) The Commission's actions would turn Bulgaria into "a
difficult member state -- like Poland," Stanishev said. He
noted that recent opinion polls showed a drop in up-to-now
overwhelming support for the EU. The anti-EU, anti-West
nationalist party Ataka is getting stronger. Corrupt
business blocks are on the rise politically (notably energy
oligarch Hristo Kovachki's Leader Party). The Commission
must realize, he said, that Bulgaria is in a pre-election
season and the EU's actions will have ramifications. At this
critical time, "our European friends must be cautious."

INTERNATIONAL PERCEPTIONS
--------------


6. (C) Stanishev saved special criticism for the
international press' treatment of Bulgaria of late. A recent
series in the International Herald Tribune profiled Bulgaria
as "The Most Corrupt Country in the EU." Stanishev said this
series did not meet journalistic standards and was based on
"80 percent outdated information." He claimed there was
"clear evidence" that some of the articles had been "planted"

SOFIA 00000775 002.2 OF 002


Classified by: DCM Alex Karagiannis for reasons 1.4(b) and (d)

by political rivals, (notably the GERB party of Sofia Mayor
Boyko Borissov.)

FOCUS ON THE FACTS
--------------


7. (C) Ambassador reminded that Bulgaria's membership came
with conditions. The question now is to what extent Bulgaria
is meeting those conditions. Talking to Brussels about
double standards will fall on deaf ears. Bulgaria must be
able to point to concrete facts. For example, she said, the
government must take charge of the debate over the future of
the national auditing office, the entity that will oversee
the more than 13 billion dollars in EU structural funds
Bulgaria is to receive by 2013. Ambassador stressed the
agency had to be independent and free from political
pressure. It must use independent auditors. Stanishev
agreed. In times of shrinking growth and FDI, Ambassador
continued, the Government must show specific reforms to
increase investor confidence as well as EU confidence. New,
transparent public procurement procedures would be a step in
the right direction. By pointing to tangible reforms such as
these, Bulgaria could change the dynamic with the Commission
and international media.



Karagiannis