BULGARIA: OUTGOING PM GAMING FOR FIGHT

C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 000404

SIPDIS

E.O. 12958: DECL: 07/24/2028
TAGS: PGOV PREL BU
SUBJECT: BULGARIA: OUTGOING PM GAMING FOR FIGHT

REF: SOFIA 381

Classified By: Ambassador McEldowney for reasons 1.4 (b) and (d)


1. (C) Summary. On the last day of his four-year
administration, outgoing PM Stanishev expressed deep
bitterness over his electoral defeat, asserting that he was
brought down by dirty politics, as well as his own coalition
partners and opponents within his own party. Meeting with
the Ambassador in an already emptied office, Stanishev
appeared out of touch with the public's anger over corruption
and his government's failure to deliver on domestic programs.
He lashed out at PM designate Borissov's inexperience and
apparent intention to press for partisan reform. Though
clearly demoralized by his trouncing in the election,
43-year-old Stanishev has a lot of fight left in him. As the
leader of the Socialist Party and head of their parliamentary
group, he can and likely will present strong opposition to
the next government. End Summary.

ECONOMY WILL BEAT PREDICTIONS


2. (C) Stanishev rejected the World Bank and IMF
predictions that the Bulgarian economy will contract by seven
percent or more this year, and stressed that Bulgaria's
healthy public finances would protect it from a severe
downturn. The new government need only maintain prudent
fiscal policy to keep the economy on track. He warned
against renegotiating a new budget in parliament or rushing
into an IMF standby agreement. Should an IMF agreement be
necessary, he advocated a model similar to those used in
Poland or Mexico and stressed that with its strong public
finances, Bulgaria should not be grouped with "countries like
Latvia."

MANAGEMENT OF EU FUNDS FINALLY WORKING, DON'T ROCK THE BOAT


3. (C) After high-profile scandals and relentless European
criticism for misappropriation of EU funds, Stanishev
emphasized that an effective oversight and management system
is now finally in place. He warned that a new overhaul of
the system would delay absorption of funds at precisely the
moment they are most critical. Elimination of the Deputy
Prime Minister for EU Funds Management post that he created
in the wake of the scandals would also be a mistake, he
argued, since a "permanent whip" with broad powers to compel
interagency cooperation is essential to preventing future
misappropriations.


4. (C) In a similar vein, he said he would strongly oppose
any plan to create a "mega-ministry" to handle all issues
pertaining to road construction. He admitted that Bulgaria's
road network remains in poor condition and the failure to
complete the Trakia Highway from Sofia to the Black Sea was
one of his biggest regrets. After years of financial and
legal delays, Stanishev said the road building program is now
"all set to move forward" and reform or renegotiation of the
project would simply create new delays.

REFORM OF DANS ) AVOID EXPERIMENTS


5. (C) Stanishev went out of his way to caution the new
government against "changes or experiments" with DANS,
Bulgaria's national intelligence and investigative service.
He emphasized that DANS was designed to be apolitical and
constrained by "checks and balances." Bringing the entire
organization into the Ministry of Interior would be a serious
mistake, he argued, since "Let's be honest. It is the
ministry in the most need of reform."


6. (C) COMMENT: Highly emotional following his electoral
defeat, Stanishev was calm throughout the meeting. He
emphasized at several points that he wants to facilitate a
"civilized, European-style" transfer of power, but he is also
warning that he will fight if the next government
investigates him or other Socialist party leaders. He noted
bitterly that incoming Prime Minister Borissov and "his
allies in Brussels" waged a deliberate campaign to discredit
Stanishev's government on EU issues. Now, he said "we will
see who does what." Clarifying his willingness to go on the
attack, he added, "it will be up to the next government to
consider national interests. From now on, I will be more
concerned with politics."


7. (C) The last elections were an unmitigated disaster for
the Socialists, whose share of parliament dropped from 31
percent to 17 percent. Stanishev personally, however, has
not lost any of his fire, and he moves into opposition with a
chip on his shoulder. So far he has survived calls from the
older leftists inside his party to step down and appears set
to lead his party in opposition. At only 43, Stanishev is
certain to remain an important political force. As a
pro-Western moderate, he would be poised to play a

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constructive role, but personal animosity between him and the
next Prime Minister will ensure the combative relationship
between Bulgaria's two largest parties will continue.


8. (C) While several of Stanishev's concerns, particularly
those on the potential instability of next government and the
dangers of over-reliance on the Ataka party are legitimate,
his warnings against reform run strongly counter to public
(and expert) opinion. His Socialist-led coalition government
notched several achievements during its four-year mandate
(including EU accession),but it is clear he and his party
continue to underestimate the public's desire for serious
reform and its deep anger over corruption, organized crime
and ineffective governmental institutions. END COMMENT.
McEldowney