Europe, Headlines

BULGARIA: Losing Billions to Corruption

Claudia Ciobanu

BUCHAREST, Nov 11 2008 (IPS) - Far from succeeding in pressuring Bulgaria to solve its problems with high-level corruption and organised crime, the European Union is forced to watch its aid money drain away into the coffers of shady businessmen well connected with the Bulgarian political class.

When Bulgaria joined the European Union (EU) Jan. 1, 2007, the alliance promised to grant the Eastern European country at least 11 billion euros in aid by 2013. The money is largely meant for infrastructure development and agricultural programmes in the poorest member of the EU.

But in July this year, the European Commission (EC), the executive arm of the EU, suspended payments of roughly 500 million euros to the country. The EC accused Bulgaria of mismanagement of European funds through corruption and inefficiency in national aid management agencies.

The EU Anti-Fraud Office (OLAF) is currently investigating the Nikolov-Stoykov group that is suspected of defrauding 7.5 million euros from the Special Accession Programme for Agriculture and Rural Development (SAPARD) funds.

In an OLAF report leaked to the Bulgarian media Jul. 15, the fraud watchdog writes that “the Nikolov-Stoykov group is a criminal company network composed of more than 50 Bulgarian enterprises and various other European and offshore companies.”

OLAF accuses the business group of taking EU aid money ostensibly to buy new manufacturing equipment, but using it to buy second-hand technology from Germany – and appropriating the difference. Additionally, companies from the group have been importing food products from outside Europe on fake licences and then placing the goods on Western European markets, OLAF says.

The two leaders of the group, Ludmil Stoykov and Mario Nikolov, have both been investigated for fraud. Stoykov was arrested last year but charges are still to be brought against him. Nikolov is facing trial for fraud.

Over the last few weeks, the main opposition force in the country, the Citizens for European Development of Bulgaria (GERB), has been revealing links between the Nikolov-Stoykov group and the governing Bulgarian Socialist Party (BSP).

The opposition has said that Ludmil Stoykov financed the election campaign of President Georgi Parvanov (BSP). And GERB has recently submitted evidence to the General Prosecutor’s Office that Prime Minister Sergei Stanishev (BSP) met privately with Mario Nikolov in 2005, after which businesses from the Stoykov-Nikolov group gave close to 100,000 euros for the BSP election campaign.

In response to the accusations, Prime Minister Stanishev said that his party has around 3,000 donors annually and cannot check everything about every individual who makes a donation. He added that “if there was any evidence that any of the individual donors violated the law and this is not clean money, my party will donate it to charity.”

On Oct. 14, the General Prosecutor’s Office asked the State Security Agency (SANS) to investigate BSP campaign financing. SANS was established in December 2007 by the Bulgarian government as a mixed military and civilian counter-intelligence service in charge of fighting organised crime, high-level corruption and trafficking. The head of the agency is appointed by the cabinet, and he then chooses his deputies.

But while SANS was called (by the Prosecutor’s Office) to investigate BSP financing, the cabinet dismissed the agency’s deputy head, Ivan Drashkov. Prime Minister Stanishev accused Drashkov of “non-observance of the law, and damaging the prestige of SANS” following revelations that the agency had spied on more than 50 journalists and some members of parliament.

Prominent Socialist politician, former minister for the interior Roumen Petkov, has condemned the dismissal of Drashkov, making SANS a battleground for an internal power struggle in the Socialist Party. But Petkov may have his own reasons.

“Drashkov has been promoted by Roumen Petkov, he is considered Petkov’s man,” Tatiana Kostadinova, a Bulgarian political scientist at the Florida International University told IPS. “Petkov is angry at Stanishev for being fired this spring, and is preparing to become the new leader of BSP. It’s rivalry and competition over every issue, in this case control of SANS.”

Petkov was forced to resign Apr. 13 after it was revealed that he had held meetings with “the Galevi brothers” being sought by the authorities for suspect dealings. On Oct. 20, Petkov was charged with divulging state secrets, and in the same week authorities launched a raid in south-west Bulgaria to search for “the Galevi brothers”, who are nowhere to be found.

“It seems that there is a competition for privileged information, which should be used for the benefit of the public,” says Tatiana Kostadinova. “Instead, groups within the BSP try to monopolise it for private use.”

Recent opinion polls show that public confidence in the government has fallen below 10 percent. And this is not just due to corruption scandals linked with the BSP. The Socialists’ partners in government, the Movement for Rights and Freedoms, have a similarly tarnished public image, and their leader Ahmed Dogan is considered the most unpopular political figure in the country.

General elections are due in June next year, but the opposition has been repeatedly calling for an early ballot. GERB and two smaller opposition centre-right parties launched a campaign last month asking citizens to sign symbolic orders for dismissal of the government. In a country of 7.5 million, Bulgarian media reported that close to a million such orders were collected in an urn placed outside the Bulgarian parliament.

Beyond the disenchantment, more quantifiable consequences of corruption and inefficiency are becoming visible. Bulgaria’s economy minister Peter Dimitrov announced Oct. 22 that foreign direct investment decreased by 1.17 billion euros for the January-August period over the corresponding period the previous year. This was due to both the global financial crisis and a loss of investor confidence in Bulgaria.

Bulgarian economists have warned that the most severe effects of the global financial crisis might hit the country next year, and that European institutions would be reluctant to inject any money into Bulgaria for fear it would be diverted by crime groups and corrupted leaders.

On Oct. 23, the National Road Infrastructure Agency announced that it was halting its entire development programme for 21 tenders worth 160 million euros for road repairs. Most of the money was granted under the EU Regional Development Fund. The programme had been halted, the agency said, because of “too many irregularities with the paperwork.” More than half the tenders went to companies belonging to the same businessman.

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