Bulgaria: Country Background Report

Bulgaria: Country Background Report

Order Code 98-627 F
Updated July 13, 2001
CRS Report for Congress
Received through the CRS Web
Bulgaria: Country Background Report
-name redacted-
Specialist in International Relations
Foreign Affairs, Defense, and Trade Division
Summary
In June 2001, the party of Simeon II, Bulgaria’s former King from the pre-
communist era, won just short of a majority of the vote in parliamentary elections.
Simeon, who founded his party three months earlier, did not run for a seat in parliament,
but nevertheless was nominated by his party on July 12 to become Prime Minister.
Simeon II is the first ex-monarch to return to power in eastern Europe since World War
II. The Simeon II National Movement party replaces a center-right government that
achieved many significant economic reforms and consolidated Bulgaria’s pro-Western
orientation. Primary goals for Bulgaria remain full membership in NATO and the
European Union. U.S. Administrations and Congress have noted Bulgaria’s positive role
in promoting peace and stability in the Balkan region. This report will be updated as
events warrant.
Background
From the 14th to the 19th century, Bulgaria was part of the Ottoman empire. It gained
independence in the late 19th century. Bulgaria was on the losing side of three wars in the
20th century and came under communist rule in 1944. During the Cold War, Bulgaria had
the reputation of being the Soviet Union’s most stalwart ally in the Warsaw Pact. Todor
Zhivkov, head of the Bulgarian Communist Party, led a repressive regime in Bulgaria for
35 years. Beginning in 1989, Bulgaria began a gradual process of transformation to a
democratic and market economic state that progressed more slowly than in other central
European countries (such as Poland or Hungary), but with no violent changes in power
as in Romania or Yugoslavia.
Bulgaria is a parliamentary democracy with a directly elected president. The prime
minister and council of ministers hold most executive powers. Members of parliament are
elected for four years, while the president has a five-year term. In 1994 parliamentary
elections, the Bulgarian Socialist Party (BSP), the former communist party, won an
absolute majority of the vote. Under Socialist Party leader and Prime Minister Zhan
Videnov, economic reforms stalled while corruption grew. The Videnov government
steadily lost support as economic conditions deteriorated to crisis levels. In early 1997,
Congressional Research Service ˜ The Library of Congress

CRS-2
the opposition Union of Democratic Forces (UDF) led popular demonstrations against the
BSP government.
Early elections held on April 19,
Bulgaria at a Glance
1997, brought back to power the
UDF and its coalition partners,1 who
Area:
42,823 sq. mi., slightly larger than
won an absolute majority of the vote.
Tennessee
Ivan Kostov of the UDF became
Population:
7.9 million (2001 census)
Prime Minister. The Kostov
Ethnic Groups: Bulgarian (85%); Turkish (9%);
government took swift measures to
Roma (4%).
stabilize the economy and firmly
Capital:
Sofia
orient Bulgaria’s foreign policy
GDP/capita:
$1,600 (2000 estimate)
Leadership:
Petar Stoyanov, President
toward integration into Euro-
Simeon Saxe-Coburg, Prime
Atlantic institutions. The Kostov
Minister-elect
government became the first in the
Last Elections: June 17, 2001 (parliamentary)
post-communist era in Bulgaria to
October-November 1996
complete its term in office. It
(presidential)
weathered several external economic
storms and received international
Source: U.S. Dept of State, Reuters
praise for the example it set as a
zone of stability in the volatile
southeast Europe region. However, the Kostov government became plagued by
widespread allegations of corruption and suffered drops in approval ratings by a
population weary of economic hardship and distrustful of its political leaders.
Bulgaria continues the process of transition from a centralized economy to a
prosperous and stable market-oriented one. Economic reforms slowed considerably
during the BSP-led government from 1994 to 1997. With the backing of the International
Monetary Fund (IMF) and other international financial institutions, the Kostov government
introduced macroeconomic stabilization measures and structural reforms that resulted in
a reduced budget deficit, lower inflation, and a rise in foreign investment. The
introduction in July 1997 of a currency board swiftly pushed down Bulgaria’s soaring
inflation rates and continues to contribute to financial stability. Bulgaria’s GDP declined
by over 10% in 1996 and by 7% in 1997. GDP rebounded with 3.5% growth in 1998.
The 1999 Kosovo war hit the Bulgarian economy by curtailing exports and expanding the
current account deficit. Export growth, however, fueled strong GDP growth (around 5%)
in 2000. GDP growth is expected to slow slightly to 4.8% growth in 2001 and 2002.2
Unemployment remains high, at nearly 20%. The next government led by the Simeon II
National Movement is expected to maintain the fundamental course of economic reforms
of the previous government. However, it will be under pressure to make good on the
party’s campaign promises of economic benefits and improved living standards.
1 The UDF was briefly in power from late 1991 to 1992. For the 1997 vote, the UDF formed an
electoral alliance with the Bulgarian Agrarian National Union (BANU), the Democratic Party
(DP), the Social Democratic Party (SDP), and the Turkish Initiative Committee for Renewal (ICR),
known collectively as the United Democratic Forces. The Union of Democratic Forces by itself
won 123 seats in parliament.
2 Bulgaria: country forecast. The Economist Intelligence Unit, July 6, 2001.

CRS-3
2001 Elections and New Government. Bulgaria’s previous elections focused
on the divide between the two largest political groups, the leftist Socialists and the UDF-
led reformers. A new element to the June 2001 elections was the emergence of a new
political force centered around Simeon II, Bulgaria’s former king. As a child, Simeon was
forced out of the country by the Communist leadership in 1946. He spent 55 years in exile
in Spain and became a successful business consultant. In April 2001, just a few months
before the elections, Simeon founded the Simeon II National Movement (SNM) and its
standing in public opinion polls swiftly and steadily rose. Simeon pledged to improve
living standards within 800 days in office, fight corruption, lower taxes, increase social
spending, and pursue accelerated economic reforms. Simeon did not himself run for a seat
in parliament; the party’s ticket included young business persons and local celebrities,
many Western-educated.3 None in the SNM party, including Simeon, claimed to have any
governing experience. Apparently receptive to the notion of a fresh start to political life,
Bulgarian voters flocked to Simeon’s party, even while details of its program and even its
prospective leadership candidates remained vague.
The official results of the June 17, 2001, elections were as follows:
Party
% of vote
Seats in
parliament
Simeon II National
42.74%
120
Movement
United Democratic Forces
18.18%
51
Coalition for Bulgaria (incl.
17.15%
48
Socialist Party)
Movement for Rights and
7.45%
21
Freedoms
total
240
Simeon’s party won 120 seats in parliament, one short of an absolute majority. Both
the UDF and the ethnic Turkish Movement for Rights and Freedoms considered entering
into coalition talks, but only the latter, which has 21 seats in parliament, is expected to join
a Simeon-led coalition government. The UDF, meanwhile, has pledged to support the
government’s efforts to join the European Union and NATO, but said it will oppose any
efforts to restore the monarchy in Bulgaria. After his party’s defeat, former Prime
Minister Kostov stepped down as UDF leader.
Stated priorities for the SNM team include lowering taxes, balancing the budget,
increasing transparency in the privatization process, and attracting foreign investment.4
SNM leaders say that they wish to keep the general direction of the previous government’s
3 Some candidates had to withdraw their names after they were identified as having had links with
the communist-era secret police.
4 Reuters, July 12, 2001; The Economist, June 16, 2001.

CRS-4
reforms, but accelerate their implementation. Some observers speculate that the Simeon
National Movement may eventually seek to re-establish the monarchy in Bulgaria,
although the SNM denies having this goal.
Foreign Policy
Bulgaria and NATO. Bulgaria seeks NATO membership and hopes to be among
the countries NATO may invite to join the alliance at the 2002 NATO summit in Prague.
Nine other countries also seek membership in NATO (Albania, Croatia, Latvia, Estonia,
Lithuania, Macedonia, Romania, Slovakia, and Slovenia). Leaders from these countries
have pledged solidarity in their efforts to join NATO and have jointly called for NATO to
extend membership invitations in 2002.
At NATO’s April 1999 in Washington, DC, the allies welcomed their newest
members (Poland, Hungary, and the Czech Republic) and reaffirmed their willingness to
accept new members in the future. They announced the creation of a Membership Action
Plan (MAP) to provide advice and support to countries seeking NATO membership. As
part of the MAP, applicant states submit annual national programs on their preparations
for membership. Bulgaria submitted its latest annual national program of the MAP in
November 2000. The Bulgarian armed forces are in the process of reform and
restructuring, but are considered a late starter on reform. The armed forces consist of the
army, navy, and air force, with personnel strength of nearly 80,000 in 2000. By 2004, the
armed forces are to be reduced to about 45,000 troops under a new structure of rapid
reaction, main defense, territorial defense, and reserve forces. Bulgaria’s defense budget
in 2000 was over 2% of GDP, and projected to reach 2.8% in 2001. Bulgaria contributes
a small platoon each to NATO’s SFOR operation in Bosnia and KFOR operation in
Kosovo. The Bulgarian defense industry was active in the trade of small armaments, some
of which found their way to outlaw or rebel forces worldwide. The Kostov government
cut back significantly on foreign arms sales in 2000 and 2001 and cracked down on illegal
arms shipments.5
During Operation Allied Force in 1999, NATO extended a security guarantee to
countries neighboring Serbia, including Bulgaria. Bulgaria granted NATO transit rights
and use of its airspace, in spite of strong Bulgarian public opposition to the air strike
campaign. In April 2001, the Bulgarian parliament ratified a memorandum with NATO,
signed two weeks earlier, authorizing the transit and temporary stationing of NATO troops
on Bulgarian territory at any time. It is the first such agreement to be concluded between
NATO and a non-NATO country.
Bulgaria and the European Union. Bulgaria signed an association agreement
with the European Union in March 1993, and formally applied for EU membership in
December 1995.
Bulgaria is one of twelve associated countries currently in negotiations on joining the
European Union. Bulgaria opened accession negotiations in February 2000 in the second
“wave” of countries to start the accession process. In its latest progress report on EU
5 For further information see “With pain and hope, Bulgaria curbs weapons trade,” The
Washington Post, July 8, 2001.

CRS-5
candidate countries (from November 2000),6 the European Commission assessed that
Bulgaria continued to meet the political criteria for membership, but needed to strengthen
the judiciary. It said that Bulgaria has made progress in becoming a functioning market
economy, but was not yet able to cope with the competitive pressure and market forces
of the Union. It reported substantial progress by Bulgaria in aligning its legislation with
that of the EU in several functional areas. In December 2000, EU leaders reaffirmed that
the Union would be ready to accept new members by 2003 and that actual accession by
the first new members could be achieved in 2004, but outside observers view this timetable
as optimistic. Though Bulgaria is not expected to be among the first countries acceding
to the EU, the previous Bulgarian government’s goal was to conclude accession
negotiations in 2004 and achieve full EU membership in 2006. The EU agreed in late
2000 to remove Bulgaria from the so-called “blacklist” of countries requiring visas for
entry into EU territory, fulfilling a major goal of the Bulgarian government.
Regional Relations. For years, Bulgarian governments have emphasized good
relations with neighbor countries in the region. Bulgaria has actively participated in
numerous multilateral cooperation initiatives on economic, political, and security issues
in the Balkan and Black Sea region. In March 1998, six southeastern European countries
— Bulgaria, Turkey, Greece, Albania, Romania, and the former Yugoslav Republic of
Macedonia (later joined by Italy) — agreed to create a multinational peace force. The
joint Multi-National Peace Force Southeast Europe was inaugurated in September 1999
in the Bulgarian city of Plovdiv, the force’s headquarters for an initial 4-year period.
Bulgaria also participates in the Stability Pact for southeast Europe, a multi-dimensional
forum launched in 1999 by the European Union to promote regional economic recovery
and stability. Bulgaria maintains good relations with its neighboring countries, including
NATO allies Greece and Turkey. Bulgarian officials have spoken out against border
changes in the region and against future independence for Kosovo.
Perhaps no other conflict has alarmed Bulgaria as much as the sudden escalation of
violence in the neighboring Former Yugoslav Republic of Macedonia (FYROM, referred
to here as Macedonia) since early 2001. Bulgaria has historic ties to Macedonia, with
many Bulgarians contending that the two share a common language and culture. At the
same time, Bulgarian governments have strongly supported Macedonia’s territorial
integrity since Macedonia claimed independence in 1991. Bulgaria fears that prolonged
violence in Macedonia could lead to the dismemberment of the young state and invite
greater instability in the region. The Kostov government condemned the terrorist actions
by the Albanian insurgents and urged the parties to resolve problems through political
dialogue. Bulgaria has lent military assistance, including tanks and other military
equipment, and economic support to the Macedonian government.
U.S. - Bulgarian Relations
Relations between the United States and Bulgaria have improved steadily since the
fall of communism in Bulgaria and the rest of eastern Europe in 1989. The United States
has provided bilateral assistance to Bulgaria for economic restructuring and the
development of democratic institutions, and has supported multilateral financial and
development aid programs for Bulgaria. From Fiscal Year 1990 through Fiscal Year 2000,
6 The Commission’s reports are available on the web at http://europa.eu.int

CRS-6
the United States provided over $326 million in Support for East European Democracy
(SEED) Act bilateral assistance. Unlike some other central European countries that have
undergone transformation from communism, Bulgaria has also been adversely affected by
the violent conflicts in the region that have, among other things, disrupted trade routes and
undermined regional stability. In consideration of this, U.S. Administrations have
continued to designate bilateral aid funds for Bulgaria (while aid programs to more stable
regions in Europe have discontinued). For FY2001, the United States provided an
estimated $35 million and for FY2002, the Bush Administration has requested $35 million
for Bulgaria. The United States also provides military assistance to Bulgaria in the form
of foreign military financing (FMF) grants and funds for international military education
and training (IMET) programs ($7.8 million in FMF and $1.1 million in IMET for
FY2001). The United States has also funded programs for emergency food aid,
educational institutions, and Peace Corps volunteers. In 1999, U.S. exports to Bulgaria
reached $185 million and U.S. investors ranked fourth among foreign investors in
Bulgaria.
The United States and Bulgaria have shared the common interest of promoting peace
and stability in the unstable southeast Europe region. Bulgaria has been an active
participant in U.S. - supported regional initiatives such as the Stability Pact, the Southeast
European Cooperative Initiative (SECI), and the Southeast Europe Defense Ministerial
(SEDM). The Clinton Administration expressed gratitude for the Bulgarian government’s
steady support during NATO’s Operation Allied Force campaign against Yugoslavia, and
pledged assistance to offset adverse economic effects resulting from the Kosovo war. In
November 1999 President Clinton became the first U.S. President to visit Bulgaria. He
called Bulgaria a positive example for the region and said that a “more compelling case”
(after the Kosovo war) could be made for NATO membership for the nations of southeast
Europe.7
In April 2001, former Prime Minister Kostov became the first head of government
from central Europe to meet with President George W. Bush and other top Administration
officials in Washington, D.C.. Subjects of discussion reportedly included the conflicts in
southeast Europe, further NATO enlargement, and the upcoming Bulgarian elections. The
Bush Administration reportedly made no promises about Bulgaria’s candidacy for NATO
membership, but endorsed the Kostov government’s unequivocally pro-Western outlook
and reformist policies. During his first official visit to Europe in June 2001, President
Bush expressed strong U.S. support for launching the next round of NATO enlargement
at the 2002 alliance summit meeting in Prague. The Bush Administration has yet to
indicate how many or which countries it will support for an invitation to join the alliance.
Aspirant countries, including Bulgaria, warmly received Bush’s expressed commitment to
further NATO enlargement.
7 Reuters, November 22, 1999.

EveryCRSReport.com
The Congressional Research Service (CRS) is a federal legislative branch agency, housed inside the
Library of Congress, charged with providing the United States Congress non-partisan advice on
issues that may come before Congress.
EveryCRSReport.com republishes CRS reports that are available to al Congressional staff. The
reports are not classified, and Members of Congress routinely make individual reports available to
the public.
Prior to our republication, we redacted names, phone numbers and email addresses of analysts
who produced the reports. We also added this page to the report. We have not intentional y made
any other changes to any report published on EveryCRSReport.com.
CRS reports, as a work of the United States government, are not subject to copyright protection in
the United States. Any CRS report may be reproduced and distributed in its entirety without
permission from CRS. However, as a CRS report may include copyrighted images or material from a
third party, you may need to obtain permission of the copyright holder if you wish to copy or
otherwise use copyrighted material.
Information in a CRS report should not be relied upon for purposes other than public
understanding of information that has been provided by CRS to members of Congress in
connection with CRS' institutional role.
EveryCRSReport.com is not a government website and is not affiliated with CRS. We do not claim
copyright on any CRS report we have republished.