Denmark firmly supports Bulgaria and Romania‘s Schengen bids and hopes that the two countries would join the agreement during its EU presidency, Danish PM Helle Thorning-Schmidt has said.

“Bulgaria and Romania have met the requirements for joining the Schengen Agreement; we should stimulate them by accepting them in Schengen. If someone has abided by the rules, they should proceed to the next level,” Thorning-Schmidt has declared, as cited by the Bulgarian BGNES news agency.

Denmark is working very actively in support of Bulgaria‘s Schengen accession bid, according to the Danish Prime Minister.

On Monday, Thorning-Schmidt met with her Bulgarian counterpart Boyko Borisov in the Balkan country’s capital Sofia.

The Netherlands remains the last Schengen state to strictly oppose Bulgaria‘s phased-in accession to the agreement after Finland softened its position in mid-November. Finland now says it would accept a phased-in solution for the Balkan country if it sees a positive Cooperation and Verification Mechanism interim report at the beginning of 2012.

Bulgaria and Romania were initially planned to join the Schengen Area in the spring of 2011, but their entry was opposed by France and Germany, which also voiced objections relating not to technical criteria, but rather to corruption and organized crime.

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Bulgaria is no different than the common trend of decline in the number of reservations for winter vacations, according to the Minister of Economy, Energy and Tourism, Traicho Traikov.

Traikov spoke for the media Friday, after being asked to comment on fears of the tourist sector about a decline of bookings from Russian and UK tourists. He said there is such decline and if it doesn’t catch up at the last moment, there will be a drop of the UK market on Bulgarian winter resorts.

The Minister cited data from World Travel Market, showing a drop of reservations for Switzerland by 67%, by 80% for the US, and by 50% for France.

One of the reasons for the possible decline in the number of tourists from the UK, cited by him, is preliminary data that in 2015, the forecasted income of British households would not reach the 2002 levels. In addition, in order to guarantee the stability of the country’s social system, there is a planned acceleration of the retirement reform by eight years in order to establish retirement age for both males and females at 67 years.

Traikov informed his institution is supporting the proposal for the so-called “seasonal hotels” to pay tax only when they are open for business and have visitors, but the percentage is not yet determined.

British tourist are waiting to find out when there will be snow in order to make reservations and the later are way behind the preliminary contracts signed with tour operators, the Bulgarian Monitor daily writes, citing people from the tourist business being nervous about both the unfavorable meteorological conditions and the financial crisis.

The lowest price for packages for British tourists, who are key for Bulgaria‘s winter resorts, starts at GBP 250-300 for a week stay, including airfare and a ski lift card.

The second group on which local resorts rely – the Russians also do not make plans for winter vacations in Bulgaria unless there is snow in the forecast, experts say.

Tour operators estimate 50% current reservations of the entire capacity of the resorts.

Last winter the “good” snow arrived around January 15, and lasted until April, but tourists did not book vacations after the peak of the season.

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Plovdiv, Bulgaria‘s second largest city, is in the focus of the festivities in the country as it celebrates the 126th anniversary since its unification.

A solemn retreat starting 20:30 local time on Tuesday will be the culmination of the celebrations in the city, the bTV private channel has informed. The holiday is also marked with events all across the country.

Bulgaria‘s President Georgi Parvanov and Parliamentary Speaker Tsetska Tsacheva are present at the event.

On September 6, 1885, the Principality of Bulgaria unified with the autonomous Ottoman province of Eastern Roumelia, a few years after its liberation from Ottoman yoke.

The historic proclamation was made after a march by a handful of Bulgarians from the small town of Saedinenie  (“Unification“) to the town of Plovdiv, removing one of the gravest injustices imposed in the wake of the Berlin Congress. The Unification was prepared by a network of secret revolutionary committees in Eastern Roumelia, and was backed by the then Bulgarian ruler, Knyaz (King) Alexander I Batenberg.

Great Britain had been the primary protagonist in downsizing Bulgaria during the Berlin Congress because it feared a large Bulgarian state with access to the Mediterranean would be under Russian influence. However, in 1885-1886, it backed informally but rather noticeably, Bulgaria‘s Unification, seeing that the Russian Empire at the time was against this move, which stirred diplomatic tension in the Balkans, and seized the chance to demolish Russian influence in Bulgaria.

As other Balkan countries objected to Bulgaria‘s Unification, Serbia attacked Bulgaria in November 1885. In a grand national effort to defend the Unification, the young Bulgarian Army, which had just been left by its senior Russian officers, repulsed the attack, and defeated the Serbs on their territory, thus making the Unification of Northern and Southern Bulgaria a fait accompli.

But it was not until 1886 when the Great Powers recognized the almost doubled state of Bulgaria with a Bulgarian-Ottoman treaty.

After the Unification of 1885, Bulgarian efforts were focused on making Macedonia and the rest of Thrace part of the country. Thus, Bulgaria backed the VMORO (Internal Macedonian-Adrianople Revolutionary Organization) and its staging of the failed Ilinden-Preobrazhenia Uprising in 1903, and subsequently took part in the Balkan Wars of 1912-1913, World War I (1915-1918) and World War II (1941-1945).

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The name of the actual buyer of the State-owned cigarette-maker monopoly Bulgartabac is going to be revealed very soon, Economy and Energy Minister, Traicho Traikov, promised.

Speaking Saturday from the Black Sea city of Varna, Traikov, however, stressed that the most important issue was who the investor is, not the buyer. He added that there is no guarantee about the ID of the latter, “unless it is one of the strategic ones.”

The Minister explained the possibility the tobacco monopoly can be resold stands, but whoever acquires it, will have the same commitments, reiterating social ones, related to the jobs of people at the company, were among the best protected.

In an earlier TV interview, also on Saturday, the Minister said the contract guarantees jobs at the Holding, and the company’s continuing pay of taxes and fees to the State. He pointed out workers there have excellent job conditions, and their labor contracts are among the most generous in the country.

When asked who is going to be the guarantor that Bulgartabac will comply with the contract, Traikov stated the control belongs fully to the Privatization and Post-privatization Control Agency.

The only member of the Agency’s Supervisory Board, Rusi Statkov, to vote against the deal, declared earlier that Bulgartabac must not be sold since the contract is against national interests. The Minister stressed again the deal was a good one taking into account the current situation.

After five-hour debates on Friday, the Supervisory Council of the Privatization and Post-privatization Control Agency approved the sale of Bulgartabac to o BT Invest, a firm wholly owned by Russia‘s government bank VTB.

The Supervisory Board of the Privatization and Post-privatization Control Agency is a political body, elected by the Parliament. It consist of three representatives of the ruling Citizens for European Development of Bulgaria, GERB, party, one each from the opposition left-wing from the quota of the opposition left-wing Bulgarian Socialist Party, BSP, the opposition ethnic Turkish Movement for Rights and Freedoms, DPS, the right-wing Democrats for Strong Bulgaria, DSB, and the far-right, nationalist Ataka.

The price offered by BT Invest, the sole bidder standing, after several major players withdrew, is EUR 100.1 M with investments of BGN 7 M in the next two years and the commitment to purchase 5 000 metric tons of Bulgarian tobacco a year (about 14% of the crop). The draft contract also includes a clause banning a resell in the next 5 years.

Meanwhile, the same day, the labor union of the Bulgartabac workers organized a protest rally in front of the Privatization Agency’s building in Sofia. They oppose the sale of the cigarette maker to the only remaining bidder in the public procurement procedure and insist that the Governing Board rejects the offer.

In a declaration to Prime Minister, Boyko Borisov, the Union demands halting the deal and the resignation of the Privatization Agency’s CEO, Emil Karanikolov. About 500 people took part in the rally.

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Georgi Angelov, Senior Economist with the Open Society Institute – Sofia,argues that the ESM and the Pact for the Euro are a real burden for the poorer EU member states and they significantly decrease their incentives to join the Eurozone.

The background

In the first decade of the existence of the euro, there was a very interesting phenomenon. The Eurozone candidate countries had to meet strict criteria, while the Eurozone member states in practice had no such conditions (normatively, such rules existed but were not observed). There was a remarkable case, when a candidate for the Eurozone was not admitted as it had inflation rate just 0,01% above the required level. At the same time, many countries of the Eurozone did not meet the requirements for a government debt for years on end, but no action was taken against them.

The Eurozone rules were not only unjust – they were counterproductive too. Common sense requires respecting the rules within the Eurozone in order to ensure stability of the euro. As this was not done, now many Eurozone member states are on the verge of default. At the same time, the goal of imposing the euro as a global currency required the quick accession of the new member states of the EU, at the time when they were willing to enter the Eurozone. This was not done.

Paradoxically, the countries with a better fiscal and economic policy were outside of the Eurozone, while the countries within the Eurozone had worse fiscal policy. For example, in 2008 all new EU member states had a government debt below 50% of GDP, excluding only Hungary, while in the Eurozone the government debt was over on average 70% of GDP. What is more – seven of

the ten countries with the lowest level of government debt in the EU were outside the Eurozone in 2008. They were outside the Eurozone mostly because they were not admitted to it. The Eurozone did not admit countries with a good economic policy, while the Eurozone itself had a weak fiscal policy as a whole. It is hard to believe, but it is a fact.

The current state of affairs

From the perspective of the countries outside the Eurozone, the situation in recent months did not change for the better. It is just the opposite. After they created the mess with the Eurozone fiscal problems, the big countries came up with a “solution” – a bailout fund for rescuing the defaulted states – although bailout of bankrupt countries is illegal under the current legislation of the EU. Now the change in the Lisbon Treaty is put forward, aiming at legalizing the bailout fund, the so-called ESM (European Stability Mechanism).

The rescue fund itself (ESM) will have a capital of 700 billion euro of which 80 billion euro will be effectively deposited and the rest will be provided when necessary. The initial proposal was to allocate the capital on the basis of population and GDP – meaning that the poorest countries will pay the most as a share of GDP, while the richest will pay least. It was only after strong opposition by the new member states a small and temporary concession was made – during the first 12 years of Eurozone membership for the countries with less than 75% of average GDP, the weight of population will be 12,5% instead of 50%.

However, even under the new system the poor countries will pay more as a share of GDP, and this problem will exacerbate after the 12 year transitional period. Twelve years are not enough for the poor to become rich. Rather paradoxically, the poorest member of the Eurozone will pay the most as a share of GDP – and this money will save one of the richest countries in the EU such as Ireland, Belgium, Spain, etc. It will be even more paradoxical if poorer countries enter the Eurozone – such as Romania, Bulgaria and Latvia. The poorest will come to the rescue of the richest!

The financing mechanism of the ESM is in no way linked to the risk of one country needing assistance. In fact, the countries with the smaller government debt as Estonia and Bulgaria (which are least likely to default) will pay most as a share of GDP in the rescue fund. I.e. the allocation of capital is not only unjust to the poorer countries – it punishes the prudent countries, which have to increase significantly their debts in order to contribute their share to the fund. At the same time, the counties with the largest government debt will pay the least.

And we are not talking about some trivial sums here. For example, the share of Bulgaria in a 50-50 weight of population and GDP is about 6,1 billion euro – or about 17% of GDP. Countries such as Luxemburg, the Netherlands, Austria, Belgium and Finland will have a 3% to 5% share of GDP. In practice, this is an “entry fee” for Eurozone membership, i.e. an additional criterion to the candidates, which are already facing higher requirements. The candidate countries, which have nothing to do with the problems of the Eurozone and have always have had a better fiscal policy, will have to participate with a larger share in saving the defaulted Eurozone member states.

What is the responsibility of Bulgaria for non-compliance with the Eurozone rules in the last decade so that it has to pay for it? Bulgaria holds the European record for government debt reduction for the last decade – but will not be rewarded for it, but it will be “fined” to pay the most in the ESM when it enters the Eurozone. The payment in cash, together with the promise for future payments when necessary will put a burden on the cost of financing of the country, i.e. this is a real burden for the economy.

It is unclear why the ESM is being established, when the International Monetary Fund can adequately fulfill this role. Moreover, the rescue fund of the Eurozone is being used for political goals, e.g. the pressure by France against the low corporate tax in Ireland.

Poor and low debt countries to pay the most in ESM

Estonia and Bulgaria have a minimal government debt – with a minimal share in the common debt of the countries in the EU, Their share in the ESM capital however is about 15 times higher than their share in the EU gross debt. On the contrary, Germany, France and Austria will pay less to the ESM than their share in the debt. The poorest and least indebted countries will pay much larger share in the ESM than they are entitled to.

But the ESM financing is not the only problem. In parallel, the Pact for the Euro is being developed and the countries outside of the Eurozone were not invited in the discussions in any way. Despite this, there is a huge political pressure on them to announce that they “voluntarily” join the Pact for the Euro. Apparently, the Pact for the Euro breaches the principles of equality in the EU, because the opinion of the new member states was not taken into consideration. It is also used for imposing policies that are harmful to the poor states and detrimental for achieving high economic growth. The Pact for the Euro includes coordination and harmonization of taxes, which has nothing to do with the stability of the euro, and is promoted mainly by France with its wish to prohibit low taxes. But the low taxes are the key element of the policy for encouraging higher economic growth and convergence – if the poor countries have the same high taxes as the rich, there will never be high growth, prosperity and wealth.

We already have an experience with the harmonization of the indirect taxes, which demonstrates clearly how the same minimal rate is appropriate for a rich country as Germany, but it is extremely heavy for a poor country as Bulgaria. For a German, a 30-40 cents tax on a liter of fuel is negligible, while for a Bulgarian this is a huge sum with an average salary of 300 euro per month. It is not coincidental that the high excise duties on fuel and cigarettes create problems with smuggling and grey economy in the poor countries.

In addition, the Pact for the Euro talks about assessment of competitiveness, which will be done through comparison in the dynamics of salaries. The Pact claims that the big and steady increases in wages bring about erosion of competitiveness. However, there is no exemption from the rule for the poorer countries. It is obvious that if a country is poor and achieves high economic growth, the levels of prices and levels of salaries in this country will increase at a faster pace that in the richer member states – this is the whole logic of convergence. The poor countries can never become rich if they don’t achieve a high growth of incomes.

It is not surprising that the Pact for the Euro does not include the point of view of the poorer countries – after all, they didn’t participate in its negotiation. This is an evidence that policies dictated entirely by the “old” Memeber States are not the best for everyone, especially for the poorer member states. Even before the crisis Brussels was displaying lack of understanding for the economic circumstances in the new member states. Then, it was often claimed that the big current account deficit is a problem, although the latter was a direct consequence of the intensive FDI flows. We have to thank only the financial crisis because as a result the big current account deficits quickly disappeared, thus invalidating the assumption that they would cause problems during the crisis.

In short, both the ESM and the Pact for the Euro are a real burden for the poorer EU member states and they significantly decrease their incentives to join the Eurozone. The new member states are gradually taking Sweden’s route – according to Eurobarometer surveys popular support for joining the Eurozone is dwindling in these countries, while trust in local currencies is rising (especially if it’s a stable one like in Bulgaria and the Czech Republic). For years we have been warning that the Eurozone has to enlarge rapidly while the new Mmeber States are still willing to join, because the time will come that they will no longer be wishing to do so. It appears like this moment is approaching and introducing new burdens such as the ESM and the Pact for the Euro will only aggravate anti-Euro tendencies.

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Bulgaria’s economy performed slightly better in the second quarter than was originally estimated, according to seasonally adjusted data of the National Statistical Institute.

Latest NSI data released Tuesday indicated that Bulgaria’s GDP grew by 0.3% in the second quarter of 2011 compared with the first quarter – an improvement compared with the 0.1% growth for Q2 that was originally announced in August. The average Q2 growth of EU 27 compared with the first quarter was 0.2%.

The year-on-year growth figure for the Bulgarian economy in the second quarter has also been revised up to 2.0%, from 1.9% announce earlier according to the flash estimates.  The EU 27 y/y growth in the second quarter was 1.7%.

In spite of the slight positive revision, Bulgaria’s economy still registered a slowdown of its growth in the second quarter, after in Q1 2011 it grew by 0.7% compared with the last quarter of 2010, and by 3.3% year-on-year.

In the second quarter of 2011, Bulgaria’s GDP amounted to BGN 18.804 B, or EUR 9.614 B, which translates into a per capita GDP of EUR 1 284.

In April-June 2011, Bulgaria’s industrial and agricultural sectors increased their relative share in the added value of the economy, while the share of the services declined. The industry saw its share grow by 2.3% y/y reaching a share of 33.4%, and the agriculture’s increased by 1.1% reaching 5.8%. The share of the services declined by 3.4% down to 60.8%.

A total of 3.492 million people were employed in Bulgaria in the second quarter, a decrease by 3.5%. The gross added value per employed person increase by 6.1% in the second quarter year-on-year.

In the second quarter of 2011, individual consumption constituted 70.1% of Bulgaria‘s GDP. Investments accounted for another 21.1%. The country’s external balance (exports-imports) was negative BGN 414 M, or 2.2% of the GDP.

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A total of nine bodies have been discovered since the Russian “Bulgaria” boat sank Sunday, with local authorities claiming there is little chance for survivors to be found.

A total of 80 people have been rescued, but scores are still missing after the two-deck river cruiser sank in the Volga river.

Chances that any survivors may be found are decreasing, Emergency Situations Ministry spokeswoman Irina Andrianova has said, according to the Daily News Engine.

There were more than 170 people on board of the riverboat, including at least 30 children. The “Bulgaria” boat sank in the middle of the river in the Volga region near the village of Syukeyevo in the Kansko-Ustinovsky district of the Republic of Tatarstan on Sunday afternoon.

The double-deck ship was built in Czechoslovakia in 1955 and is designed for 140 passengers, according to the site of the company that owns it.

The governments of Bulgaria and neighboring Romania have asked the European Commission to help convince older member states to lift restrictions for job-seekers from the two countries as of 2012.

Bulgarian Labor Minister Totyu Mladenov and his Romanian counterpart Sebastian Lazaroiu have sent to this end a joint letter to Employment, Social Affairs and Inclusion Commissioner László Andor.

In the joint letter, the two ministers call on the European Commission to issue a report on the free movement of workers from their countries, which could serve as a basis for decision-making prior to the scheduled review of the restrictions at the end of this year.

“We strongly believe that such a report would help member states which still uphold restrictions on their labour market for Bulgarian and Romanian nationals to take a positive decision for the restrictions to be lifted,” reads the letter.

“We believe that the free movement of workers must become a reality and that transitional measures should be removed at least two reasons: the free movement of workers is a fundamental right in the EU and the types of migration from new member states do not justify these measures,” the ministers point out.

Romania and Bulgaria are in the second phase of the restrictions placed on the labor market commonly referred to in EU circles as the “2+3+2-year arrangement”. The second phase ends on 31 December 2011.

Ten member states have kept job restrictions for the citizens of the two Balkan countries that joined the EU in 2007.

The restrictions can be kept for another two years, until 2013, if the countries present evidence to back up their claims that the Bulgarian and Romanian job-seekers are a burden for their labor markets.

The UK, Germany and Austria have also retained labour market restrictions for citizens of Bulgaria and Romania despite a recommendation from the European Commission that they be lifted.

Bulgarians and Romanians are also required to secure a work permit in order to take up a job in Ireland and Belgium.

The other EU-25 Member States that have notified the Commission of their decision to continue to apply national law on labour market access after 1 January 2009 include Italy, France, Luxembourg, Malta and the Netherlands.

The presence of eastern European workers is extremely sensitive in Austria and Germany, which border the poorer region and the situation became even worse when recession started to boost unemployment rate.

The European Commission and the European Parliament can only recommend to the member states to open their labor markets for Bulgarians and Romanians, but it is up to the countries themselves to take the final decision.

It is doubtful however whether the joint efforts of the Bulgarian and Romanian governments will yield the expected results.

Earlier this year Austrian Labor Minister Rudolph Hundstorfer forecast that ten major EU member states will keep their labor markets closed for citizens of Bulgaria and Romania till 2014, the maximum period they are allowed.

This means that the ten Western European countries in question will wait until the end of the so called transition period of two-plus-three-plus-two – or up to seven – years after Bulgaria and Romania‘s EU accession in 2007 to open their labor market for Bulgarians and Romanians.

While Hundstorfer did not name the EU member states in question, it was obvious that he meant the ten countries still having restrictions: Austria, Belgium, France, Germany, Ireland, Italy, Luxembourg, Malta, the Netherlands, and the UK.

According to the Austrian Minister‘s forecast, these countries will keep the labor restrictions on Bulgarians and Romanians as long as they are legally allowed to by EU rules.

After 2014 the European Union will allot direct agricultural subsidies only to active farmers and not to landowners who do not cultivate the land, the bloc’s Commissioner for Agriculture, Dacian Ciolos, announced.

Following the approval of the European Union budget proposal for the period 2014 to 2020, the European Commission is about to begin to prepare legislative proposals to reform the Common Agricultural Policy (CAP). It is expected to be published in October.

“We will propose a simplified financial support for small farmers and define clearly what a farmer and an active farmer means to avoid that subsidies go to the landowners who are not farmers and do not cultivate the land,” Ciolos said, as quoted by Agerpres agency.

Bulgaria can count on a 10-15% increase in the monies from EU funds after 2014, it emerged after the European Commission approved late on Wednesday a proposal for the EU budget 2014-2020.

The European Commission has proposed to streamline faster the levels of agricultural subsidies in the old and new member states, which according to Bulgarian European Commissioner Kristalina Georgieva can boost direct payments to Bulgarian farmers by 70%.

A total of 30% of the money, however, will be granted only on condition that the farmers develop organic agriculture, according to Commissioner Georgieva.

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Portuguese giants Sporting officially confirmed that they have completed the signing of Parma‘s unsettled Bulgarian striker Valeri Bojinov.

The Bulgaria international has signed a five-year contract with Sporting after the two clubs agreed on a EUR 2.6 M bid for 80% of the player’s economic rights. The fee could rise to EUR 3.5 M depending upon the club’s performances.

The 25-year-old, who has also played for Fiorentina, Juventus and Manchester City, will wear the number seven shirt for the Lisbon side.

“I am an aggressive player on the pitch. I like and want to score goals. Sporting must always play to win. Only win and do their best,” he said upon his arrival in Lisbon.

The 25-year-old Bulgarian striker, one of Bulgaria‘s top football hopes, has had sporadic success at Parma recently, leading Bulgaria‘s national coach Lothar Mattheaus to criticize his performance.

The deal also involves yielding Jaime Valdes to the Italians.

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