They insisted on a meeting with Borisov and his Deputy, Finance Minister, Simeon Djankov, but did not get a positive response.

Meanwhile, the demonstrators, represented by the National Grain Producers Association, were invited to meet with Agriculture Minister, Miroslav Naydenov, but declined the invitation on the grounds he is not authorized to sign any decisions.

The Association’s Chair says – one the invitation came too late and two – people have trust only in Borisov’s words.

The grain producers demand adherence to the financial agreement signed by the cabinet in September, immediate lift on excise on fuel they use and Djankov’s and Naydenov’s resignations. They vowed to stage a new protest Wednesday. Their permit expires at 10 pm the same day, when they have to leave the city.

Meanwhile, Naydenov confirmed that the cabinet remains unwavering in not giving in to the grain producers in their demands for more funding, saying he favored their sector for a long time, and now is “enjoying the results of it.”

“They will receive what is slated in the budget – this is what we can do now; I wish it was more too. If we show weakness and yield to the pressure – we will have a domino effect,” the Minister stressed.

He appealed to the protesting farmers to act reasonably and stop the rallies, saying as a citizen and father, he wants Bulgarians to have on the table not only grain, but meat, fruits and vegetables.

Naydenov explained that the Association of Grain Producers first asked to meet at 9 am; then said it was too early and asked for 11 am, and then changed it to 2 pm, and finally were the only ones from the farming sector, who failed to show up.

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Salaries of top politicians in Bulgaria will be frozen at their levels from the end of 2009, according to Prime Minister, Boyko Borisov.

The move will be implemented despite the cabinet’s decision to up the minimum monthly wage in Bulgaria in May, 2012 – from BGN 270 to BGN 290.

“This is the situation globally; this is the situation in Bulgaria,” Borisov says, cited by “Monitor” daily.

According to the Parliamentary Code, the wage of Members of the Parliament equals three times the average monthly salary for the country.

The average salary in the third quarter of 2011 was BGN 753. If it stays at this level in the beginning of 2012, it means that MPs, whose fixed salaries range between BGN 2 196 and BGN 2 259, will lose BGN 63 each month.

Ministers, on their part, will lose BGN 82 a month. Their salaries are fixed at BGN 2 855.

Borisov has a monthly wage of EUR 1 500, which he says is way less than the one of his western counterparts.

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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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The repaired Bulgarian section of Danube Bridge 1 between the city Ruse and Romania‘s Giurgiu was opened Saturday by Prime Minister, Boyko Borisov.

The bridge is the only one existing on the Danube to connect Bulgaria and Romania, for which the Bulgarian government has allocated BGN 1.7 M.

Borisov was accompanied at the ceremony by Regional Minister, Rosen Plevneliev, Transport Minister, Ivaylo Moskovski, and Culture Minister, Vezhdi Rashidov.

“Our Danube capital Ruse needed these reconstruction works. When facts speak for themselves, even the opposition remains quiet. When our visitors enter Bulgaria, they will immediately feel the upsurge that is taking place in our country. Construction works at the Danube 2 bridge are also progressing nicely and I hope once it is finished traffic will double on both” Borisov said at the opening.

The Bulgarian side of Danube Bridge 1 was repaired in the course of two months with works launched on June 30, and finished on time and on schedule. The asphalt pavement, the hydro-isolation and the concrete pavement under the asphalt were fully replaced.

The so-called joint Danube strategy of Bulgaria and Romania includes hydro power cascades on the Danube as well as building more Danube bridges in addition to the existing Danube Bridge 1 and Danube Bridge 2 at Vidin-Calafat, which is still under construction. There have been discussions of combining the future bridges and hydro-power plants.

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Bulgaria has demanded that Belene nuclear project is frozen for another three months as of July, the energy and economy minister announced on Friday.

“We have proposed a three-month delay so that we have time to catch up with the so-called back office work,” Minister Traicho Traikov said at a conference about the energy infrastructure, which is taking place in Sofia.

“We need additional information about the cost of the project, because what we have received so far from the Russian side has not been satisfactory,” said Traikov.

He added that negotiations for a new contract with Moscow for the construction of Belene can continue even while the project, which has hit a snag over safety, financial and price concerns, is frozen between July and September.

Asked by journalists whether Bulgaria faces the risk of being taken to arbitration by the Russian contractor Rosatom as it is likely to miss the July 1 deadline for signing a final agreement for its construction, Minister Traikov said:

“The arbitration is not a risk, it is an option.”

The 12th annex to the main contract between Bulgaria and Russia on the construction of two 1,000 megawatt nuclear reactors at Belene, in the north, will expire at the end of June.

The Bulgarian side apparently wants to steer clear of rushing for last-ditch effort in the negotiations with the Russian state nuclear corporation Rosatom for the fate of the Belene nuclear power project.

The annex triggered a huge scandal at the beginning of April after the head of the national utility company NEK Krasimir Parvanov signed an agreement with Rosatom‘s subsidiary Atomstroyexport that potentially threatens Bulgaria‘s national interests by obliging the Bulgarian government to reach a final agreement with the Russians on Belene by July 1, 2001.

Traikov slammed Parvanov and announced he is going to be fired, but the dismissal was later overturned by Prime Minister Boyko Borisov.

Borisov harshly criticized the Energy Minister’s hasty and emotional reaction and threatened him with being kicked out of office.

It turned out that Parvanov has coordinated his actions with Deputy Prime Minister, Simeon Djankov, who oversees finance and economy.

The signed document stirred heated debates in Bulgaria as it came before the two sides agree on the price of the project and conduct safety checks.

Bulgaria and Russia are unable to agree on the major bone of contention - the price for the construction of the 2000-MW Belene NPP.

Russia says the project construction price should be EUR 6.3 B. The Borisov government wants to set the price at as little as EUR 5 B.

After it was first started in the 1980s, the construction of Bulgaria‘s second nuclear power plant at Belene on the Danube was stopped in the early 1990s over lack of money and environmental protests.

After selecting the Russian company Atomstroyexport, a subsidiary of Rosatom, to build a two 1000-MW reactors at Belene and signing a deal for the construction, allegedly for the price of EUR 3.997 B, with the Russians during Putin’s visit to Sofia in January 2008, in September 2008, former Prime Minister Stanishev gave a formal restart of the building of Belene. At the end of 2008, German energy giant RWE was selected as a strategic foreign investor for the plant.

The Belene NPP was de facto frozen in the fall of 2009 when the previously selected strategic investor, the German company RWE, which was supposed to provide EUR 2 B in exchange for a 49% stake, pulled out.

In mid-March 2011, apparently acting on concerns caused by the situation in Japan‘s Fukushima NPP after the recent devastating earthquake there, the European Commission confirmed that it wants to reexamine the Belene NPP project – once Bulgaria finds an investor for it – even though it already approved it back in 2007.

Norway, Iceland, and Liechtenstein are granting Bulgaria funding amounting to EUR 126.6 M under Bulgaria-Norway and European Economic Area (EEA) mechanisms.

Norway’s Ambassador to Bulgaria Tove Skarstein and Bulgaria’s EU Funds Minister Tomislav Donchev signed two memorandums for the grants on Friday in Sofia in the presence of Prime Minister Boyko Borisov.

The grants come from the governments of the three EEA countries under the Financial Mechanism of the EEA 2009-2014, and the Norway Financial Mechanism 2009-2014.

Norway alone is granting Bulgaria EUR 48 M under the Norway Financial Mechanism, plus a sizable share of the EEA Financial Mechanism grant of EUR 78.6 M.

The funding provide by Norway, Iceland, and Liechtenstein will be used to support Bulgarian projects in the fields of healthcare, education, cultural and natural heritage, green industry innovations, energy efficiency, renewable energy sources, and cooperation within the Schengen Area.

Bulgarian Prime Minister Boyko Borisov thanked the people and governments of Norway, Iceland, and Liechtenstein, while Bulgarian Minister in charge of EU Funds absorption Tomislav Donchev pointed out that all state institutions, municipalities, NGOs, and firms in Bulgaria are eligible to apply for the money.

Norwegian Ambassador Tove Skarstein has underscroed the good cooperation with Bulgarian partners, and the high results achieved in the spending of Norway and EEA funds so far.

During the first program period, Bulgaria received EUR 41.5 M in Norway/EEA grants. Some of the projects this money was spent on include the first Museum of Contemporary Art in Bulgaria, a digital center at the National Library, archaeological excavations on the St. Ivan island near Sozopol where relics of St. John the Baptist where found, a solar energy park, tourist and information centers, among others.

The Bulgarian government has signed a consulting contract with UK-based company HSBC for the financial analysis for the project for the construction of the Belene nuclear power plant.

Bulgaria‘s Cabinet and Prime Minister Boyko Borisov in particular have made it clear that the results from HSBC’s financial appraisal of the Belene project, i.e. whether it is economically feasible, will be decisive with respect to the government’s final decision on whether to go ahead with the project whose price has been a bone of contention with the selected executer, Russian state corporation Rosatom.

Bulgaria will be paying HSBC EUR 2 M for its services plus 0.95% of the end price of the Belene NPP if it is realized, according to media reports confirmed later on Tuesday by Bulgarian Economy Minister Traicho Traikov.

This means that if HSBC declares the Belene NPP project to be economically feasible, and it is constructed, it will get a fee of EUR 47.5 M if the plant costs EUR 5 B.

Subsequently, Vladimir Karolev, an economist, who according to Traikov, is working with HSBC in Bulgaria, explained for the Dnevnik daily that the non-flat fee that HSBC will get will be 0.95% of the foreign investment capital attracted for the project, which can come from anywhere, including from the Russian state corporation Rosatom.

The Bulgarian government’s contract with HSBC itself was sealed late Monday night via fax, according to the Ministry of Economy, Energy, and Tourism.

The HSBC experts will be doing their work on the financial appraisal of the project for Bulgaria‘s second NPP in London but are also expected to visit Bulgaria within the two-month deadline that they have to complete their work as last Bulgaria‘s National Electric Company NEK and Rosatom subsidiary Atomstroyexport signed a 12th annex to their expired agreement stipulating that a decision about the fate of the Belene project should be arrived at by June 1, 2011.

The consulting company is supposed to analyze the project thoroughly and advise the Bulgarian government regarding its final price as well as its potential restructuring. Under the consultancy contract, HSBC is also supposed to participate in the search for strategic investors for Belene as efforts of the Borisov Cabinet have not proven very successful in that regard.

The Bulgarian Energy Holding, the parent company of NEK, picked in November 2010 HSBC, one of the world’s biggest banks, for a consultant to help it decide whether the project is economically feasible.

Six candidates had submitted documents to bid in the tender opened by the Bulgarian Energy Holding for Belene consultant – HSBC, Societe Generale, KPMG in a consortium with McGuire, Rothschild, Argil, and Ernst & Young.

“With this step the project enters a crucial stage. The conclusions of the consultant will be the answer to the question whether or not Belene nuclear power plant will be built,” Bulgarian Economy and Energy Minister Traicho Traikov said on Sunday regarding the signing of the consultancy contract with HSBC.

The statement comes just days after Traikov drew the ire of Prime Minister Boyko Borisov after he slammed and dismissed the National Electric Company head Krasimir Parvanov for signing an agreement with Rosatom‘s subsidiary Atomstroyexport that potentially threatens Bulgaria‘s national interests by obliging the Bulgarian government to reach a final agreement with the Russians on Belene by June 1, 2001.

The plant was originally to be built by Russian company Atomstroyexport for EUR 4 B, plus “escalation costs” including inflation and other factors – a condition accepted by the Stanishev Cabinet (2005-2009); the Borisov Cabinet, however, has demanded a firmly set price from the very beginning apparently afraid that the Russians might demand more money using the escalation costs clause.

The firm had signed a contract with the previous, Socialist-led government, swept from power by Borisov’s conservative GERB party swept in last year’s July elections.

Due to the delays in the launch of the construction works, stalled over price disputes and funding problems, Russia now says the project construction price should be increased to EUR 6.3 B, while Bulgaria‘s government has been haggling for a price as low as EUR 5 B.

Bulgaria‘s new center-right government suspended the construction of the nuclear power plant last year until it finds a new investor and funds to complete the project at Belene, on the Danube, 180 km northeast of the capital Sofia.

In November 2010, shortly after a visit to Sofia by Russian PM Putin, Bulgaria‘s National Electric Company NEK and Russian state company Rosatom signed a memorandum providing for a final fixed price for the two reactors of EUR 6.298 B.

According to the non-binding memorandum expiring on March 31, 2011, Bulgaria‘s NEK will have a share of 51% in the Belene NPP, Rosatom – a share of 47%, Finnish company Fortum – a share of 1%, and French company Altran Technologies – a share of 1% with an option to increase it. Serbia has expressed interest in acquiring a share of 5%-10% but the talks for that have not been finalized yet.

After it was first started in the 1980s, the construction of Bulgaria‘s second nuclear power plant at Belene on the Danube was stopped in the early 1990s over lack of money and environmental protests.

The Belene NPP was de facto frozen in the fall of 2009 when the previously selected strategic investor, the German company RWE, which was supposed to provide EUR 2 B in exchange for a 49% stake, pulled out.

In mid-March 2011, apparently acting on concerns caused by the situation in Japan‘s Fukushima NPP after the recent devastating earthquake there, the European Commission confirmed that it wants to reexamine the Belene NPP project – once Bulgaria finds an investor for it – even though it already approved it back in 2007.

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The factory will make automatic and non-automatic side windows and heated back windows with an annual capacity of 1.3 million square meters and a turnover of USD 20 M at full capacity.

This is the fifth manufacturing facility of the Turkish glass giant in Bulgaria through its, after the factory for household glass, launched in 2005; for flat glass, launched in 2006; the mirror line and the line for appliance glass from 2007.

In 2008, “Sisecam” froze the project for automobile glass manufacturing over the shrinking of the European market. It has invested about USD 400 M in Targovishte so far, and employs 1 500 workers through its subsidiary Trakiya Glass Bulgaria. Its management has disclosed it considers doubling its investments but has asked the Bulgarian government for incentives.

Novinite.com (Sofia News Agency) talked to Sisecam Chair and Managing Director Ahmet Kirman, Exec. VP on flat glass Gulsum Azeri, Exec. VP on glassware Taner Uz.

You made it clear that you requested assistance by Prime Minister Borisov and the Bulgarian government regarding the further investments of Sisecam in Bulgaria. What exactly is it that you are requesting

Kirman: We mentioned in our statements and during previous meetings that we had with the Bulgarian Prime Minister and other members of the government that in order for us to realize a new investment of USD 400 M in Bulgaria, the authorities should make some amendments in the legislation regarding the investment incentives. Both the Prime Minister and the other ministers promised that they will take proper measures on this issue. We sincerely hope that they will make the necessary steps in this direction, and will thus help Bulgaria become the largest glass-producing complex of Europe because they will allow us to invest USD 400 M more in Bulgaria.

More specifically, what exactly are you going to be investing into?

Azeri: We know that we already have a flat glass factory in Bulgaria, which is very big. We are actually planning to build one more plant with the proportions, i.e. a second production line for flat glass. Of course, this production facility can be created either in Bulgaria, or in another European country.

In addition to this new facility for flat glass, we are also planning and considering a new facility in Bulgaria for the production of sustainable glass. At present, this kind of glass is not produced in Bulgaria. It is designed to save electricity and energy, and to have better heating isolation qualities. These are expensive products with high added value. What is more, we also plan to open a new facility for laminated glass. All of these types of glass are for the construction sector. For the facility that we just opened – for automobile glass – we plan a big expansion.

Uz: In addition to the existing production line for household glass, we plan to build a second one, which will allow you to produce about 200 million additional items such as glasses, cups, etc. The new investment in this production in Targovishte will be USD 61 M, and our capacity in household glass will reach 420 million items annually. The facility that we will construct in this field will include all production processes, and will allow us to produce absolutely all kinds of household glass.

If you do get the legislative incentives you are asking the Bulgarian government for, when do you expect these investments to be realized?

Kirman: We expect that most of them will be realized at the end of 2012, of course, if these legislation changes become a fact.

What is it specifically that you are asking the Bulgarian government for?

Kirman: When we talk about legislation amendments, we have in mind amendments like the ones anywhere in the world – tax cuts and tax breaks. We are talking about huge investments here so it makes sense to provide incentives based on their size.

You mentioned that you new facilities can be built in another country?

Azeri: No names. We just have alternative places where we can realize this investment. As company management, we prefer to realize it in Bulgaria but there is a neighboring country which is really good with incentives for big foreign investors.

Do you mean Romania?

Azeri: I will not mention any countries. We just hope that this can be settled because usually the investments that Bulgaria gets are for 15-30 million. We are talking about USD 400 M more on top of what we have already invested here. I think it is logical that such large investments should be viewed differently. We are not considering a different location in Bulgaria, only Targovishte, where we have plenty of space to expand.

Very close to Targovishte, in Razgrad, another city in Northeast Bulgaria, the Chinese state-owned company China Luoyang Float Glass Group plans to invest about EUR 80 M in a glass factory. How is that investment going to affect yours?

Kirman: How many years have we been waiting for this investment to come true?

For a few years but it is expected to happen soon.

Kirman: You should keep waiting.

Still, if it is realized, do you expect strong competition from them with respect to the EU market and even with respect to the human resources in the region?

Kirman: I don’t believe that they will be able to compete with us.

Now that the crisis appears to be over, do you plan to raise the salaries for your workers in Targovishte?

Kirman: We are trying to provide payments to the best of our ability. Our remuneration policy in Bulgaria is the same as any other place where we have business operations. I want to point out that we did not reduce the salaries during the worst time of the crisis. This means only one thing – as long as these factories make money, the workers will make money as well.

Many foreign investors in Bulgaria are concerned about a potential shortage of labor – both skilled and unskilled. Do you have such difficulties in Targovishte? What share of your qualified workers and management did you bring from Turkey?

Kirman: Initially, when we started to invest in Bulgaria, we brought qualified laborers from Turkey but that was just at the beginning. At present, we have about 1 500 employees. Of those, only 50 are Turkish citizens. From here on we will continue the same way. We have almost no need to bring people from the outside. And we work the same way in Bulgaria as we do in our plants in Russia, Egypt, Bosnia and Herzegovina, Georgia.

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Bulgaria‘s Finance Minister Simeon Djankov plans to dedicate all of his efforts to the passing of Constitution amendment guaranteeing stable state finances, known as the “Financial Stability Pact.”

The measures termed “Financial Stability Pact” were first announced by Djankov on February 8 at a lecture at the New Bulgarian University in Sofia following the US tradition in which crucial policy speeches are delivered at academic institutions.

On Tuesday, Djankov and his two deputies Vladislav Goranov and Boryana Pencheva provided further details about the provisions of the Financial Stability Pact.

Djankov himself declared that he will focus on the Pact in the next few months, and will not be dealing with his original top priority – Bulgaria‘s bid to join the ERM II and the euro zone – until the Financial Stability Pact is not adopted.

The three main pillars of Djankov‘s Financial Stability Pact to be solidified via Constitutional amendments are introducing a limit to allowed budget deficit, restricting the ability of the state to redistribute public funds as a percentage of the GDP, and introducing a qualified majority vote of two-thirds of the votes in Parliament to change Bulgaria‘s direct taxes.

The Finance Minister thus gave up on his controversial and much criticized idea that provided for making changes to tax rates only after a referendum.

Djankov first mentioned his plan for Financial Stability Pact during the Parliament debate on the government‘s confidence vote several weeks ago. The idea for legally-binding restrictions of state finances was earlier put forth by the rightist Blue Coalition, which occasionally supports the measures of the ruling center-right party GERB and the Borisov Cabinet but is also often highly critical of them.

Djankov‘s Financial Stability Pact is expected to enter into force as of January 1, 2013, several months before the expiration of the four-year term of the Borisov Cabinet and before the regular parliamentary elections provided that the government serves its full term. This means that the Pact, if approved, will be in force for those ruling Bulgaria after the present Cabinet of Boyko Borisov.

The Financial Stability Pact and the so called “fiscal board” that it stipulates will help Bulgaria to join the euro zone, the Finance Minister pointed out, while explaining that he will not be pressing for accession to the euro zone waiting room, ERM II, for the time being.

He has not commented on whether the proposed Constitutional amendments change Bulgaria‘s state structure since they will prevent the citizens from selecting among political forces with differing financial visions.

Bulgaria is already restricted with respect to its state finances by the Stability and Growth Pact of the EU, which requires that the budget deficit be below 3% of the GDP. Djankov has pointed to the example of Germany, which in 2009 adopted a constitutional amendment restricting the budget deficit to enter into force in 2014. The Bulgarian fiscal board, however, will be much more comprehensive.

Its first measure provides for banning the government from redistributing more than 37% of the GDP, without factoring in Bulgaria‘s contribution to the common EU budget, and all state expenditures on EU funding such as national co-funding of programs and projects.

The Finance Minister pointed out that the in past 15 years, Bulgaria‘s governments have redistributed sums equaling between 36% and 41% of the GDP, while the current government‘s spending were between 35% and 36% of the GDP.

The second measure refers to the budget balance, with the maximum allowed budget deficit being 3% of the GDP. However, the Finance Ministry has crafted a detailed set of rules which account for periods of economic growth or downturn.

Thus, in the event of positive economic growth, if the public debt is between 20% and 40% of the GDP, 40% being the maximum allowed, the Council of Ministers will be entitled to propose improving the budget balance by at 37% of the projected GDP growth. If the state debt is below 20% of the GDP, the proposed improvement of the balance can be below 37% of the projected GDP growth.

In the event of an economic downturn, the government will be allowed to propose worsening the budget balance by up to 37% of the projected GDP decline if this does not go beyond a deficit of 3% of the GDP, and if the funding of the deficit with public debt will not lead to its going over 40% of the GDP.

The government plan also provides for a special mechanism in case of emergency situations such as natural disasters that can affect substantially the national economy. The emergency mechanism is also designed to keep the budget deficit below 3%.

The third measure states that changes of the direct taxes can be adopted only by a qualified majority vote, with 2/3 or 160 out of a total of 240 MPs required to vote in favor.

Djankov believes that the proposed measures will “cement” Bulgaria as having one of the strictest fiscal policies in the European Union, and will be supported by both the rightist and the center-leftist opposition. The draft Financial Stability Pact was presented to the chairs of all parliamentary groups.

It is highly doubtful whether Djankov will be able to get his fiscal board through. In order to amend the Constitution, the Borisov government will need to have three-fourths of the MPs, or 180 MPs, to vote in favor of the motion in three different votes. It is still unclear if the Cabinet stands a decent chance of muster enough votes to get the Djankov plan through since the ruling party GERB and its allies from the nationalist party Ataka have a total of 137 votes.

The opposition in the face of the Bulgarian Socialist Party and the ethnic Turkish party DPS has a total of 76 MPs, which is enough to block the motion.

“The Financial Stability Pact is the most important topic for the state finances and if this idea is successful in Bulgaria, it can be adopted by other states as well,” he has stated while also saying that every “soberly thinking” Member of Parliament should support the proposed measures.

Djankov further declared his hopes to “export” the Financial Stability Pact idea to other EU countries once the measures are adopted and proved to be feasible in Bulgaria. Djankov, a former senior World Bank economist, is a globally renowned economic scientist.

“The path toward the eurozone will be easier, because we will be able to show that the fiscal discipline is not only now, but that it will be maintained over time,” Simeon Djankov told Bloomberg agency in Brussels last week. “It is an independently good policy to have, but it certainly will help us in the drive for the euro.”

Bulgaria‘s center-right government had revived at the end of last year its plans to apply to join the bloc’s exchange-rate mechanism, the so-called euro zone waiting room, after it was forced to drop the euro bid in April over a larger than expected 2009 deficit. Countries must be members of ERM II for two years before they can formally join the euro zone. The Bulgarian lev is already linked to the euro in a currency board that keeps the Bulgarian currency at 1.9558 to the euro.

Latest data has showed that Bulgaria registered a budget deficit of 3.9% in 2010 instead of the forecast 4.8%. Bulgaria‘s deficit under the consolidated fiscal framework on cash basis was BGN 2.8 B in 2010, or 3.9%. The accrual deficit, which is measured according to EU accounting rules, was 3.6%. According to Bulgaria‘s revised 2010 State Budget Act approved in June, the expected 2010 budget deficit was 4.8%, or BGN 3.691 B.

Bulgaria has the lowest personal and corporate income tax in the EU at 10%, which was introduced at the beginning of 2008, replacing the previous system, which combined several different tax rates – between 20 and 24%, depending on income.

Bulgaria also has the lowest social security rates, which coupled with a 10% flat rate, makes it very attractive for physical entities, employers and potential investors.

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