The main instrument used by the European Union to measure the state of the new member states is the so-called Catch-Up Index. It aims at answering the question: Are the new EU countries from the Central and Eastern Europe catching up with the old, Western EU countries? The index registers the level of convergence, or divergence along four categories: economy, quality of life, democracy and governance.

“Unfortunately, Bulgaria remains at the bottom of the ranking. The only difference over the past 12 months regards the fact that Bulgaria outstripped Romania in this ranking. It is mainly due to slightly worsened indicators in our neighboring country, rather than to any substantial improvement of Bulgaria’s indicators”, said in an interview for Radio Bulgaria economic expert Georgi Angelov from the Open Society Institute. Unlike Bulgaria, the countries from the Visegrad Group (The Czech Republic, Poland, Slovakia and Hungary) and the Baltic countries have been slowly catching up with the old member states in all four spheres:

“Bulgaria is last but one in the ranking with regard to all four indicators. However, this country performs best in terms of economy - 39% of the average in the old EU member states, whereas in terms of quality of life our country’s performance is at 29% of the one registered in the old EU members. With regard to the other two indicators in the catch-up index - democracy and governance, Bulgaria places somewhere between the first two values, but as a whole this country is lagging behind the old EU countries in all categories. ”

According to Georgi Angelov, the Czech Republic is already wealthier than Portugal and Slovakia has outstripped Greece in terms of wealth. The analyst expects this trend to continue in the future and that one, or two more new EU states will outperform Greece and Portugal which suffered from the world financial and economic crisis the most.

“We have examples in Europe, where, due to long-term reforms in the past two decades, some countries have managed to register economic growth, incomes and quality of life comparable to the ones in some Western-European countries”, Mr. Angelov goes on to say. “The Czech Republic is closer to the western countries in some aspects, rather than to the countries from East Europe. Poland, Estonia and the other Baltic states have also registered a rapid growth, which means that the good results are quite possible in our region, if the countries are governed by reformist cabinets which manage to push the economy forward, because a stable and prosperous economy is what creates new jobs, higher incomes and a better life standard.”

In Mr. Angelov’s view, Bulgaria should mainly aim at improving the work of its administrative and judicial institutions, as well as its business environment. The business environment, which is described by the governance indicator in the catch-up index, is the one that hampers the country’s economic development, i.e. it is hard to start a new business in Bulgaria, the education level is low, the public institutions are ineffective and the quality of life is very low.

How the latest crisis in Corporate Commercial Bank would affect the business and the foreign investments?

“We know too little about the companies and the economic sectors with loans and deposits in this financial institution. Undoubtedly, we are to witness some negative effects, because the solution of this issue was delayed. There was a similar case in Portugal, but this country managed to find a quick solution, whereas in Bulgaria the National Assembly rejected the proposal which aimed at solving the problems of the CCB and was later dissolved. It resulted in higher uncertainty and lower solvency. In my view, the main problem for the Bulgarian economy in the future will be linked with lower access to financing and it would perhaps fail to register even the low growth forecasted in advance. It would create difficulties to the state budget and reduce the life standard in this country.”

According to the Bulgarian economic expert, the foreign investors become very cautious in such cases. Their activity has dwindled due to the political crisis in Bulgaria. The Bulgarian economy has been performing at a low gear for many years now. Meanwhile, the bank deposits of the Bulgarian citizens and companies have skyrocketed. How could Bulgarian citizens and firms transform some of the bank deposits into investment and consumption?

“It is very important to transform this money into real investments, rather than into consumption, because we know that consumption mainly boosts imports in Bulgaria. There is a lot of spare money in the banking system, which, unfortunately is not transformed into loans and business investments. It is due to the lack of entrepreneurial spirit, i.e. it is much easier to keep money in bank deposits, than take a business risk and create new jobs. This is a long-term problem of the Bulgarian economy.”

English version: Kostadin Atanasov