Introduction communist state (Katsikas 157). The country
For being part of the former Soviet Union, Bulgaria has long been perceived a communist state (Katsikas 157). The country is mainly comprised of a Slavic-speaking population and historically, it has been part of the Ottoman Empire (for close to half a century before it attained independence in the 19th century) (Katsikas 157).
Bulgaria’s entry to the European Union (EU) was characterized by several political and economic intrigues. These developments characterize the contents of this research paper because we seek to undertake an economic analysis of Bulgaria and understand the influence of the EU in the country’s political and economic welfare.
Economic Data Analysis
Between 2001 and 2005, the Bulgarian government embarked on formulating several economic plans to boost the country’s economic development (Katsikas 157). The implementation of these economic plans saw the country reduce its unemployment rate and inflation levels in the last decade.
As seen in appendix one, Bulgaria had previously witnessed unemployment levels of up to 20%. From appendix one, it is observed that the rate of unemployment in Bulgaria was directly related to the rate of gross domestic product (GDP). As the gross domestic product increased, the level of unemployment decreased.
This observation has been witnessed in many other economies around the world. Estimates from the Bulgarian government show that in the year 2010, the unemployment rate in Bulgaria was 9.5%, but in 2011, the government reported that this figure had dropped to 8.8% (Katsikas 157). Also, from appendix one, we can also establish that, since 2001, Bulgaria has witnessed increased growth in its GDP projections. Indeed, the country’s GDP growth has been consistent until the onset of global economic downturn.
Nonetheless, economists attribute Bulgaria’s GDP growth to its entry into the European Union (EU) (Katsikas 157). This observation is affirmed by the fact that, Bulgaria registered an economic growth of about 6% after it was included in the EU, and for the four years preceding the global economic downturn of 2008/2009, there was a consistent growth in GDP (Katsikas 157).
The main drivers for Bulgaria’s economic growth were increased spending, more bank lending and increased foreign direct investments into the European country. Appendix two shows the level of direct foreign investments by geographical structure up to the year ending 2011.
Although successive Bulgarian governments have expressed their commitment to improve the country’s economic prospects, the global economic downturn of 2008 significantly dented the Bulgarian economy.
Katsikas explains that, “the global downturn sharply reduced domestic demand, exports, capital inflows, and industrial production” (157). The global economic downturn reduced the country’s Gross Domestic Product by 5.5% (in the year 2009) where it quickly stagnated in 2010 only to pick up again by 2.2% the following year (Katsikas 157). Appendix three shows this trend.
The Bulgarian population, which is estimated to be living below the poverty line, is 21.8% (Katsikas 157). When we assess the distribution of family income according to the GINI Index, we can establish that Bulgaria registers a figure of 45.3 (Central intelligence Agency 1).
When compared to the rest of the world, Bulgaria stands at number 39. If we assess the household income of the Bulgarian population according to consumption by percentage share, we can establish that in the lowest 10% of the population, the consumption percentage is 2% and in the highest 10% of Bulgaria’s population, a consumption by percentage rate of 35.2% is registered (Central intelligence Agency 1).
The country’s economic prospects for the coming years are positive but like most countries in Southern Europe, Bulgaria is still grappling with substantial corruption in the country, coupled by a weak judiciary and rampant crimes from organized crime gangs in the country.
Benefits and Costs of Being a Member of the EU
In 2005, Bulgaria signed an economic treaty with the EU that saw it join the economic body in 2007. The decision to allow Bulgaria to join the EU was however characterized by hefty safety and economic costs for Bulgaria (preconditions) (Katsikas 113). The biggest cost for Bulgaria to join the EU was the shutting down of the Kozloduy nuclear power plant, which was estimated to supply a third of the country’s electricity (Katsikas 113).
This precondition was set after EU members expressed reservations about the safety of communist-era nuclear power plants. It is reported that Bulgaria shut down some of its power plants a few minutes before its entry into the EU but months, later the country formulated plans to develop other nuclear power plants (Katsikas 113). These plans have however been shelved because of inadequate funding.
In exchange to reform its economic policies, Bulgaria expected the EU to consider the country an equal member of the European Union. Even though there were initial restrictions regarding the movement of labor between Bulgaria and other EU states, recent times have seen decreased hostility among Bulgaria and its neighbors (Europeadia 1). Bulgaria is now considered an important player in the EU and similarly, it is also a member of United Nations (UN) and the North Atlantic Treaty Alliance (NATO).
However, the entry of Bulgaria into the EU provided it with unique economic opportunities. A key advantage is the unique mobility of labor in the Bulgarian economy where Bulgarians can seek employment opportunities outside their country. Similarly, Bulgaria can enjoy the movement of expatriates into their country.
Here, Bulgaria can offer its citizens better living and working conditions considering it is already grappling with the problem of low standards of living within its borders. Considering the operations of the EU are international, through the admission of Bulgaria into the EU, Bulgaria can easily benefit by improving the flexibility of its labor supply market (Katsikas 113). This way, Bulgaria can easily realize the benefits of a common market.
The establishment of a common market and expanding the labor market is bound to have a positive impact on reducing unemployment. In this context, unemployed people in Bulgaria can seek employment opportunities outside Bulgaria. Consequently, Bulgaria’s unemployment levels are bound to fall.
Bulgaria’s decision to join the EU also poses several advantages with regard to production and productivity. Through the introduction of Bulgaria into the EU, the country enjoys increased investments due to inwards investments from other EU members. There is a greater flow of capital investments from other European members in such types of situations and Bulgaria can easily improve its productivity (Katsikas 113). Complementarily, the country’s production is easily improved in this manner.
Joining the EU also stabilizes a country’s currency because any country that joins the EU has the option of using the Euro, which is usually a more stable currency when compared to local currencies (Katsikas 113). In fact, the Euro is a strong world currency and therefore inflationary pressures that emanate from the poor performance of a country’s currency are likely to be eliminated. Furthermore, by joining the EU, member countries are governed by a unitary monetary policy, which keeps inflation low.
Lastly, joining the EU poses more advantages to Bulgaria regarding its external trade policies. Since Bulgaria is a member of the EU, it enjoys the free movement of goods and services within the EU. Therefore, there are fewer restrictions on taxes and customs.
Consequently, there are less hassles regarding the important or exportation of goods. From this understanding, Bulgaria can easily find a better market for its goods and services. The country’s external policies will therefore be enlarged according to the structure of the EU and more economic gains can be enjoyed as a result (Katsikas 113).
Preceding the entry of Bulgaria into the EU, EU members demanded a critical policy reform on the area of corruption and organized crime. Initially, Bulgaria did not receive an invitation to join the EU perhaps because of its political instability and shaky economic prospects due to rampant crime (Csd 27). Economic crime and corruption were some of the greatest concerns expressed by official of the EU for barring Bulgaria from joining the EU.
Corruption is highlighted as a strong reason for the negative perception of Bulgaria among its European neighbors. More so, corruption was seen as a great hindrance to the utilization of EU aid on the southern European country. Bulgaria was known to misuse EU aid, which was meant to uplift the welfare of its people (Csd 27).
This situation saw the EU freeze its aid to Bulgaria severally. Furthermore, EU used this platform to create more restriction for Bulgaria to join the EU. From this understanding, EU member states said that Bulgaria had to tackle rampant corruption in the country before it was given more aid.
There was a strong air of reluctance observed by EU officials regarding the commitment of the Bulgarian government to tackle organized crime and corruption in the country. This observation set the ground for the first precondition of EU on Bulgaria because the Bulgarian government was forced to take urgent actions to fight crime and corruption (Csd 27). This was one policy reform that Bulgaria had to undertake before joining the EU.
Preceding this precondition was the suspension of European aid to the Southern European country (amounting to millions of Euros). Germany and France set the strongest preconditions when they vowed to block Bulgaria from accessing the Sechengen passport free zone until they were satisfied that the country had made significant gains in tackling crime and corruption (Csd 27). This precondition was directly related to the poor economic performance of the country during the years preceding Bulgaria’s admission into the EU.
This fact is true because rampant crime and corruption were important barriers to economic growth in Bulgaria and consequently, these vices led to increased corruption and unemployment in the European country. The Center for the Study of Democracy (21) also reports that Bulgaria was prompted to give a crime and corruption report semiannually to reiterate its commitment to eliminating these vices.
After weighing the findings of this paper, we can establish that Bulgaria’s entry to the EU prompted its economic growth. However, the high levels of corruption and crime (in Bulgaria) is the main reason why Bulgaria received the most stringent preconditions for any country in Europe to join the union.
Compared to other European countries, Bulgaria was perceived to have a very weak structural capability for implementing economic and social reforms. It is therefore clear why EU had to be tough on the state to change this situation. These observations characterize Bulgaria’s political and economic landscape.
Center for the Study of Democracy. Anti-Corruption Reforms In Bulgaria: Key Results And Risks. London: CSD, 2007. Print.
Central Intelligence Agency, Bulgaria Economic Profile. January. 2010. Web. 22 February. 2012.
Csd. Crime Without Punishment: Countering Corruption and Organized Crime in Bulgaria. London: CSD, 2009. Print.
Europeadia. Free Movement Of Workers In The EU. February. 2011. Web. 22 February. 2012.
Katsikas, Stefanos. Negotiating Diplomacy in the New Europe: Foreign Policy in Post- Communist Bulgaria. London: I.B.Tauris, 2011. Print.