Bulgaria must bolster defence spending in response to the Russian invasion of Ukraine and war in the Middle East, the country’s defence minister has told beyondbrics in exclusive comments. Velizar Shalamanov (pictured), a member of the caretaker government that will step down after elections next month, reiterated Bulgaria’s commitment to Nato at a time when some of the alliance’s members have been accused of backing away from their obligations.

However, a long-term shift towards higher defence spending and a break with Russia will be hard to implement. Continue reading »

Will there be any end to Croatia’s economic travails? The EU’s newest member state has not seen meaningful growth since 2008 and its GDP shrank again in the second quarter, by 0.8 per cent.

It was the eleventh consecutive quarter of contraction, indicative of a deep economic funk upon which EU accession last July has made barely a dent. In need of lasting structural reform, the economy is likely to limp to the end of the year in continued recession. Continue reading »

Negligible inflation and a desire to maintain exchange rate stability in spite of capital inflows were the key factors prompting Romania to cut interest rates to an all-time low, analysts said on Tuesday.

On August 4, the National Bank of Romania (BNR) reduced its key policy rate to 3.25 per cent from 3.50 per cent. Reuters quoted Governor Mugur Isarescu as telling reporters that more easing was possible. “There may be further (easing) space but, this time, we’d be forced to take decisions taking into account the external environment to a greater extent,” Isarescu was quoted as saying. Continue reading »

After the deluge, the contraction. Serbia’s economy shrank by 1.1 per cent year-on-year in the second quarter after the country was hit by serious flooding that may have caused €1.7bn of damage.

May’s floods came just when the economy seemed to be picking up again and a new government was installed with a big majority and mandate for sweeping reform. The impact of the disaster has been felt across the economy and will weigh on full-year growth, now expected to be negligible. The shrinkage in the second quarter, reported in a flash GDP estimate from Serbia’s statistical office, followed a 0.1 per cent y-o-y rise in Q1. Continue reading »

And it's goodbye from him

Bulgaria’s battered and unloved government formally resigned on July 24, its reputation shaken by its policies and alleged murky business links – and, more recently, a banking crisis. With snap elections looming in October, a caretaker government will now seek to steady the ship and repair relations with the European Union. The election is expected to usher in the nominally rightist opposition with the hope it will take a more reform-minded and western-looking approach. Continue reading »

Bulgaria’s under-fire central bank has turned to the European Central Bank to oversee the country’s financial system days after it announced that it would allow the country’s fourth-biggest lender to collapse.

Bulgaria’s banking system as a whole remains well-capitalised. But the Bulgarian National Bank’s decision to enter talks with the ECB about joining the joining the European Single Supervisory Mechanism (SSM), even though Bulgaria is not in the eurozone, is an admission of draining confidence in the country’s financial and political authorities. Continue reading »

An attempted murder in a bar brawl; a president under siege after the arrest of his brother and son-in-law on graft charges, having already survived two referendums on impeachment – Romanian politics may be messy but it is rarely boring.

For the economy, though, it is business as usual. And perhaps the fact that the law can reach even those closest to the country’s most powerful man is a positive development for a country once seen as a byword for corruption. Continue reading »

Vucic spreads his message of doom

Could Serbia become the Greece of the Danube and go bankrupt within a year, just as other European countries are having some success in grappling with their debt problems? That was the recent warning from Aleksandar Vucic, the country’s new prime minister, should his government fail to implement a package of tough economic reforms, including extensive privatisation and labour liberalisation.

Vucic’s doom-mongering is partly a signal to his electorate that there are hard times ahead. Serbia is indeed on a dangerously unsustainable trajectory. But it is not quite at the buffers yet. Continue reading »

Bulgaria’s central bank issued a dramatically-worded statement on Friday warning of “an attempt to destabilise the state through an organised attack against Bulgarian banks” after the country saw its second bank run in a week.

While the banking sector as a whole is well-capitalised, the manner in which two major financial institutions have been hit raises serious concerns about the country and poses risks to its economy. Continue reading »

Controversial Bulgarian tycoon Tzvetan Vassilev blamed Sofia’s state prosecution service and media attacks for sparking a run on his Corporate Commercial Bank (KTB) as shareholders declined to rescue the country’s fourth largest lender, raising the prospect of nationalisation.

Speaking to beyondbrics, Vassilev said the run on KTB last week was “triggered by absurd speculations of certain factions of the Bulgarian prosecution service, which were blown out of proportion by Bulgarian media”. The run came after a controversial MP, Delyan Peevski, accused Vassilev of ordering his assassination, following which the state prosecutor detained three of Vassilev’s associates. Continue reading »

Bulgaria’s central bank on Friday froze the operations of the Corporate Commercial Bank (KTB), suspended its directors and put the country’s fourth largest lender under special supervision following a bank run that had raised risks of insolvency.

Tsvetan Vassilev, KTB’s largest shareholder and one of Bulgaria’s wealthiest and most influential figures, said in a statement to the FT late on Friday that “the events that have been taking place since last week are the visible part of a carefully prepared and planned scenario aimed at destabilizing Corporate Commercial Bank”.

Vassilev did not say who he believed was behind the alleged attempt to destabilise KTB, but he did say that “more than 20 per cent of the financial institution’s assets were withdrawn in less than a week”. This, he added, would “have made any bank collapse within two or three days” but KTB had been able to withstand it, proving its “outstanding management”. Continue reading »

Bulgaria will hold an early election in the autumn, with the beleaguered government set to step down after barely a year in power characterised by street protests, accusations of links to nefarious business interests and strong criticism from the European Union.

President Rosen Plevneliev said on Tuesday that the country’s leading political parties had agreed to an election between September 28 and October 12. It comes after a junior coalition partner withdrew from the government led by the Bulgarian Socialist Party (BSP), which suffered a damaging defeat in the European elections. Continue reading »

Serbia’s central bank cut its key policy rate by 50 basis points on June 13, twice the reduction expected and another bold monetary easing move. The National Bank of Serbia (NBS) has now lowered rates by a full 100 bp in two months. The NBS is taking advantage of low inflation and easing pressure on prices, and taking account of the recent radical policy action by the European Central Bank (ECB). But the cut should also be seen in the context of May’s devastating floods, which caused Serbia’s fragile recovery to grind to a halt and has shaken domestic and international confidence in the newly-elected government. Continue reading »

European advocates of shale gas – and they do exist – have been hoping that the Ukraine crisis might galvanise governments into dropping objections to controversial fracking. But despite a growing and belated recognition that Europe must do more to diversify its energy sources, in Bulgaria at least the unpopular shale movement is going backwards.

Last month, US energy giant Chevron quietly closed its Sofia office, three years after it was awarded a licence for shale exploration that was scrapped months later. The company did not publicise its withdrawal and it has gone largely unreported. But the move is indicative both of the political challenges that frackers still face and of Bulgaria’s frustratingly inconsistent treatment of energy investors. Continue reading »

First quarter GDP figures from Croatia and Slovenia show that the former continues to slide backwards, albeit at a slower rate, while the latter continues its export-led recovery.

Croatia’s economy has not shown meaningful growth since 2008 and remains lumbered with structural problems that the government seems barely able to address. It shrank again in the first quarter, by 0.4 per cent, having contracted by 1.2 per cent in the last quarter of 2013. Continue reading »