US embassy cable - 05SOFIA1856

UNCLAS SECTION 01 OF 02 SOFIA 001856 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV, PREL, ECON, SOCI, BU, EUC 
SUBJECT: E.C. REPORT TURNS UP THE HEAT ON BULGARIA 
 
REFS: A) SOFIA 1847 B) SOFIA 1785 
 
1. (U) SUMMARY:  The European Commission (EC) in its October 
25 monitoring report confirms that Bulgaria should be able 
to accede to the EU on January 1, 2007, provided that 
promised reforms are implemented.  However, behind this 
relatively positive overall assessment lies a very harsh 
assessment of Bulgaria's progress -- or lack thereof -- over 
the last six months.   As the EC said in its accompanying 
press release, "the jury is still out." The overarching 
theme is that accession will hinge on Bulgaria's ability to 
adequately address five areas of serious concern: the fight 
against organized crime and corruption, protection of 
intellectual property rights, adequate mechanisms for 
administration of EU structural-support funds, 
agriculture/food safety, and the enforcement of motor 
vehicle insurance requirements (which falls under the 
freedom to provide services chapter).  The assassination of 
Bulgaria's second-richest citizen, banker Emil Kyulev, on 
the day following the report's release, constitutes a 
further severe blow to Bulgaria's image. The government now 
has six months to get its house in order or face a 
politically destabilizing delay in Bulgaria's accession. 
END SUMMARY. 
 
ACCESSION IN 2007 REMAINS UNCERTAIN 
------------------------------------ 
 
2. (U) The European Commission on October 25 approved its 
latest monitoring report on Bulgaria's preparations for EU 
accession, warning that Bulgaria is not sufficiently 
prepared for accession on January 1, 2007.  Even though the 
report gives a positive appraisal of developments in 
Bulgaria--identifying 50 percent of all areas monitored as 
non-problematic--the EC Commissioner responsible for 
enlargement, Olli Rehn, expressed harsh criticism and 
serious concern for areas representing about 10 percent of 
the requirements for accession.  Regarding the harmonization 
and implementation of EU laws and standards, the report 
identifies three stages of preparedness: non-problematic 
areas; areas where increased efforts are needed and the 
authorities need to accelerate the pace of reforms; and 
areas of serious concern, which will require decisive action 
to be ready for accession. 
 
3. (U) In the report, Rehn draws special attention to the 
Bulgarian government's inaction in fighting organized crime 
and corruption, expressing the EU's concern that to date 
there have been no corruption trials involving high-ranking 
public officials despite its widespread prevalence. 
(Brussels' criticism that Bulgaria has failed to combat 
organized crime was vividly illustrated by the shooting of 
the controversial and politically well-connected banker, 
Emil Kyulev, on the day following the report's release (ref 
A).) The report makes it clear that unless the Bulgarian 
government takes immediate and decisive corrective action on 
the problematic areas, it will not be ready for accession in 
2007.  The report identifies five areas of serious concern 
where Bulgaria falls short on implementing its obligations: 
 
--Justice and Home Affairs (JHA):  Serious concerns remain 
in relation to Bulgaria's preparation for implementing the 
acquis in area of Schengen and external borders, the fight 
against fraud and corruption, police cooperation, and the 
fight against organized crime. 
 
--Protection of intellectual and industrial property rights: 
Border controls should be considerably strengthened and 
coordination between customs, police and the judiciary and 
inter-agency cooperation improved. 
 
--Agriculture: Shortcomings in setting up the paying agency 
(to channel EU funds) and the integrated administration and 
control system, as well as the common market organization 
for milk and animal by-products; the veterinary control 
system (identification and registration of animals, the 
establishment of border inspection posts); and animal 
diseases control. 
 
--Under "freedom to provide services," the report points to 
weak enforcement of rules on motor vehicle insurance. 
 
--Regional policy and structural instruments:  There are 
serious concerns in relation to institutional structures and 
in particular with regard to administrative capacity and in 
the area of financial management and control. 
 
NEXT FEW MONTHS WILL BE DECISIVE 
---------------------------------- 
 
4. (U) The EC report calls on the Bulgarian government to 
muster the political will to undertake necessary reforms, 
urging special attention to implementation and enforcement. 
A number of high-level EU officials have stressed that 
Bulgaria is now in the most difficult phase of the pre- 
accession process; it is not simply a question of adopting 
new legislation, but rather implementing it.  The European 
Commission has pledged its support for the Bulgarian 
government's efforts to prepare for accession, committing 
pre-accession assistance of 545 million euros for 2006. 
 
5. (U) The EC has explicitly warned the Bulgarian government 
that it could delay accession if Bulgaria fails to stick to 
its accession commitments.  Olli Rehn has clearly stated 
that if serious shortcomings remain he would not hesitate to 
propose invoking the safeguard clause, which could delay 
accession by one year.  To ensure compliance with accession 
commitments, the EC has started an intensive monitoring 
process through peer reviews and warning letters.  The EC 
will prepare and release the final monitoring report in 
April/May 2006, which will contain the EC's recommendation 
in favor or against 2007 admission. 
 
MEETING THE REFORM CHALLENGES 
------------------------------ 
 
6. (U) Despite criticism by the European Commission, the EC 
report has provided the government with a clear idea of what 
Brussels' expectations are and what challenges lie ahead. 
Representatives of the governing coalition accepted the EC's 
criticism as fair and asserted that the Bulgarian government 
has the political will and expertise to push forward 
necessary reforms.  European Affairs Minister Meglena Kuneva 
underlined that particular perseverance and support will be 
needed in the sectors of Interior Minister Rumen Petkov, 
Justice Minister Georgi Petkanov, Finance Minister Plamen 
Oresharski and Agriculture Minister Nihat Kabil.  Foreign 
Minister Ivaylo Kalfin said he accepts the report as a 
goodwill criticism of what has to be done and asserted that 
Bulgaria can comply with the EC recommendations in a timely 
manner by spring 2006. Opposition parties are focusing on 
the significance of the EC's criticism, using the report to 
raise doubts about the coalition's ability to implement 
necessary reforms and to highlight the danger of a potential 
delay of Bulgaria's accession. 
 
7. (SBU) COMMENT: The coalition government of Prime Minister 
Sergey Stanishev has made EU accession by January 2007 its 
number one priority.  Although the pace of EU reforms 
suffered during the summer during protracted negotiations 
over forming a new government, the coalition (which has a 
two-thirds majority in parliament) had been working overtime 
to pass as much EU-related legislation as possible before 
this month's report.  In its two months in office, the 
Stanishev coalition has passed at least 25 laws related to 
EU accession.  However, as the Commission report points out, 
the real test for Bulgaria will be in implementation, and 
the latest brazen broad-daylight contract hit in Sofia 
spotlights Bulgaria's most conspicuous area of failure in 
that regard.  In the meantime, EU accession will remain the 
glue holding together an otherwise potentially fractious 
coalition here.  Any delay of Bulgaria's EU accession will 
shake political stability in Bulgaria to the core.  END 
COMMENT.