Published by Wikileaks & Bivol.bg
 date: 11/3/2006 13:30 refid: 06SOFIA1521 origin: Embassy Sofia classification: CONFIDENTIAL destination:  header: VZCZCXRO8865 PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHROV RUEHSR DE RUEHSF #1521/01 3071330 ZNY CCCCC ZZH P 031330Z NOV 06 FM AMEMBASSY SOFIA TO RUEHC/SECSTATE WASHDC PRIORITY 2777 INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY RHEHNSC/NSC WASHINGTON DC PRIORITY RUEKJCS/SECDEF WASHINGTON DC PRIORITY RUEKJCS/JOINT STAFF WASHINGTON DC PRIORITY RHMFISS/CDR USEUCOM VAIHINGEN GE PRIORITY   C O N F I D E N T I A L SECTION 01 OF 02 SOFIA 001521    SIPDIS    SIPDIS    E.O. 12958: DECL: 11/01/2016  TAGS: PREL, PGOV, BU  SUBJECT: BULGARIA: REFORM-MINDED PRIME MINISTER DETERMINED  TO KEEP UP THE PACE    Classified By: Ambassador John Beyrle.  For reasons 1.4 (b) and (d)    1.  (C)  SUMMARY:   A feisty and confident Prime Minister  Stanishev told the Ambassador Nov. 2 that his government  would not let up on reforms.  He looks to speed up structural  changes, improve government ministries' efficiency and  effectiveness, and keep up public support for reform.  The  Prime Minster stressed the importance of budget and fiscal  discipline.  He reaffirmed his commitment to strong  transatlantic relations, to Bulgaria's participation in NATO  and other overseas missions, and a capable military; but he  also held firm to a tight defense budget, lower than the  Defense Ministry wants and below the current 2.6 percent of  GDP.  He agreed that more energy and results are needed on  rule of law issues, and said that when U.S. investors  encounter specific obstacles related to crime or corruption  he wants to hear about them personally. END SUMMARY    2.  (C) Confident, forward-looking and well prepared as  always, PM Stanishev paused only a moment to accept the  Ambassador's congratulations on forthcoming EU membership  before detailing at impressive length the plans of his  government to stay energized in carrying out EU-mandated and  Bulgaria-essential reforms and structural overhauls.  Stanishev said it is important for Bulgaria not to relax but  instead to pick up the pace of reform.  This is not merely a  question of stricter EU monitoring of Bulgaria (and Romania)  in advance of the March EU report, but Bulgaria's political,  economic and social evolution and competitiveness.  Of  course, some time would be spared to celebrate: the  government plans a January 1 light-show at Nevsky Cathedral  Square, including the nearby mosque, synagogue and Catholic  cathedral to spotlight the unity and diversity of Bulgaria as  it enters the EU.    3.  (C) With new challenges ahead, the Prime Minister is  intently focused on a new institutional framework and agenda.   He described the difficult budget environment, where the  government would lose revenues from VAT and customs, and  (initially) from the reduced corporate tax rate (10 percent,  the lowest in Europe) while also having to make a substantial  contribution to the EU.  He centered on the importance of  Bulgaria's absorptive capacity for EU funds -- to demonstrate  both to the public and the  Commission/EU member states that  Bulgaria would be a good steward.  The Prime Minister spoke  with great passion about improving efficiency and oversight,  overcoming structural problems (e.g., in education and  healthcare) and improving local governance and the judiciary.   His dual focus is on administrative capacity and  constitutional amendments that would promote faster reform of  the judicial system.  He aims for political stability and  predictability; and plans to move methodically on the  economy, budget, and reform to avoid the kind of economic and  political spasms that, e.g.,  Hungary experienced.    4.  (C) Stanishev and Beyrle agreed on the strength and  vitality of bilateral relations and the security partnership.   Stanishev reaffirmed the government's commitments to its  international obligations, especially in Afghanistan and  Iraq.   The Ambassador acknowledged that fiscal and budget  discipline were essential, but vigorously pushed for robust  defense spending to keep up the momentum of transformation  already underway.  Stanishev said that Defense would get more  money than had been allocated in the initial budget round,  but gave no ground on keeping Defense at 2.6 percent of GDP,  citing fiscal discipline and competing budget and coalition  challenges.  Defense would receive more funds, but would end  up somewhere around 2.4 percent, probably a bit less.  He  favored equipping and training troops, but had a cutting  comment about procurement priorities, specifically  Eurocopter.  Stanishev welcomed the new poll numbers showing  an upward trend in public approval for a U.S. military  presence, and vowed to keep speaking out on behalf of the  joint bases.    5.  (C) The Ambassador detailed the surge in U.S. investment  in 2006, saying he hoped to attract even more in 2007, in  part through an "investment roadshow" to selected U.S. cities  together with the Bulgarian Ambassador to the U.S. He  cautioned, though, that corruption and organized crime  undercut his ability to be an effective advocate, and  detailed several specific cases of concern to U.S. investors.   Complaints over "the price of doing business" with the  Agriculture and Environment Ministries (run by the  corruption-heavy MRF coalition partner) were increasing,  Beyrle said, prompting a knowing grimace from Stanishev.  And  the influence of Russian-connected mafia syndicates like TIM  was dissuading would-be investors.  Stanishev said fixing    SOFIA 00001521  002 OF 002      these problems would not be accomplished overnight, but he  was determined to make progress.  He asked the Embassy to  bring to his personal attention any cases in which U.S.  investors encountered obstacles related to crime or  corruption.    6. (C) The Ambassador urged the Prime Minster to follow  through on Jewish restitution now that the Commission has  issued its report. The Health and Defense Ministries are  footdragging; we look to the government to do the right  thing.    7. (C) COMMENT:  The 40-year old Stanishev represents  everything that is going right in official Bulgaria.  He  knows his policy brief exceptionally well, is  forward-thinking and did a remarkably good job in navigating  EU entry.  To date, the need to preserve the coalition  undercuts his ability to do much about corruption in  government, but as he gains confidence and stature, he will  have additional strength to take on unruly coalition  partners.   It is our intent to support him in what will be a  long fight against corruption.  BEYRLE 

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