Bulgaria: GERB to win election, Bulgaria risks to enter another election spiral again

• ?Sixth parliamentary election in past three years to take place on Jun 9, to produce another fragmented parliament with more than five parties
• ?Election campaign is aggressive and based on discrediting war between major players, main parties have presented no constructive ideas regarding policy issues
• ?GERB to face difficulties in finding allies for government formation, confirms it could partner with WCC-DB, but under many conditions that WCC-DB may not accept
• ?GERB and MRF unlikely to have enough number of MPs together to make majority government, triple ruling configuration with WCC-DB is unlikely, in our opinion
• ?Opposition parties remain isolated and weak in their ability to interfere in power distribution schemes, in our view
• ?Solution to domestic political instability is not in sight yet, probability of new snap election in autumn is quite high, in our view
• ?Around 7-8% of voters in polls say they would vote for a party other than the six parties in the current parliament

The domestic political crisis prevailing in the past three years in Bulgaria has re-emerged once again after the fragile nine-month joint government of WCC-DB and GERB fell apart in March. The cabinet could not withstand the strain of constant power struggles between the two parties, so the rotation of PMs scheduled for March did not occur. Bulgarians will vote at the sixth snap parliamentary election in the past three years on Jun 9, which will take place simultaneously with the elections for the European parliament. We recall that Bulgaria passed through a series of snap elections in the 2021-2023 period, all of them unsuccessful in delivering a stable majority government and the country risks to fall back into the election spiral in 2024, in our view. The large parliamentary fragmentation in the past years, including in the last parliament, has reflected voters' successive disillusionment with both the established parties and the emerging players. Fragmentation of both the right-wing and the left-wing political spaces does not appear to be reversible for the time being, which will perpetuate the necessity of difficult multi-party negotiations for the setting-up of a majority government.

The expected reality of at least five certain parties in the parliament, none of them receiving sufficient votes to form a majority government on its own, may mean that the holding of another snap general election in the autumn of 2024 is a very plausible scenario, in our opinion. We note that the former partners in the government - GERB and WCC-DB, have immediately engaged in an aggressive campaign against each other, which risks to burn the bridges for a future partnership between them. Furthermore, the polling agencies forecast a decline in WCC-DB's election result and in the number of its respective MPs in the parliament, which could suggest that the formula of a majority coalition between GERB and WCC-DB may no longer be possible, unless they invite a third party to secure majority. Only GERB's close ally, ethnic-minority MRF, could play the role of the third partner, but we doubt that WCC-DB would agree to such a scenario, in which the balance of power would be distorted to the benefit of GERB and MRF. Collaboration with the other two certain parties to enter the next parliament - populist Vuzrazhdane and socialist BSP, is unlikely for both WCC-DB and GERB either, in our opinion. All in all, the political situation in the country remains at a deadlock, probably waiting for the emergence of the next political leader with charisma and strong promises that the voters would recognise as a viable alternative. However, we do not see an actor embodying such characteristics among the parties that will run at the Jun 9 elections.

We recall that WCC-DB owed its sharp rise as a new political project exactly to the role of a saviour and a fighter against corruption they adopted. WCC (We Continue The Change) was founded in the autumn of 2021 and was self-proclaimed as the carrier of change, which the voters awarded with large credit of trust at the following elections. The party received the opportunity to fulfil its grandiose promises by heading a difficult four-party government coalition in late 2021 that lasted only six months. The smaller democratic party of DB joined forces with WCC before the elections in Apr 2024, as the two parties shared similar commitments to fight corruption, complete a large-scale justice reform, as well as oust GERB and MRF, widely seen as the most corrupt parties, from power. WCC-DB gradually ceded these promises during its partnership with the discredited GERB in the latest government formed in Jun 2023, and with MRF in the crafting and voting of amendments to the Constitution in Dec 2023, in our opinion.

WCC-DB justified its partnership with GERB in a joint cabinet with the necessity of securing domestic political stability against the background of a tense geopolitical environment with the Ukraine-Russia war in close proximity to Bulgaria's borders. Both WCC-DB and GERB also stressed the necessity of maintaining Bulgaria's pro-Western orientation and working for the euro adoption as their priorities. WCC-DB conditioned its participation in such a cabinet upon GERB's commitment to the implementation of a comprehensive judicial system reform, requiring amendments to the Constitution. The two parties did not have the necessary number of MPs to pass such amendments and had to invite ethnic-minority MRF, the third party which declares itself as pro-Western, into the bargaining process. Later on, MRF was widely perceived to have become the third unofficial ruling partner in the government configuration. The judicial reform remained incomplete, while the general impression that GERB and MRF dominated over WCC-DB in the decision-making process, has significantly undermined voters' trust in WCC-DB's capacity to foster change.

In Jun 2023, WCC-DB and GERB agreed on a peculiar government formula, according to which WCC-DB disposed of the PM office and all ministries, except for the foreign affairs ministry allocated to GERB's politician Mariya Gabriel, who quit her position as EC commissioner for that purpose, in exchange for receiving support from GERB in the parliament. The government formula envisaged a rotation in the PM position after nine months and Gabriel was supposed to become the next PM in Mar 2024. As time went by, GERB gradually increased its appetite to receive higher representation in the government, asking to head other ministries, besides the PM position. The foreign affairs ministry was the initial bone of contention between the two parties, but eventually the tension escalated and covered the distribution of other ministries as well. The negotiations for the rotation between GERB and WCC-DB in March went to extremes, involving absurd reversals, which ignited tension in society and raised doubts about the parties' vested interests. The culmination came when Mariya Gabriel submitted an official proposal for a government to the parliament, in which she included nominees for ministers from WCC-DB who had not agreed to take part in such a cabinet. A huge scandal followed, forcing Gabriel to withdraw her cabinet proposal in the next days and putting an end to the chances of the two parties to continue ruling together. GERB mostly blamed WCC-DB of wanting the entire power for itself, while WCC-DB revived its leitmotif of GERB not wanting to commit to the judicial reform execution.

Pre-election campaign focuses on power struggles, not on key policy topics

Clashes between the two parties peaked in April. We note that the constitutional amendments, passed with the votes of GERB, MRF and WCC-DB at end-2023, restricted the President's powers and limited his options to choose an interim PM to only a range of approximately ten heads of different institutions. In early April, the President appointed Dimitar Glavchev, head of the National Audit Office and former GERB's MP, as caretaker PM, explicitly highlighting that he does not assume responsibility for the caretaker government's actions, as he would not have appointed Glavchev for PM if the older version of the Constitution was still in force. As the caretaker government is in charge of organising the elections, many of the parties, including WCC-DB, were alarmed with GERB's possible impact on the election outcome due to the party's connections with Glavchev. WCC-DB found itself in the uncomfortable position of complaining of the effects from the constitutional amendments that it itself initiated and supported in the parliament last year, thus shooting itself in the foot at the very start of the election campaign, in our opinion.

As soon as it was appointed, the caretaker government replaced the head of the customs agency, who was accused of participating in smuggling activities, and exerted pressure for the dismissal of the chief secretary of the interior ministry. Scandals around both replacements followed and the chief secretary of the interior ministry resigned, complaining of a strong political and prosecutorial pressure on him from GERB-related interior minister Kalin Stoyanov and chief prosecutor Borislav Sarafov. That kind of opening of the pre-election campaign predetermined the focus of the entire campaign on political noise related to power struggles and discrediting war between GERB and MRF, on the one hand, and WCC-DB, on the other hand, rather than on discussions on important political and economic issues. WCC-DB blamed MRF leader Delyan Peevski, who was sanctioned for corruption under the U.S. Magnitsky Act in 2021, of being the main culprit for the political situation. WCC-DB leaders said that Peevski has been the behind-the-curtain leader of GERB and that he should never be let to control the state again. Meanwhile, GERB leader Boyko Borissov warned that GERB would never rule jointly with WCC-DB again unless GERB sets the rules, while Peevski himself recalled how many times WCC-DB leaders have resorted to Peevski's mediation in their relations with Borissov. Overall, this kind of a pre-election campaign has further alienated the bulk of voters from the political life, in our view.

In difference to the previous three years, GERB is the clear favourite for winning the elections this time and can boast with successfully recovering its political domination after the temporary decline in 2021-2023. The re-establishment of GERB as the main political party is largely related to WCC-DB's actions to legitimise GERB as a natural partner for them in the past nine months, in our view. During this period, GERB has successfully taken advantage of being one of the ruling parties, yet also being in a position to criticise the government, almost entirely comprising WCC-DB ministers, when it considered such criticisms fit. For instance, the drafting of another fiscally loose budget by WCC-DB's finance minister Asen Vasilev, was one of the opportunities that GERB received in late 2023 to re-iterate its adherence to fiscal prudency and to accuse Vasilev of leading a pro-inflationary fiscal policy. GERB certainly made use of a recent IMF's warning from Mar 2024 that the planning of 3.0% of GDP deficits in 2024-2026 may entail tax hikes in the future, and its leader Borissov implied that such a development would be entirely due to WCC-DB's fiscal expansionism. Still, the fiscal policy issues have not been particularly in the limelight in the first month of the election campaign, maybe because of the fading of the unfavourable economic developments related to the pandemic and the high inflation from 2022 and 2023, in our view.

Both GERB and WCC-DB have kept silence about the increasing likelihood of a delay in the euro adoption beyond the targeted date of Jan 1, 2025. None of the two parties has interest in attracting attention to their failure to push forward the eurozone accession, so we do not expect the issue to be frequently mentioned before the Jun 9 elections. We recall that central bank governor Dimitar Radev recently implied that a postponement of the date for the eurozone accession is certain, due to Bulgaria's inability to meet the inflation criterion yet, but neither the former government members, nor the current caretaker cabinet have commented the issue. The main opposition parties Vuzrazhdane and left-wing BSP are against the eurozone entry, at least in the near future in the case of BSP, so we do not expect them to complain of the likely postponement either.

More heated debates could have been expected on foreign policy, given the geopolitical tension in Ukraine and the Middle East, but these have not taken place so far either. Three of the parties - GERB, WCC-DB, and ethnic-minority MRF, have been hardliners in their firm pro-Western orientation and support for providing military ammunitions and weapons to Ukraine. In that sense, they do not have much to add on to their clear stance. Conversely, nationalist Vuzrazhdane, currently the third largest party in the parliament, has been consistent in its anti-NATO and anti-EU stance in the past years, which will probably secure the party the votes of most Russophile citizens. Vuzrazhdane filled a political niche in late 2021, which had been emptied after BSP eased its previously firm pro-Russia stance, in an effort to make itself an acceptable government coalition partner for more pro-Western parties. We recall that the urban and younger population in Bulgaria is mostly pro-Western, but a large majority of the elderly people and residents of smaller towns and villages have pro-Russian sentiments due to historical ties with Russia. The concerns of the Russophile faction of the population with Bulgaria's provision of military support for Ukraine may mobilise it to go to the polls, so we expect Vuzrahdane to keep its result from the previous 2023 election and to be positioned between the second and fourth place. Nevertheless, Vuzrazhdane remains isolated from all of the other parties, making its access to any power configuration unattainable, in our view. There have been media and expert speculations of Vuzrazhdane being an undercover ally of GERB, but we consider an open partnership in a government between the two parties out of the question.

In regards to socialist BSP, which was once the main rival of GERB, its importance as a systemic political actor has diminished irreversibly in the past few years, which some experts attribute to weaknesses of the party leader Kornelia Ninova and others - to the fragmentation of the socialist political space into numerous leftist projects. The most recent event illustrating this phenomenon has become the registration of a new left-wing project, called Solidary Bulgaria, for participation in the election, which will be led by Vanya Grigorova, a popular trade unionist, and Maya Manolova, former ombudsman. Grigorova brought the surprise at the local elections in the autumn of 2023, when she almost won the mayor place in traditionally right-wing capital Sofia, which has nourished her political ambitions. Nevertheless, Grigorova's potential to bring about another surprise at the parliamentary elections remains uncertain for the time being, but her project will definitely steal a further percentage of voters from BSP, in our view.

MAIN POLITICAL PLAYERS

GERB-UDF coalition

The Citizens for European Development of Bulgaria (GERB) is a centre-right party, led by former PM Boyko Borissov, and is poised to win the elections, with approximately 10pps advantage ahead of WCC-DB, according to the latest polls. GEBR had a difficult period in 2020-2023, as it faced large-scale public protests in the summer of 2020 and eventually went in opposition as of 2021, being stigmatised by all other parties, except for MRF, as corrupt and undesirable coalition partner. We recall that GERB leader and former PM Boyko Borissov was even arrested in Mar 2022 over accusations for corruption and blackmail but was released due to lack of evidence. Eventually, in the autumn of 2023 when the WCC-DB and GERB cabinet was already in power, the prosecution terminated hastily the so-called Barcelona-gate investigation against Borissov, as well as the blackmail case in which gambling boss Vasil Bozhkov claimed that he had consistently bribed Borissov while the latter was PM. With the termination of the cases, Borissov gradually emerged from his weakened position. He has been also juggling with declarations for surrendering aspirations to become a PM again and promises to make room for other GERB politicians with less tarnished image, such as Mariya Gabriel, to move to the forefront of the political arena, in an effort to clean GERB's reputation. Still, there is little doubt that Borissov remains in command of the party strategy.

GERB chose the slogan "Stable Bulgaria, Secure Europe" for its campaign, confirming its declared commitment to a fiscal conservative stance, as well as to its pro-EU and pro-NATO orientation. Those commitments aside, GERB rapidly engaged in populist pre-election moves in April, jointly with the MRF. The two parties proposed the allocation of BGN 1bn from the budget in the 2024-2029 period to the state-owned mines Mini Maritsa Iztok. GERB and MRF argued that the state aid was necessary to keep the mines functioning and decrease the social-economic burden from the mining decline. In another move, the two parties pushed forward a proposal to postpone the start of the energy market liberalisation for households by one year, to Jul 2025. GERB and MRF also proposed the allocation of Easter bonuses for the poorest pensioners. Other parties, unwilling to lag behind, supported all of those proposals in the parliament with the exception of WCC-DB, which abstained.

Borissov did not exclude the possibility of ruling together with WCC-DB in the future, under the condition that GERB nominates a PM and ministers in the cabinet and that WCC-DB leaders Kiril Petkov and Asen Vasilev no longer participate in government negotiations. GERB will also consider collaboration with MRF, which Borissov called a systemic party, consistent in its policy line. Borissov firmly rejected options to negotiate for a government with opposition BSP, Vuzrazhdane and TISP, as GERB is a pro-EU party, in his words. We think Borissov's statement outlines the possible post-election scenarios: a new partnership between GERB with WCC-DB, if the two parties receive enough MP seats to make a majority; a potential GERB government with MRF, although it is unlikely that the two parties will have parliamentary majority without the participation of a third party, or the scheduling of new snap elections. We also note that Borissov has come up with some flattering comments about Solidary Bulgaria's leader Vanya Georgieva both during her participation at the Sofia mayor elections in late 2023, as well as recently. Grigorova has adamantly refused any possibility to be related to Borissov in her latest interviews.

WCC-DB

WCC-DB is a centrist party, with liberal political views, focused on anti-corruption fight and inclined towards generous and deficit-prone fiscal policy. WCC-DB's leaders Kiril Petkov, Asen Vasilev, and Hristo Ivanov have presently returned to their previously successful strategy of attacks against MRF and its leader Peevski in particular but have remained relatively benevolent towards GERB. We think that this tactic has already exhausted its efficacy, taking into account WCC-DB's inconsistency in keeping its promises, which has led to the rehabilitation of GERB as the most popular party and of MRF as an important balancing actor in the domestic politics. WCC-DB's resumed hostility against Peevski is unlikely to erase the past nine months when it easily accepted Peevski's interference in the government's decisions. Basically, WCC-DB has no other potential political allies except for GERB and MRF, due to its geopolitical orientation, and we think that its popularity will continue to diminish in the future, tarnished by the toxic partnership with the more politically experienced GERB and MRF. Recent polls showed that WCC-DB risks to lose its current second largest party position and fall back to the third or even fourth place.

MRF

Ethnic-minority Movement for Rights and Freedoms (MRF) has been traditionally a flexible party in the past decades, switching between both right- and left-wing ideas. In the past year, it has tried to affirm itself as a modern and pro-Western party, without any other substantial messages. The party can rely on a stable electorate irrespective of its policy stance, due to the unconditional support it has among the Turkish and Roman ethnic minorities in the country.

The appointment of ethnic Bulgarian Delyan Peevski as party leader in late 2023 is unlikely to undermine the stability of the party′s electoral base, as Peevski enjoys the firm support of MRF's founder and honourable leader Ahmed Dogan. We note that Peevski is a powerful businessman, media mogul and influential politician, who preferred to stay away from public appearance until recently. In 2021, Peevski was sanctioned for corruption by the U.S. Magnitsky Act, but the Bulgarian state and prosecution remained inactive and he did not seem to suffer any consequences on Bulgarian territory. Gradually, Peevski moved to the forefront of the domestic political life during the joint WCC-DB-GERB mandate, demonstrating adamant pro-EU, pro-U.S. and pro-Ukraine views, which might be considered as an attempt to get out of the international isolation and sanctions, in our view. Peevski became very active in the parliamentary life as of the summer of 2023, even before officially heading MRF, and openly held meetings with ruling GERB and WCC-DB, cementing his power and influence on the government. In a recent statement, Peevski declared that he will not allow WCC-DB to make changes to the judicial system and the national security agencies after the elections, indirectly confirming rumours of his own power over these institutions. Overall, Peevski's chairmanship of MRF has become a tool for officialising his own power status. We see MRF as a natural ally to GERB and, probably, an unavoidable partner for WCC-DB as well.

Vuzrazhdane

Nationalist Vuzrazhdane (its name meaning Revival) emerged as a party that should not be neglected in the Nov 2021 elections, when it managed to enter the parliament contrary to all preliminary forecasts. The populist party reaped the fruits of its anti-vaccination stance in the post-pandemic situation at first. Later on, Vuzrazhdane built on its strong pro-Russian, anti-EU and anti-NATO rhetoric to please the Russophile share of the population, which has felt marginalised in the past years, abandoned by its traditional party of preference BSP. Vuzrazhdane has been also firm opponent of the euro adoption and we note that the share of voters against Bulgaria's eurozone entry is quite significant. In a recent Alpha Research poll from mid-March, around 30% of the Bulgarians were against the euro adoption, compared to 53% who supported it. Therefore, Vuzrazhdane can be considered an exemplary populist party, knowing how to appeal to a relatively large share of people who feel underrepresented in the political life. We think that Vuzrazhdane has the potential to keep its current third place in the parliament, although the contest with MRF will be very tight. We believe that Vuzrazhdane will stay stuck in its position as an isolated opposition party with no allies among major parties. As an anti-systemic party in its essence, Vuzrazhdane's potential to bring about constructive proposals and feasible policy ideas, as well as to exert political influence in reality, will remain limited in the near future, in our view.

BSP

Left-wing Bulgarian Socialist Party (BSP) has been losing steam in the past years. Once the second largest party, BSP was only fifth largest party in the last parliament. BSP's internal fights for power between the different factions, as well as its inability to modernise and upgrade its political presence and messages, have been key factors for its decline. Despite the dissatisfying election results, BSP leader Kornelia Ninova has stubbornly kept her chair office, while none of the numerous new left-wing political projects succeeded in becoming a viable alternative to BSP.

BSP is traditionally pro-Russian and pro-social policy party but has significantly lost its edge in both areas in the past years. While WCC-DB has adopted a more budget expansionary policy, in favour of raising pensions, wages, and the maximum insurance income, Vuzrazhdane has replaced BSP as the main Russophile party. At that moment, we think that BSP cannot hope for improving its election results, as it virtually stays invisible in the ongoing pre-election campaign and will remain marginalised in the next parliament.

Opinion polls

The latest polls show GERB will be the almost certain election winner on Jun 9 with around 9-13pps gap ahead of WCC-DB, MRF and Vuzrazhdane. GERB cannot rely to receive more than 25-27% of the voters, or between 68 and 74 MP seats in the 240-seated parliament, so it will not be able to form a government alone. Five parties will have no issues in entering the parliament - GERB, WCC-DB, MRF, Vuzrazhdane, and BSP, while TISP has also high chances to pass the 4% electoral threshold. The new finding in the polls this time concerns the high share of people saying that they will vote for a different party, other than the main six parties - ranging between 6.6% and 8.9%, which is the equivalent of some 16 to 23 MP seats. In the past, the share of people supporting unspecified another party in the polls barely exceeded 3 or 4%, but its higher level at present entails stronger unpredictability for the election outcome, in our opinion. It certainly confirms that there is an open space for new parties, for the time being we see Solidary Bulgaria and The Left! coalition as capable of attracting some of the hesitating voters in the leftist spectrum, but polls later in May should provide more information for their prospects. A share of right-wing voters could potentially support the Green party, which recently left WCC-DB, but we do not expect it to attract many new votes.

Our preliminary calculations, based on the first polls from April and March, show that GERB and WCC-DB have chances to reach a majority in the parliament together, if the parties in the parliament are no more than six and if WCC-DB does not suffer a further erosion of its support in the remaining one month. It is almost impossible for GERB and MRF to have a majority of at least 121 MPs together, nor will any other two-party ruling configuration be possible.

Our baseline scenario is that no majority government will be formed and another snap general election will be held in the autumn of 2024. The reason is that the latest problems between GERB and WCC-DB will make negotiations for a government even more challenging than before, and we do not see sufficient potential in other parties interfering in a potential government formula. Under this scenario, the political uncertainty will be perpetuated, which we see as an unfavourable development that could affect negatively Bulgaria's economy, the euro adoption process, EU funds absorption, ability to address properly geopolitical and other economic challenges. We still do not exclude the likelihood of GERB and WCC-DB reconsidering their past actions and shaking hands for a new joint ruling initiative, possibly under the pressure of the still complicated international environment, but it is the less likely post-election outcome, in our view.

LEGISLATIVE FRAMEWORK

Bulgaria's 240-seat parliament is normally elected every four years by proportional representation and parties need to receive at least 4% of the votes to enter the parliament. As usually, the Central Election Commission (CEC) will use the Hare-Niemeyer method to calculate the seat distribution. The method was introduced in 2009 to replace the D'Hondt method, but the difference between the two methods is no more than two seats, according to our previous estimates. CEC usually publishes official election results within the first week after the elections.