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