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8.1. The changes - expectations and realities Almost a decade after the beginning of the great change, people in Central and Eastern Europe often rise the question: What should be the change and to the benefit of whom? The question sounds dramatically in Bulgaria, as it stays at the rear of the reforms in the region. The country is still in a severe crisis and stagnation. In 1996 it reached the highest level of negative change of the Gross Domestic Product among all the countries in transition, without any perspective for improvement in 1997 (Table 8. 1). In spite of thepromise for rapid privatisation made by seven consequent governments after 1990, the process has not yet received the pace which is necessary for amarket economy Changes are necessary, but their implementation is slow and painful The vast majority of the population realises that theprogress of society needed the transition to democracy and to a more efficient economic system. Change was necessary for the incorporation of the country into the world and for a full membership in the European institutions. However, what kind of changes, and for whom - this are questions which have not receivedclear, consequent, and convincing answers yet. They are associated with the expectations for the transformation of Bulgaria into a modern European state, for overcoming the painful state of transition to efficient economy and democratic policy. Table 8. 1. Real changes in the Gross Domestic Product in Central and Eastern Europe (in percent) Country 1994 1995 1996 1997 (est. ) Bulgaria 1. 4 2. 6 -7. 6 -3. 1 Estonia -2. 7 2. 9 4. 1 4. 5 Latvia 1. 9 -1. 6 2. 0 2. 2 Lithuania 1. 0 2. 4 1. 1 5. 1 Poland 5. 2 7. 0 5. 9 5. 9 Romania 3. 9 6. 9 4. 5 4. 5 Slovakia 4. 9 7. 4 5. 0 5. 0 Slovenia 4. 9 3. 5 3. 5 3. 5 Hungary 2. 9 1. 7 1. 2 2. 7 The Czech Republic 2. 6 4. 8 5. 0 5. 3 The "time" factor turned against all the expectations of the population, the political elite and the foreign partners of Bulgaria. The populationexpected arapid economic development and the building of an efficient market economy, which would enable living standards similar to those of the people in Western Europe. It expected a rapid development of the democratic institutions, a modern legislation and a powerful state, which would provide civil rights and would turn the people into free proprietors and producers. Flourishing was expected in culture and science and especially in education, which is most closely connected with the future of the nation. Although in different ways, the political elites of all ideological and political colours identified themselves with the changes and expected a fast normalisation ofeconomic life and legitimisation of the economic structures and mechanisms. Their aim wasnot to allow the crisis to impose intolerable complications on the struggle forpower. A normalisation of economic life was expected also bescause of the necessity toincrease the prestige of the country, to turn it into a reliable partner in the international economic relations, and thus to join the European economic and political institutions. Disappointment holds all participants in the changes The external factor played an important role in the development of the crisis in Bulgaria. The dissolution of the Council for Mutual Economic Assistance led to the loss of about 60% of the export markets of Bulgarian production in Central and Eastern Europe. In spite of the statements about liberalisation of the export regime for Bulgaria made by its Western European partners, trade barriers were actually strengthened and its exports diminished. The worsening state ofBulgarian industry led to a decline inthe competitiveness of Bulgarianexport goods abroad. Theimpoverishment of the population allowed no compensation of the losses on the external markets by the internal demand. The negative trends were fostered by the UN-embargo againstformer Yugoslavia. Bulgaria omitted trade benefits for USD 6-7 billion. As a consequence of all these developments, the country has a destabilised state budget, which hampers the service of the external debt. The national currency reserve declined to USD 541 million at the end of October 1996, against USD 1, 2 billion by the end of 1995. The minimal positive trade balance of ca. USD 200 million could not cover the growing necessities for import of food supplies andfor the service of the foreign debt. To meet the foreign debt service payments, the state dependson obtainingloans from the International Monetary Fund, the World Bank and other international institutions. Thus the geopolitical dependence of Bulgaria increases. Led by their geopolitical and economic interests, the foreign partners of Bulgaria expected democratisation, rapid rationalisation of production, modern legislation, and social stability for accelerating the inflow of investments and payments to creditors. Neither of this hopes occurred. An impoverishment unheard so far took place and the inflation grew from "high" to "hyper" rates (Table 8. 2). Table 8. 2. Inflation (Deflation of the individual consumption)   Country 1994 1995 1996 1997 (estimates) Bulgaria 81. 9 53. 8 110. 0 100. 0 Estonia 40. 2 34. 0 24. 0 17. 0 Latvia 28. 1 26. 0 17. 0 13. 0 Lithuania 51. 3 27. 8 19. 0 14. 0 Poland 32. 2 27. 8 20. 0 17. 0 Romania 129. 7 33. 3 35. 0 30. 0 Slovakia 13. 6 9. 7 5. 8 6. 0 Slovenia 20. 3 13. 6 10. 0 7. 4 Hungary 19. 6 26. 4 24. 0 20. 0 The Czech Republic 10. 7 9. 1 8. 8 7. 8 Total 42. 8 24. 8 22. 1 17. 4 * Deflation GDP           Unemploymentincreased to unprecedented rates too. In 1996 the national currency unitlost ca. 80% of its value, which caused a rapid reduction of the incomes in real terms. Table 8. 3. Indices of real incomes by years for the period 1990-1996 Basic years     Years 1990 1991 1992 1993 1994 1995 1996 1990 100. 0             1991 61. 2 100. 0           1992 65. 6 107. 6 100. 0         1993 62. 7 102. 5 95. 2 100. 0       1994 55. 5 90. 5 84. 6 88. 8 100. 0     1995 50. 7 82. 9 77. 2 81. 1 91. 3 100. 0   1996 37. 8 61. 4 57. 3 60. 2 67. 8 74. 3 100. 0   A specific feature of the economic and social situation in the country in 1996 was the evident effect of aging of the industrial facilities. More than 70% of the industrial equipment in the country has been operating longer than 20 years. This reduces the competitiveness of the Bulgarian exports. The urgent need to cut the budget subsidies because of the huge budget deficit and because of the recommendations of the international financial institutions caused the cease of unreasonable subsidies and the closure of state owned enterprises. This was followed by the rise of unemployment among qualified workers and by the increase of social polarisation. Despite the steps for reduction of the budgetary expenditures, the internal debt grew enormously. The large payments on the external debt are a heavy burden on the foreign currency balance. The impoverishment of the population at the end of 1996 and the beginning of 1997 proceeded rapidly. This led to broader differentiation of incomes. While in 1991 the upper 10 per cent of the population have disposed of 12% of the incomes and the lowest 10 per cent of 5% of theincomes, in 1996 these indicators are respectively 32% and 2.4%. The purchasing power dropped to the level of biological survival A stable trend towards increasing the scale of poverty occurred. In 1996 and at the beginning of 1997 the purchasing power of the population sank down to the level of biological survival. The Institute for Social and Trade Union Studies announced, that the costs for adequate nourishment of an individual in Sofia at the end of 1996 amounted to Levs 40, 235, when the average wage for the country was Levs 15, 831. At the end of January 1997, the costs forfood for a resident of Sofia was already Levs 79, 547. Several jumps in prices of bread, electricity and gasoline increased the costs of life more than 5 times. Bulgarian people faced new conditions in their struggle to survive. They became panic-stricken and entered a new phase of social disintegration. During 1996 expenses exceeded the registered family incomes. This means that people withdrew their savings for food.   Box 8.1. Escalation of impoverishment According to the National Statistical Institute, the rate of inflation for the first two months of 1997 is 391.2% (basis 100 in 1996). The price of bread increased by 144.2%, of milk - by 194.2%, of white cheese - by 353.7%. The prices of shoes and clothes rose by more than 300%, and of school textbooks by 369.5%. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxExceeding the parameters of "stagflation"- the combination of stagnation and inflation - is typical for the current situation. A transition to total stagnation ("totalgnation") occurred, since it was very difficult to pursue anti-crisis policies. The regulatory attempts to overcome certain aspects of the crisis became senseless with a view to the contradictions of the whole complex of mutually linkeddimensions of the crisis. The social disintegration, caused by the keen polarisation of incomes, has other than economic parameters as well. Poverty, the decreased purchasing power, the inequality in property, the different access to the public wealth have severe psychological effects. The growing marginalisation of new groups of the population, who fall into the low incomes status, increased their perception of social inequality. The utilisation of cultural services and the expenditures for education are rapidly shrinking. According to the data of the National Statistical Institute for 1996, only 2. 5% of the total expenditures of households go for education and entertainment, while in rural areas the percentage is 1. 5%. The impoverishment and its economic and socio-political manifestations lead to reduction of the confidence in the institutions and to difficulties in developing legitimacyfor governmental policies among broad social groups. Impoverishment distorted the value system The social interaction  for the implementation of the transformationhas been hindered by the loss of the living standards and the quality of life of significant segments of society, but also by the sharp worsening of the social climate and distortion of the value system of Bulgarian society. The growing delinquency, which is typically pointed out as the major problem in public opinion surveys, additionally undermines the confidence in state institutions as well as to their ability to protect people. Corruption strengthened increasingly the lack of confidence in the effectiveness of the state institutions to resolve the problems of the country to the benefit of the entire society. The alienation between people grew in parallel to the individualist approach to survival without observing the interests of other members of society. The everyday struggle for living does not provide favourable conditions for the development of society. New processes, which contain prerequisites for a later crisis are unleashed, which, if not contained, may endanger the future of the nation. The demographic decline unheard in the history of Bulgaria and the emigration of young people led to a substantial reduction of the economically active part of the population. This endangers national security at present and will endanger it in the future. The lowest level of the birth rate, registered in 1996, shall be the reason for new lows of the birth rate some 20 years later. Not sufficient recruits will be available for the army. The aging of the Bulgarian nation will continue. According to the demographic forecasts of the National Statistical Institute, in the year 2000the number of recruits in the army (both age cohorts - 18 and 19 years of age) will be reduced to 106 thousands(against 126 thousands in 1993). In 2015 the reduction will reach 70 thousands. The number of the economically active population, which has to support an increasing number ofpensioners, shrinks uninterruptedly. Box 8. 2. Parameters of the demographic collapse •Stoppage of the growth of the population. From 9‰in 1957-1965, the annual growth average declined to negative values ofminus 9 ‰ in the period 1986-1995. •The natural growth of the population fell from 18. 2‰ at the beginning of the century to minus 2. 2‰ in the middle of the nineties. •The aging of the population. In 1946, the population up to the age of 15 was 29. 8% of the total number. The share of the population at retirement age (females above the age of 55 and males above 60) was 11. 6%. In 1996 the figures are 19. 17% and 24. 5%. •The mortality rate increased from 8. 1‰ in 1960 to 19. 8‰ in the mid-nineties. 8. 2. Science in the conditions of crisis A rather telling manifestation of consequences of the crisis in society is the crisis in science. It activates social disintegration and, on its part, reduces the possibilities for the civilised transformation to a market based economy. By the current finance deficit an unprecedented reduction occured of expenditures for science as a share of the GDP. In 1996, 0. 29% of the GDP, or Levs 3, 000 Million have been spent for science. In Europe the annual average expenditures for science have been 2. 5% to 3. 0% of the GDP during the recent years. Empirical data substantiate the point that 0. 3% of GDP is the limit under which the scientific structures usually collapse. No otherformer socialist country has cut expenditures for science so drastically. Science expenditures fell under the critical minimum Well established scientific structures have been destroyed. A series of scientific institutes have been closed or lead poor existence. The Bulgarian Academy of Sciences is now forced to the humiliating position to permanently beg for budgetary support. No beneficial conditions for the establishment of private or joint organisation of scientific research have been set. The staffing of Bulgarian science declined. The average age of the Bulgarian scientist grows. Thousands of young and promising scientists and inventors left the country to seek better conditions for life and work. This endangers the natural reproduction of the scientific potential in Bulgaria. The country looses its prospects. In order to develop research, the structural changes are not sufficient but scientists are also needed. In the conditions of economic and social crisis, developed countries regard science as a strategic branch. Exactly the opposite happened in Bulgaria. Economic prerequisites led to cuts in the budgetary expendituresfor science and education. However, it has been proved, that even with a certain delay, scientific research may pushthe economic cycle ahead to growth. The crisis in science undermines national security The crisis in science endangers the national security. The point does not concern the reduction of special military and related research activities alone which are linked directly to the security, where Bulgaria had already a leading position. The collapse of the scientific structures reduces strongly its national prestige. A perception for vulnerability appears, when this process coincides with austerity budgets in other spheres like defence and health care. The crisis in science has the most disturbing consequences in relation to human resources. The intellectual ceiling of the nation is lowering. People develop pseudo-market notions, consumption psychology, and a common opinion, that science is a not affordable luxury in this society. Moreover, the crisis of science destroys human relations, the public morale, and cultural life. The basic reason for the crisis ofBulgarian science is the absence of clear understanding of its role in the contemporary and future Bulgarian society. The absence of a clearly defined positionof what is the nation heading to, awakes negative prejudices among the majority of Bulgarians concerning the necessity to develop national science. This public notion sometimes serves as an argument for politicians and justifiescutson possibilities for existence and success of the Bulgarian science. This discourages and demoralises the Bulgarian scientists. The late years gave plenty of examples, when capable Bulgarian scientists turn to non-proper activities only because of the much better material stimuli in other spheres. Scientists meet no partnership on the part of the state and seek their field for research abroad. Scientific schools which have been built up for decades are loosing their potential or disappear. This diminished activity strengthens the impression that our science is "dying out" and "has no role" in future Bulgarian society. In the emerging value system the individual devotion to science is not a prestigious and attractive choice. The crisis of science hinders the overcoming of the crisis of society A vicious circle emerges. The crisis in society is fostering the crisis of science; on its part, the crisis of science makes the way out of the crisis of society more difficult and protracted. The feeling for perspective and development disappears. The lack of clarity and public consensus on the future of our society is hampering not only the science, but many other action spheres to find their way out of the maze. The potential paths of societal development are not predetermined. Different scenarios of progress or regress are possible. Different views on the future of Bulgarian society exist. A specific role and development of Bulgarian science corresponds to each of them. If the state should rely predominantly on tourism and agriculture, the science sphere could be narrowed around research, related to these activities predominantly. If society sets for an all-out development of the country, where the natural resources and the educated human resources wouldbe utilised to an optimum, science will play a much more important role. Box 8. 3. The Gross Domestic Product and the development of science The analysis of the current status of science, of its material basis, information resources and international contacts shows, that to enable its recovery, it is necessary to provide at least 2. 5-3%, but not less than 1. 5% of the GDP, for this branch in the course of the next 3-4 years. In the case of 1. 5% of the GDP, 20 years shall be needed to align the financial provisions for one scientific position inBulgarian science with that in the European Union of 1991. Only allocating this percentage of the GDP to science will enable applied research which, on its turn, will allow the country torecover from the crisis. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 8. 3. Who wins and who makes losses from the transformation? The deepening of crisis in all of its aspects brought about substantial changes in mass consciousness. For a segment of the population, the polarisation and the impoverishment became a source for nostalgic feelings about "the good old times" of economic and social guarantees. For another part the polarisation and the impoverishment became the main reason for protest against institutions, and against the party elites ruling the country. Both ways of estrangement from the reforms, although with different intensity, are influencingthe ongoing transformation rather negatively. The support to the reform disappears, inimical attitudes arise to institutions which are expected to implement the reform. Political forces do not always have real knowledge abot the content and the depth of these processes. When on power and contributing to worsening the economic and social contradictions, they try to present the social tensions as a phenomenon which is inspired predominantly by the political opposition. When in opposition, the same elites try to take the lead of public dissatisfactionwith the aim to achieve higher political positions. But when they take the power, especially of its executive branch, the mechanisms of "unmet expectations" starts to work against them. Most governments after 1990 resigned because of mass protests against their "high social costs" policies. A long period of cultivation of democratic reflexes is necessary to enable the political elite to grow up to the understanding, that in the conditions of a deep crisis, confrontation is counter-productive. A widely shared anti-crisis programme should be adopted, and not to be attacked on political reasons later. It is natural that approaches for resolving the crisis differ. However, in case that an agreement on principal issues would be achieved, as for the protection of the national production, the need of aid from the IMF, the combating corruption in the state administration, etc. , this agreement should be immediately settled legally as a basis for government and introduced in the national anti-crisis programme divested from political bias. Seven years after the beginning of the changes it is obvious, that the transformation was beneficial only for narrow segments of society. These groups cultivated a common psychology and philosophy and are united by common interests. Among them the aim prevails to destabilise the state institutions and to hinder the introduction of a modern and stable legislation, to supplement the market methods of economic activities by force, to apply non-market approaches, in most cases illegal, to achieve control over the banking and the customs. These circles are unanimous in the fight against law and order which could hinder their fast and enormous profits. Their ruthless strive for profits is caused by their own over-appreciation, and by the desire to imitate standards of life of the Western economic elite. Despite contradictions within these groups, by attempts of institutions to act against them, they oppose them as a homogenous force. The common feature of profiteering groupings is not obeying the law Among these groups are: A. Representatives of the nomenclature and high ranking managers before and after November 10, 1989. They used reserves of the state, and links between themselves (especially the employees in the system of state security) to export large amounts of foreign currency abroad, or to invest it in trade operations with deficit goods. Many of these persons, former officers of state authorities, established parallel financial and economic structures, and use Mafia methods for their enrichment. Gaps in the legislation were abused and huge profits earned byfollowing the exemption of non-profit organizations from custom duties, for instance. As a result of legally allowed tax alleviation, in 1992 the foundation "Sapio" earned a fast profit of US$ 10 Million which were exported abroad. In this period the mechanisms of commodity deficits were still there and investments in specific trade operations resulted in fast return and high profits. Large and fast profits were also accumulated during the UN imposedembargo on Yugoslaviamainly through illegal exports of oil derivatives. High profits of up to 3, 000% were obtained by illegal import of cigarettes and liquors when avoiding custom duties and excise tax. In this sphere the interaction with Mafia structures is intensive. B. Corrupted politicians and officials from the state administration. By the current underdeveloped forms of market economy, red-tape, bottlenecks for the business, restrictions, quota limits, hampering custom regulations, voluntary decisions on issuing licenses and sell-off of municipal and state property there is a fertile soil for corruption. Large transactions were made possible through the mixture of individual, political, and lobbyist interests. They led to strong infringements of national interests and stimulated feelings against the government. Over-export caused the grain-crisis and the increase of the bread prices. Following a series of suspicious transactions, the state company "Neftochim" in Bourgass faced bankruptcy. A drastic increase of prices of fuels was imposed in order to stimulate recovery, which, on its turn, unleashed the hyperinflation at the beginning of 1997. C. Criminal groupings and Mafia-circles. Even though proprietors of "dirty money" strive to legalise them, converting their activity into legal businesses, the ineffective legislation, the weakened institutions for legal protection, and the delinquent environment created conditions for the establishment of Mafia circles. They act on rules borrowed from the global Mafia experience. The newly emerged security businessfunctions according to the same rules. It is hardly possible to distinguish this business from racketeering, because the assignments for these services are imposed on behalf of the servers. The large sums, accumulated by these structures, are exported abroad or invested in the cash privatisation. This is the firm ground of their future economic power. Destruction of previous legal structures without establishing substitutes was the first open door for the current criminal wave. The second were chaotic changes in the law. The obsolete legislation waseliminated without enforcing new regulations to determine the rules in the new market conditions. Box 8. 4. "The grey zone " of the illegal and quasi-legal business In the grey zone, free from state control, structures emerged accumulating capital by illegal or quasi-legal methods:   Establishment of private banks with state credits of low interest; Incorporation of joint ventures with quasi-external capital, but with entitlement to export profits; Issuing export licenses for metals, agricultural products, and other commodities, which turned to be extremely profitable in the not yet liberalised price system in the country; Organising channels for illegal cross-frontier traffic, for example of stolencars. Various structures joined the illegal business - the state administration, the political and the business nomenclature, former officers of the Ministry of Interior and of the State Security Committee, delinquent persons, former sportsmen (the violent structures of the economic groupings). These circles accumulated already huge initial capitals and now try to legalise their business through switching over to "national enterpreneurship", "insurance" and "banking". The transformation according to the current model is fully acceptable for them. The illegal business is actively seeking legalisation The major problem during the economic transition in Bulgaria is not so much the very fact of emerging and increasing of the Mafia or quasi-Mafia groups, but the absence of normal market conditions, of authentic market actors, and of normal market behaviour. These factors, plus a sound contemporary legislation of European type, are the most solid prerequisites for restricting the power of the "new masters" in Bulgaria. There is still anothersegment of the population, who found their place in the new, even not sufficiently developed, market relations. These are the representatives of the small business, who managed to confirm their place in the new, even not well developed market relations. Despite the extinguishing taxation policies and high interests, they succeeded to survive. The representatives of the emerging group of rentiers have also no reasons for complaints against the transformation. The group comprises predominantly indivifuals who received restituted property and supplement their incomes with rents. No conditions for property to be included in the investment process exist yet. In fact, incomes of this type have a relatively low share in incomes received by households. The National Statistical Institute announces that 1. 2% of the incomes of households come from obtained property. Luxury consumption against the background of mass poverty The above mentioned groups who won from the transformation in its present form have an even easier access to larger shares of the public wealth. The consumption on behalf of the first three of the above mentioned groups has luxury character which is not common in the country. In bigger towns this creates the impression of wealth and well-being. Simultaneously, the survey on household budgets, carried out by the National Statistical Institute in 1996 indicates, that almost 50% of the incomes of the population are used for food. The expenditures on many other items are minimal, for example on furniture: Table 8. 4. Expenditures of the households by type and by residence of households   Type of expenses Total Towns Villages   Relative share Total expenses 100. 0 100. 0 100. 0 Food 48. 2 46. 9 51. 2 Liquors 2. 8 1. 6 2. 1 Tobacco-ware 2. 1 2. 2 2. 0 Dwelling 3. 4 3. 8 2. 5 Energy for the housing 6. 7 7. 2 5. 7 Furniture 3. 5 3. 8 3. 0 Clothing, shoes, personal belongings 6. 5 7. 0 5. 3 Personal hygiene and health care 3.6 4.0 2. 8  Education and free time 2. 5 2. 9 1. 5 Transport and communications 7. 6 8. 1 6. 4 Family farm 3. 7 1. 3 9. 0 Other expenses 10. 4 11. 2 8. 5 The impoverishment of large families, unemployed and pensioners is fast. They spend more than 50% of their incomes on food. These groups suffer rapid and massive, absolute and relative restriction of incomes and worsening of their quality of life, which includes social indicators like delinquency, parameters of the environment, bad socio-psychological climate and stress caused by impoverishment. These are the reasons for the increase of mortality rate during the last years and for the reappearance of eradicated diseases like tuberculosis. For a significant part of the population, the transformation in its nowadays parameters isunacceptable. In a comparative survey across the former socialist countries, 65% of the pollees in Bulgaria responded that "now they live worse, than in the 80’s". The transition is not acceptable for the high social costs paid for it. Instead the expected growth of the national wealth people meet poverty and unemployment up to wasting of valuable human resources. The personal strategies for survival increased the social disintegration, pushing into the limelight short-term goals and no middle or long-term objectives in the transition. 8. 4. Anti-crisis programme The undesirable situation requires urgent action, including compromises on behalf of the political forces, mobilisation of all the capable and talented people from the entire population, reasonable external aid at the right time for a rescue programme. Both the governing and opposition political forces must grasp the fact, that the collapse of economy is harmful to both parts of the political elite. One of the worst tragedies in Bulgaria during the last decade is the polarisation of the political forces, the definition ofpolitical positions on the basis of the "anti"- principal, the fight against any, even reasonable proposals of an opposite side, solely on political reasons. The pluralism which is necessary for the democratic process has been substituted by the domination of the two political poles. The structural reason for this is the lack of a solid middle class to build up the fundament for thepolitical centre. There is a threshold, beyond which no normal mechanisms for changing the political elite are applicable. Beyond this limit there is the chaos, which makes the normal political life impossible. In a situation like this the introduction of legislation which is adequate to the economic progress is difficult. The mechanisms for regulating the economy are ineffective. In order to redirect the transition towards servicing the national objectives and the economic, political, and cultural interests of Bulgarian people, it is necessary to outline and urgently accept a new conceptual framework for the implementation of the anti-crisis programme and the market reform. For clear defining of reformpriorities First, due to the complex influence of various components of the crisis, it is impossible to search for a complex solution to it now. More than ever before, it is necessary to give an answer to the question: Where to start from, which priorities of the anti-crisis programme to select? This could be done only if the political forces refer without any demagogy tohighly qualified teams of experts for the task of drafting a scale of priorities and seek to achieve consensus for outlining the anti-crisis programme. Box 8. 5. Elements of the anti-crisis programme ·Promotion of business and export, and acceleration of privatisation; ·Introduction of a Currency Boardand keeping inflation under control through fixing the exchange rate of the Bulgarian Lev; ·Financial recovery of enterprises and liquidation of loss-making enterprises; ·Social protection for redundant workers; ·Establishment of a social protection network for the poor strata of the population; ·Strengthening the bank system through sell-off or restructuring of non viable banks; ·Increase of the compliance to tax-collection, especially togathering taxes from big tax-payers; ·Agreement for reliable financing from the international financial institutions. Second, strong political will is needed on behalf of all political parties for the consequent continuation of the market reform. Seven years after the beginning of the changes it became dramatically clear, that our approach to the reform is mistaken. By a primitive market economy and destroyed, yet still existing state-centralised economic system, the results of their combination are sad. It is not affordable to combine state property of more than 80% of the industrial enterprises with free prices and over-liberalised currency regime. This leads to combining the faults of both systems in aknot. Approaches should be sought for the establishment of a market economy, which motivates the initiative and the activity of the population, and not to stimulate the search for comparisons with former periods. For promotion of the enterprise initiative Third, it is necessary to combine the anti-crisis with middle-term and long-term programmes for the transformation. The anti-crisis measures should not undermine the future, longer-term solutions. Experience says that the continuous use of budgetary deficits for social policies reflects negatively on thefunctioning of the economic system in future. Immediate anti-crisis measures should be applied in a way to minimise their long-term negative impact. Otherwise, part of the difficulties of the reform will be passed from one generation to another. Fourth, it is necessary to pursue the structural adjustment, which has been postponed by all governments after 1989. However, not abstract constructions of the "fairy tales"-type are needed, but to launch an active, immediate reform, whichcorresponds to the need to combine the anti-crisis programme with a long-term reform for liberalisation of the economy. In this respect, the privatisation of property is only a prerequisitefor a way out of the crisis and not an instrument of an anti-crisis policy. The understanding of privatisation as privatising solely the profit should be eradicated. This means to eliminate the groups who stay at the outlet of the productive system and earn the financial results from openly or secretly privatised enterprises. In order to reach fair results from the transformation of the state property, it should be distributed broadly among the population using the mechanism of privatisation. Following the initial distribution, privatisation could contribute to the improvement of the economic and social situation of the population only when implementing its function, namely provision of commodity markets, establishment of a normal capital market, stabilisation of the monetary system. In its social dimension, the privatisation could be turned into a mighty lever for the social transformation through its contribution to the establishment of an independent segment of proprietors in Bulgaria. For privatisation which develops a middle class The reduction of the "dolarisation" of the national economy is of utmost importance for the achievement of an immediate effect from changing the property over the industrial enterprises. The large increase of the volume of imported raw materials for the production of Bulgarian goods and services (more than 3 times), will lead unavoidably to hyper-inflation by every next devaluation of the Bulgarian Lev. Together with the rapid impoverishment of the population it will cause total destruction of all economic links and an unfavourable impact on the reproduction process. That is why it is an immediate goal of the structural adjustment to stimulatea new process of "Bulgarisation" of the row-material and energy basis of the national economy in compliance with a stable involvement of the scientific-technical component in thelocal production. The structural reform should not be an end in itself. It could contribute for the human development if it provides conditions for the well-being of Bulgarian people, for their dignity and new economic self-confidence. The reform could contribute to the development of the economic potential if it is beneficial for the economic development, which leads to real economic growth. This means: economic growth without new unemployment and polarisation of the wealth. This means a growth, which contributes to the development of the culture and the democratic institutions. The structural adjustment cannot be postponed Fifth, rapid consolidation of the institutions in the Republic of Bulgaria is necessary. In this respect, even more topical becomes the conclusion of the publication "Bulgaria 1996. Human Development Report": "The consolidation of the state institutions is the key for the solution of any other economic and social problems". The simplified understanding of the total withdrawal of the state from the economic activities as a dynamic element of the market reform should be abandoned. Indeed, the disassembling of the centralised system requires privatisation of production capacities, reduction to a minimum of subsidised and inefficient enterprises, and the implementation of direct production investments on behalf of the state. That means not an elimination of the regulatory role of the state, but establishment of a favourable institutional environment for the implementation of the reform, namely modern legislation, control on the currency turnover, reasonable budgetary policies. No transformation is possible without the regulatory and supportive role of the state. The state is the basic factor, which could protect the local production in a period of shrinking of both the external and the internal markets. In other words, the state must determine the rules of the transformation. It should stop the plundering of the state property, protect individuals and their private property against crimes, create a favourable climate for business development. No social integration is possible without a legal order. A key issue for the implementation of the transformation is the potential of the state to be used for strengthening the links between the economic reform and the social interaction in the course of the transformation. For modern taxation policies and effective social insurance Sixth, despite the difficulties in the period of the economic crisis, it is necessary to combine every short-term anti-crisis or long-term transformation measureswith social guarantees for the participants in the reform. In the period of macro-economic imbalance "compensation criteria" should be applied. In other words, those who earn from the transition should grant part of their benefits to others, who sustain losses from the transformation, in order to make the process more acceptable for larger groups of the population and to avoid social tensions. This could be achieved only by an efficient taxation policy of the state and by a modern network for social protection. The world experience shows that in a situation of crisis it is possible to apply measures (not always unbearably expensive), in order to "socialise" the reforming economies, by passing information to employed about the prospectsfor further employment, by offering information services to the potentially and the really unemployed, by organising vocational retraining, compensation programmes and programmes for development of the small business. It is of extreme importance to accompany the structural reform by measures for social protection of people, who stay jobless as a result of closures. Those, who are gifted for entrepreneurship should be supported to start their own business, and others to be re-employed. In the whole process of transformation political guarantees for the irreversibility of the transition to market economy and democratic structures should be implanted. The reform should not be restarted by every change in the political elite. It is a Bulgarian paradox that all parties are in favour of the reform and changes, however, no real progress and movement has started yet. The main question is: could sufficient forces and reserves be discovered in order to set the mechanism of recovery in motion and to achieve economic growth, or the country will dive in chaos and hopeless stagnation, every time seeking the "bottom", which proves to be deeper by every new critical situation. Some grounds for optimism exist despite the severe situation. They refer to the qualified and educated labour force, to the developed and not fully exhausted industrial basis, to the traditions in agriculture. If social agreement, common political will for changes, and progress would be developed, then the Republic of Bulgaria will be able to enter the 21st century as a middle-developed European country with its own potential and orientation to fully participate in the European integration processes.

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