By Krassen Nikolov
European taxpayers have been depleted with dozens of millions of euros as a result of fraud with the European Operational Programme – “Development of Rural Areas“ in Bulgaria. From 2007 to 2013 the EU provided €101 million for building 746 guesthouses in rural areas of the poorest member country. The idea was to develop tourism and to promote the natural habitat and the old traditions of Bulgaria. Instead, much of the money was used for building private villas that are not open for guests.
The projects are entirely controlled by the Bulgarian State Fund “Agriculture”. This institution had kept its eyes wide closed for the fraud: a striking example of the huge corruption in the country that has flourished during the rule of the three largest Bulgarian parties – GERB, BSP and DPS.
Although the media had reported about the guesthouse scams, the scandal exploded just before the launch of the EU election campaign. It happened because of an investigation of the websites bivol.bg and blagoevgrad-news.com, which led to the resignation of the Deputy Minister of Economy Alexander Manolev (GERB).
Manolev owns land near the town of Sandanski situated near the border with Greece. He has given a 20-year-old young woman the right to build on his property. She has received a €190,000 EU subsidy to build a luxury villa in the mountains. The project includes a private 3 km-long conduct for mineral water. So far the evidence shows that European money was used to build a private luxury villa and the 20-year-old woman turned out to be the daughter of Alexander Manolev’s children’s baby-sitter. The funding was approved in December 2015, just one month after Manolev was appointed Deputy Minister of Tourism in the second government of GERB.
The prosecutor’s office has begun an investigation, and the European Commission announced that it is following the case. Meanwhile, the leader of the BSP election list Elena Yoncheva was also involved in a similar scandal after an “investigation” of the GERB-related pik.bg website. It revealed that a company of her stepfather had built three houses with European money in Velika village, on the Black Sea coast. The authorities started an investigation. Yoncheva said the events took place before she became related with her step-family.
On Tuesday, the Deputy Director of the State Fund “Agriculture” Ivanka Mizova resigned. Her personal phone number was publicised as a contact for renting one of the guesthouses built near the resort town of Velingrad. The problem is that she is the head of the institution that grants funding for the construction of these luxury villas.
The prosecution and the police have started a revision of all 746 houses built with European subsidies. But society does not expect great revelations. Bulgarians have extremely low confidence in the prosecutor’s office (only 10% of the people trust it) because of the suspicions of political influence and corruption. Rumen Porozhanov, who is now the Minister of Agriculture, was the director of the State Fund “Agriculture”, which has granted funding for the guesthouses. He personally approved the project for the house of Manolev.
Until now, the Bulgarian authorities have imposed fines of 13 million euros for faults in the construction and use of guesthouses, but in the last weeks it became clear that the wrongdoing is much bigger. So far, 110 guesthouses have been checked. It turns out that at least 1/3 of them are not used for tourism and the owners will have to return the subsidies. Faults are detected in other projects too. Consequently, the programme beneficiaries will have to return the money. This is the largest percentage of wrongdoing under EU programs in Bulgaria.
Impact on EU elections
The scandal with the guesthouses is indicative of the way institutions work in Bulgaria, which exercise control and perform checks only when put under pressure. The revelations of fraud with EU money hit strongly the ruling party GERB and forced the Prime Minister Boyko Borissov to order checks that had to be made years ago.
The massive fraud with EU funds involved came immediately after the apartment scandal and the consequences are already visible. Despite the expectations of Boyko Borissov the monitoring under the Cooperation and Verification Mechanism will not be lifted during the term of the Juncker Commission.
But the biggest problem for GERB’s leader is the expected defeat of this force in the European elections. That will mean a serious possibility of early parliamentary elections before the end of the year. And Borissov faces the option of not completing his mandate for the third time.
A month ago, GERB was comfortably leading over BSP. But the apartment scandal had a huge impact on society, and the ruling party lost nearly 5% of its support. The guest houses scandal can only deepen this crisis and make the electoral loss bigger.