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Homes and a Scandal in Bulgaria

How did the “Apartment-Gate” affair explode, when previous, bigger scandals failed to detonate? by Boyko Vassilev 24 April 2019

A property scandal in Bulgarian government circles has exploded since late March, in a way that previous affairs have not – possibly because “Apartment-Gate” concerns assets on a human scale, rather than intangible billions in a bank.

 

The affair was sparked by Tsvetan Tsvetanov, who is number two in the GERB ruling party, as well as driving the party’s campaign machine and serving as president of its parliamentary group.

 

As revealed by the Bulgarian section of Radio Free Europe, Tsvetanov made an agreement to acquire a newly built luxury flat with a dedicated elevator from the garage, in a posh Sofia neighborhood. The deal involved him exchanging two other apartments and making a payment of 100,000 lev (around $57,520) to the construction company. On the same day and through the same notary, the construction company sold Tsvetanov’s two older apartments to someone the politician knew.

 

The problem was that the prices declared to the notary for all the apartments involved in the deal were well below market value – meaning less tax for the state. Additional questions arose, as to whether the construction company enjoyed legislative favors from their connection to Tsvetanov.

 

Similar stories about other, artificially discounted apartments emerged, involving other members of the ruling party, and the scandal gradually spilled over into almost every institution of power, including the opposition, the president, and the wife of the chief justice.

 

Initially, Tsvetanov tried to defend himself, arguing that he had not broken the law. However, although he was Prime Minister Boyko Borissov’s right-hand man, the latter had much to lose. It was just a month before the European Parliament elections in May – and, perhaps for the first time, Borissov and his GERB party might struggle to win.

 

Borissov acted decisively. Tsvetanov was forced to leave his parliamentary seat – though he retained his party jobs.

 

The premier offered no face-saving exit to others involved, either. A justice minister, three deputy ministers (of sports, of energy, and of the economy), and a member of parliament have all resigned. The president of the anti-corruption commission and a deputy chief prosecutor were sent on vacation in order to give investigators a free hand. All of them took the same line of defense as Tsvetanov: not feeling guilty but stepping down nevertheless. GERB hailed this “moral standard” and criticized the opposition for not following suit. After all, with anger rising in society, even the innocent must take note of public opinion!

 

But where did this public anger arise from? Perhaps because flats are something Bulgarians know all about. The topic runs right through their psyche, like a constantly running ticker-tape of property prices. According to unofficial estimates, more than 90 percent of Bulgarians own some form of property, a figure that would be astounding in any rich Western country. For ordinary Bulgarians, a house or a flat feels as though it is worth double the same sum in stocks and shares. Tsvetanov, whose property deal touched off this affair, was not chosen by the party for a presidential bid in 2011 partly as a result of being revealed as the owner of six apartments. If he had possessed the same amount of assets, but in treasury bonds instead, nobody would have minded.

 

Yet Tsvetanov had unaccountably forgotten his lesson from 2011, jibed the politician’s former mentor, Borissov.

 

This preoccupation with property is a double-edged sword. On the one hand, it is a blessing. Bulgarians have a place to live — and often even another one to rent out.

 

On the other hand, these properties can often be run-down or over-valued. Many flats are in shaky communist-era, concrete-paneled blocks. They have an expiration date, and the mere thought of the day when they will start to crumble is an unimaginable catastrophe. Even if these old buildings do stay standing forever, they are a graveyard for capital – tying up the bulk of the average Bulgarian family’s assets, limiting economic risk, but also restricting capital mobility and private initiative.

 

It is far from rare to see Bulgarians living in much bigger flats than they can afford, slaves to their own property. Old people in downtown Sofia dwell in huge apartments worth hundreds of thousands of dollars – yet cannot pay the heating bills. Why don’t they sell, for something smaller but affordable? Ask this and you will hear all kinds of explanations, most of them irrational, from “One never sells property” to “I’m keeping it for the kids” — kids who may have emigrated, with no intention of returning.

 

This familiarity with property brings issues of corruption closer to home. Bulgarians were not especially moved when 3.5 billion lev (around $2 million) vanished in the collapse of the Corporate Trade Bank in 2014-2015. But billions are abstract, whereas a cheap flat is something everyone can understand.

 

It is still too early to predict all the consequences of Apartment-Gate. On the one hand, the uproar might prove a cure for corruption, which everyone had thought incurable. On the other hand, with nearly everyone having bought a cheap flat at least once — or having under-declared property — who would venture into politics and risk exposure?

 

Will this scandal be the house-cleaning that Bulgarian politics needs? Perhaps, in a limited way. It will certainly encourage Bulgarian politicians not to engage in corrupt practices where nosy neighbors can see — and judge.

Boyko Vassilev
 is a moderator and producer of the weekly Panorama news talk show on Bulgarian National Television.
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