Our correspondent Andreas Frank writes: If anybody still had doubts that the European Union gets undermined by organized crime – here is more evidence.
On 29 June 2014, Bulgaria asked the Commission to authorise the provision of a credit line of 3.3 bn BGN ($2.3bn) to be provided by Bulgaria to the banking system in order to respond to speculative attacks that occurred over the past week.
With EU’s support, the Bulgarian National Bank overcame a run on deposits caused by an “organized criminal attack” against several banks, it said in a statement.
Earlier, queues formed outside some Sofia branches of First Investment Bank AD, which paid 800 million lev to clients on June 27. Bulgaria asked the European Commission to support the credit line a week after the central bank put fourth-largest Corporate Commercial Bank AD under administration after a big depositor withdrew funds.
“Last week, it transpired that certain individuals have been targeting the third-largest bank, urging customers to withdraw their deposits,” the European Commission said in an e-mailed statement. “This created concerns about the liquidity of the bank in question and risked spilling over to some other institutions, despite the fact that the Bulgarian banking system is well capitalized and has high levels of liquidity.”
Bulgaria’s ruling Socialists are under pressure to resign following a poor showing in European Parliament elections on May 25. The government, which took office a year ago, is fighting to keep the banking system stable as opposition politicians say the current leadership has brought the country to the brink of ruin. President Rosen Plevneliev called early elections yesterday for Oct. 5 and will dissolve Parliament Aug. 6.
The country of 7.5 million, which is the European Union’s poorest state by economic output per capita, joined the 28-nation bloc in 2007 along with neighboring Romania. The EU has repeatedly criticized both countries for failing to curb corruption among senior government officials and sever their links with organized crime.
The banking crisis has stoked tensions on the political scene. Speaking on National Television on June 28, Finance Minister Petar Chobanov accused former prime minister and opposition Gerb party leader Boiko Borissov of causing “panic” by making “uncontrollable and incompetent statements on such sensitive subjects as the financial security.”
Chobanov was responding to a statement made by Borissov, who was toppled from power by street protests 14 months ago, in a June 28 television interview that Bulgaria’s “finances and bank system are in a catastrophic state as a result of this government’s rule.”
While the credit line “should stabilize the situation in the short run,” questions remain over political stability, Peter Attard Montalto, an emerging-market economist at Nomura Holdings Plc, said by e-mail today.
The central bank said it will use cash from the Bulgarian Development Bank and the Deposit Guarantee Fund, both state-owned, to recapitalize Corporate Bank. Corporate Bank and FIB account for 18.5 percent of assets held by lenders, according to the central bank.
EU PressRelease
BNB PressRelease
