Bulgaria to decide on Corpbank in mid-October – President
By Matthias Williams and Tsvetelia Tsolova
SOFIA (Reuters) – Bulgarian authorities will take a decision on what to do with Corporate Commercial Bank (Corpbank) only after the results of an audit are known around mid-October, President Rosen Plevneliev said on Tuesday.
The fate of Bulgaria’s fourth-largest lender has been in limbo as efforts to rescue the bank were scuttled by the outgoing parliament, dragging out the Balkan state’s worst banking crisis since the 1990s. Authorities have estimated the cost of a possible state rescue at around 1.5-2.0 billion levs ($1.0-1.4 billion).
Plevneliev named a caretaker government on Tuesday to govern until elections on Oct. 5, and is due to dissolve parliament on Wednesday, following the resignation of the Socialist-led coalition in late July.
In a wide-ranging interview in his office, Plevneliev, 50, said his interim government would push for Bulgarian banks to be put under European supervision, and would set a process in motion to enable Bulgaria to join the euro zone by 2020.
The president said the central bank could take a decision in October on whether to stabilise the bank or let it collapse, and how far to protect depositors, and promised his administration would fully support the central bank’s efforts.
“There is an international, an internal audit going on, from widely respected international and Bulgarian auditing companies,” Plevneliev said.
“For the moment, no politician and no government can do anything but just wait to see the numbers.”
“BE PATIENT”
The central bank seized control of Corpbank after a week-long run on deposits in June, shut down its operations and ordered an audit of its books. As panic spread and a run started on another lender, the outgoing government also freed up an emergency credit line to support the financial system.
A dollar-denominated bond by Corpbank matures on Aug. 8 and, in the absence of a rescue, is likely to default. Some of the bondholders may take legal action against the government if Corpbank is tipped into insolvency and they are not repaid.
Plevneliev called for the bondholders to be “patient” while the audit continued.
The crisis has drawn renewed attention to the investment climate in Bulgaria, after Standard & Poor’s in June downgraded its sovereign credit rating to one notch above junk, citing continuing political instability.
Plevneliev said Corpbank was a “special case” and that, overall, Bulgarian banks were very stable and liquid. He also emphasised that Bulgaria successfully launched a 1.5 billion euro sovereign bond in June, despite the bank run.
On Monday, the outgoing lawmakers refused to approve a proposal to widen the fiscal deficit and raise new debt, narrowing the scope of the interim government to take decisions.
Plevneliev said it would nevertheless propose to raise the fiscal deficit to just under 3 percent from a planned 1.8 percent, although this would need the endorsement of the next government and parliament.
EU MONEY ON HOLD
He said he wanted some of the extra income to go towards paying workers at construction projects such as highways and railways, which slowed or stalled under the previous government.
Bulgaria has only until 2015 to claim some 3 billion euros from the EU to support such projects.
Plevneliev pledged that his interim government would use the powers it has to slash spending by about 100 million euros ($133 million) in order to free up money to pay fines to Brussels, which would then unfreeze a separate pot of EU development funds worth about 2 billion euros.
After October’s election, Bulgaria will have its fifth government in two years, and Plevneliev urged political parties to rise above short-term point scoring.
“Today’s problems in Bulgaria are very different sometimes from the problems of the Bulgarian political parties,” he said. “And that was my appeal: Please stop your partisan games, look at the problems of your nation, of your people.”
He also said the interim government would re-nominate Kristalina Georgieva, currently the EU Humanitarian Affairs Commissioner, to serve in the next European Commission, and propose that she be named the EU’s foreign policy chief.
He said his government would push a project to connect Bulgaria’s natural gas network to Greece, but added that the proposed construction of the Russian-led South Stream pipeline would remain on hold until approved by Brussels.
(Editing by Kevin Liffey)
