Controversy surrounds a decision by the municipal council in Bulgaria’s city of Plovdiv to mandate negotiations with the European Investment Bank for a credit line of 120 million leva (about 60 million euro).
The mandate was given at a city council meeting on December 28, with councillors voting 30 in favour and 16 against, with two abstentions.
Zdravko Dimitrov, elected mayor of Plovdiv in November 2019 on the ticket of Prime Minister Boiko Borissov’s centre-right GERB party and who has championed the proposed borrowing, told the city council meeting that negotiations with the EIB on the loan would take about six months.
“The conditions for the proposed credit line from the EIB are less than one per cent interest, no repayment fee, no upfront fees, a seven year grace period and a 24-year repayment period,” Dimitrov said.
He said that the loan would not result in increases in municipal taxes.
Key points in the controversy are whether Plovdiv can afford the loan and precisely what the city’s managers will use the money for.
Dimitrov said that if a contract is concluded with the EIB, there would be public consultations before the administration decides which projects would be implemented first using the funds from the credit line.
“I have heard many speeches from different people. How many of these people have owned businesses, borrowed and paid loans, paid salaries? When did they become so competent?” he said.
“If you want – we will not draw a loan, let’s be lethargic and all that. No decision will be made forcibly. We decide everything together. Europe gives cheap money and if we want, we will take it, if we do not want it, we won’t,” Dimitrov said.
Vesselina Alexandrova, a city councillor for Democratic Bulgaria, said that the group opposed the mandate to negotiate the loan because insufficient arguments had been advanced for the borrowing.
“Hurrying is unacceptable. We are not aware of the financial status of the municipality. There is nothing urgent, withdraw your proposal,” Alexandrova said.
A proposal by the opposition Bulgarian Socialist Party group to hold a referendum in Plovdiv on whether to take the loan was rejected.
Nikolai Radev of the BSP said that with the repayment term of close to a quarter of a century, “we are transferring this loan not to our children but to our grandchildren”.
“Show how this city will develop economically, so we know if it will be able to service a credit line of 120 million leva in the next quarter-century,” Radev said.
Dimcho Petrov of the ultra-nationalist VMRO asked what the real financial situation of Plovdiv municipality was, and asked if Borissov, as a friend of Plovdiv and of mayor Dimitrov, would help the city.
Kostadin Garov of the ultra-nationalist National Front for the Salvation of Bulgaria described the proposed loan negotiation as a “pleasantly packed holiday gift for Plovdiv citizens”.
The proposal was rather selfish, Garov said. “We will take out and spend this money and our grandchildren will pay it back,” he said. His proposed amendment, cutting the sum to 30 million leva, was rejected.
Iliya Kirchev – one of Plovdiv’s nine deputy mayors named by Dimitrov, in this case in charge of finance – said that the main idea of the loan was to provide the freedom to implement important projects in the city without increasing municipal taxes and fees.
“This loan is a guarantee that taxes will not be increased,” Kirchev said.
At a presentation earlier, Kirchev presented a list of 35 indicative projects, divided into four groups, that could be carried out using the money to be borrowed.
The first group includes projects in progress for which contracts have been concluded but no funding is provided. The second is projects in preparation for applying for funding from European programs. The third group includes projects that have been contracted and have already started. In the fourth group are large infrastructure sites for which there is currently no funding available.
Some Plovdiv media said that their own polling had shown that residents of the city opposed taking out the loan.
The plan to borrow was attacked by Slavcho Atanassov, the VMRO-NFSB mayoral candidate defeated at a second round by Dimitrov in the autumn 2019 elections.
“The truth is that this loan can only finance a few large city projects that are worth over 20 million leva. The condition that the EIB finances 50 per cent of the project immediately raises the question of where the other 50 per cent comes from,” Atanassov said.
“Currently, Plovdiv does not have its own funds for such sites and there is no fresh money, on the contrary, it is sunk in debt, which it has not had since the transition. As I said in the election campaign, for which I was attacked by the other candidates – Plovdiv is bankrupt, and unfortunately I was right,” he said.
“The reality is that the previous mayor, Mr (Ivan) Totev, left empty municipal coffers and many unresolved issues. The new mayor must tell this truth to the people of Plovdiv and warn them of the difficult times ahead,” Atanassov said.