BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 5 – 12 JUNE 2009 )
Sections/headline briefs:
MACROECONOMY:
· Korean firms hunt for Bulgarian partners
· Bulgaria-Italy bilateral trade topped three billion euro in 2008
· Bulgaria registers export collapse of 27%
· Bulgaria’s heavy truck market slides 80% Y/Y Jan-May
· Lyulin Motorway to be completed by 2012
· The Bulgarian authorities paid €2.1 M for external audit on the EU funds
· Rose oil price drops
· Winter wheat crop expected to be smaller than last year’s
· Bulgaria and Spain to cooperate in ICT
· Bulgaria new car sales keep 50% slide in January-May 2009
· Bulgaria is in recession
· Bulgaria "trapped" with currency pegs at over-valued rates
INVESTMENTS:
· German investors lured by Bulgaria's business climate
· GERB leader Borisov Vows to create best Conditions for Foreign Investors
· Intersnack sticks to crisps project
· Asarel Medet opens waste treatment unit
· Bulgaria among the countries with greatest drop down of FDI
COMPANIES:
· Bulgaria's Trace Group Hold wins €1 M sewerage system contract
· State saves Bulgaria railroads company from bankruptcy
· Greek entrepreneur announces Bulgaria coffee shop plans
· Two Bulgarian companies in Hewitt ranking
GLOBAL FINANCIAL CRISIS ANALYSIS AND NEWS:
· No-Crisis Dimension
· ECB fears new banking crisis
Articles:
MACROECONOMY:
Korean firms hunt for Bulgarian partners
Korean machine building companies will meet up with Bulgarian peers on June 11 in Sofia, hoping to ink distribution contracts and explore opportunities for joint industrial projects. Korea Trade-Investment Promotion Agency has invited ten Korean firms, which specialise in the manufacture of car parts as well as agriculture and auto equipment. Viewed by most Korean entrepreneurs as a gate to the European Union, Bulgaria welcomes around ten delegations from the Asian country each year. This month’s get-together will be attended by Bulgarian firms including agricultural machinery maker Agromachina, metal company Beta Industries, forklift truck manufacturer Balkancar Record, Agrostil and Metalagro.
Bulgaria-Italy bilateral trade topped three billion euro in 2008
Trade between Italy and Bulgaria topped three billion euro in 2008. Among the European Union member states, Italy is one of Bulgaria’s biggest trade partners after Germany, with a trade surplus of almost 700 million euro.Italy is also one of the biggest investors in Bulgaria. According to official statistics, Italian foreign direct investment (FDI) in Bulgaria was 995 million euro in 1996/2007 and preliminary data put FDI at 97 million euro in 2008. Big and well-established conglomerates have invested in strategic sectors, joined by small and medium-sized enterprises, who have made use of market opportunities in the industrial and agricultural sectors, as well as the fair and exhibitions industry in Plovdiv.According to data from the Sofia office of Italy’s national institute for foreign trade ICE, there are about 1000 Italian companies operating in Bulgaria and another 2500 joint ventures. The fact that Italy was chosen as the partner country of the Plovdiv International Fair in 2008, just three years after its previous designation as such, is further proof of the close economic and trade ties between the two countries.Italian firms can count not just on the support of the Italian embassy and the Sofia office of the ICE, but also institutions like the Italian Chamber of Commerce in Bulgaria, which is fully recognised by the Italian foreign trade ministry, the Consultive Committee of Italian Entrepreneurs in Bulgaria, the very active representation of the Emilia-Romagna region, the Foreign Centre of the Joint Piemonte Chambers of Commerce and Casa Sicilia Bulgaria.
Bulgaria registers export collapse of 27%
In the first trimester of 2009, Bulgaria's export went down by 26,8% and reached 5.221 billion levs (1euro=1.95levs), announced sources from the National Statistical Institute.
The abrupt export drop is the immediate result from the world economic crisis and the lower demand for Bulgarian goods abroad.The country's import is dropping even faster: by some 30%: together with transport fees and insurance taxes it stands at a total of 7.8 billion levs.The state's commercial deficit amounts to 2.6 billion levs which is by 35% less than it was in the corresponding period of 2008. However, there is a positive trend, too: Bulgaria has increased the export of foods, beverages and tobacco by 35%; the sum stood at 742 million levs in the last trimester of 2009, announced investor.bg.The import of the above-mentioned products has increased by 6.37% thus reaching 758 million levs.
Bulgaria’s heavy truck market slides 80% Y/Y Jan-May
Sales of trucks of over 18 tonnes in Bulgaria plummeted by almost 80% in the five months through May compared with the same period of 2008, said Stoyan Zhelev, chairman of the Association of Car Manufacturers and their Authorized Representatives for Bulgaria (ACM). Light vehicles and trucks of 7.5-18 tonnes suffered a decline of 65%, whereas car sales dropped by an average of 45%, placing Bulgaria in the golden mean among other European markets. Zhelev explained the main stumbling block for the Bulgarian car market is the lack of any fleet policy, saying that Bulgaria is the only European country to have adopted no environmental standards for imported second-hand vehicles. He noted that the industry association has proposed a set of legislative measures to all Cabinets but they have all fallen on deaf ears. Zhelev ruled out the introduction of financial aid to encourage the replacement of old cars with new as Bulgaria is not a manufacturer, but said it is high time the country extended value-added tax (VAT) to all company cars. The tax is currently being imposed exclusively on 1+1 and 6+1 seat vehicles. ACM data released yesterday showed that dealers sold 12,432 new cars, lorries, buses and motorcycles, which is twice fewer than the numbers for the corresponding period of last year. Deals struck in May diminished to 2,448 from 2,795 in April and 2,545 in March, with the many bank holidays contributing to much of the slowdown. January and February were the slackest months, generating respective sales of 2,300 and 2,345 units. Toyota cemented its lead as the best-selling car make with 1,432 units, or 10.73% of the market. The runner-up was Volkswagen, followed by Peugeot.
Lyulin Motorway to be completed by 2012
The European Commission expects the Lyulin Motorway to be completed in 2011-2012 at the present pace of construction, said Carsten Rasmussen, Bulgaria Unit deputy head at the Directorate General for Regional Policy. He was quoted by the press office of the National Road Infrastructure Agency (NRIA).Rasmussen and the NRIA management participated in the fifth meeting of the committee for monitoring and control of projects implemented with Cohesion Fund financing in Varna on June 4-5. NRIA Executive Director Yanko Yankov said he was confident that despite the delay, judging from the work accomplished in the last six months construction would be completed according to schedule. Yankov said construction would accelerate in the next 14 months.The Agency said some 1,000 people were working round the clock at the site, which is five times more than last year. Although payments under the ISPA Program were suspended for a while, Bulgaria managed to finance the construction project with public money, Yankov said. The contractor has been paid for all the work done, he added. The money will be refunded from 115 million euro available under the ISPA Program, which the European Commission blocked last year and decided to release again in May.
The Bulgarian authorities paid €2.1 M for external audit on the EU funds
2 124 442 euro are paid to external audit companies for the European funds, announced for Darik the ministry of finance. The audit companies with which the ministry has signed contracts are: “Grant Tornton” LTD, “KPMG Bulgaria” LTD, “Ernst & Young Audit” LTD, “Delloit Audit” LTD and “Pricewaterhouse Coopers Audit” LTD.The companies have made check of projects funded with European money in the period 2007-2009. The financial ministry reminds that the audits were done in relation to the implementation of the obligations of Bulgaria for control over the acquisition of the European funds.In the end of May the deputy prime minister on the acquisition of the European funds Meglena Plugchieva claimed that the government has spent “huge amount” of money for external audits, part of which overlap. Last year after the audits of “KPMG Bulgaria” LTD ten projects worth 88 million euro were stopped in the “Road infrastructure fund”. The company made also many check on the pre-accession programs PHARE and ISPA.
Rose oil price drops
Rose oil producers from the Kazanlak region in Bulgaria hope to produce some 2.5 tons of rose oil this year. In the opinion of Prof. Nedkov, director of the Bulgarian Research Institute for Roses, the price will be EUR 4,500 per kilogram, cheaper than the last year when the price reached EUR 5,000. The campaign for gathering the rose flowers is expected to finish by the end of this week.
Winter wheat crop expected to be smaller than last year’s
Up to now it is expected that the winter wheat crop will be smaller than last year’s, Steliyan Stoyanov, chairman of the Association of Bulgarian Grain Producers, said in an interview with FOCUS News Agency. The reason is the smaller amount of moisture preserved in the winter and spring. The productive moisture is less and rainfalls that have economic significance are not sufficient. In sum, the drought will have effects, he said.
Bulgaria and Spain to cooperate in ICT
The State Agency for Information Technologies and Communications (SAITC) and the government of the Spanish region of Extramadura signed a protocol of intent in Sofia on Tuesday, the SAITC press centre said. The document was signed at the opening of a two-day meeting of senior officials of the Extramadura government, SAITC, Spanish and Bulgarian representatives of the sector of information and communication technologies. The industry-wide structures: of Bulgaria, BAIT, ASTEL, BASKOM and ICT Cluster, and of Spain, ICT Cluster and the Federation of Associations of IT Companies of Extramadura, also signed a protocol of cooperation. The forum entails big potential both for the Bulgarian and the Spanish participants due to numerous similarities between Bulgaria and Extramadura in economic, technological and social terms, SAITC President Plamen Vachkov said at the opening. Maria Dolores Aguilar Secoe, Second vice president in the government of Ekstramadura and regional minister of economy, trade and innovations, said that after Spain's accession to the EU Extramadura has turned from a poor into a developed region thanks to the information technologies. Teodor Zahov, Chairman of the SAITC Governing Board, said that the Bulgarian companies should get familiarized with the experience of the Spanish business in the absorption of EU funds.Tuesday and Wednesday the sides will exchange experience in the introducing of e-government, management of EU funds, e-healthcare and the usage of ICT in education.
Bulgaria new car sales keep 50% slide in January-May 2009
New car sales dwindled around 50% year-on-year in the five months through May or as much as they shed in January to April 2009, showed data by the industry association. Dealers sold 12,432 new cars, trucks and buses in January to May 2009 or 50.32% less than in the same period of 2008. New car sales dipped 48.54% on the year to 11,968 units in the first five months of the year as truck and bus sales plummeted by 73.68% for the period. Japanese Toyota was the top-selling car make with 1,432 units sold in the five months, followed by German Volkswagen with 1,284 units and French Peugeot with 1,076 units. Ford, Citroen and Opel came fourth, fifth and sixth with respective sales of 1,040, 1,002 and 963 units in January to May 2009. Skoda, Dacia and Chevrolet held their ground amidst the stagnant market, selling 706, 589 and 490 units, respectively. New truck and bus sales totalled 464 for the first five months of 2009, with Mercedes at the top with 187 trucks, followed by Iveco (125) and MAN (62). Motorcycle sales were the least affected by the ongoing crisis dropping only 22% to 199 units.
Bulgaria is in recession
Bulgaria’s gross domestic product marks downturn with 3.5% in the first quarter of this year compared to the same period of 2008, show preliminary data from the national statistics.In the first quarter of this year the economy has shrank with 5% compared to the previous three months. According to the statistical data this is the second successive quarter in which the GDP marks a downturn compared to the previous three months, which means that Bulgaria can be defined as being in recession.The GDP of the country for the first quarter of 2009 is 13 961 100 000 BGN according to current prices.The created by the economic sectors gross added value accounts for 11 606 800 000 BGN according to current prices. Re-calculated in comparable prices the added value reduces with 2.8 % compared to the respective period in the previous year.The industrial sector reduces its relative share in the added value of the economy compared to the first quarter of 2008 and reaches 31.1% in the first quarter of 2009.The relative share of the added value, realized from activities in the field of services is 64.9%, which is with 1.7% points more than the respective period in 2008.The relative share of the agricultural sector in the added value of the economy decreases with 0.7% points and reaches 4% in the first quarter of 2009.The changes in the structural shares are determined by the actual increase of the added value of the service sector 2.5%, while the added value, created by the industrial and agricultural sectors marks a downturn respectively with 12.4% and 4.8% compared to the same quarter in 2008.81.7% of the produced GDP has been spent for individual consumption in the first quarter of 2009.The actual reduction is 6% compared to the respective quarter of 2008. The index of the physical volume of the investments 85.9% determines a relative share of this category from 25.9% of the produced GDP.The external balance of goods and services is negative. The import of goods and services surpasses with 2382 million BGN the value volume of the export. For this period the volume of the external turnover has decreased with 21%. The export of goods and services has decreased with 17.4% while the reduction in the import of goods and services compared to the respective quarter in 2008 is 21.1%.
Bulgaria "trapped" with currency pegs at over-valued rates
Bulgaria, together with Latvia, Estonia and Lithuania, are trapped with currency pegs at over-valued rates, implying harsh deflation, the Daily Telegraph wrote in an article about the global recession."There is a limit as to how much pain can be borne in democracies," said Edward Parker, Fitch's head of emerging Europe, who spoke at a Fitch Ratings conference on Eastern Europe.According to him there is no quick fix for Eastern Europe."It is going to be even more difficult for them to export their way out of trouble than it was for East Asia in the 1998 crisis," said Parker.The article points out that the European Central Bank is paying close attention to mounting difficulties at 25 banks deemed crucial to the health of the eurozone financial system, fearing another wave of bank turmoil next year if the recession drags on."The banks are strong enough to weather the current downturn so long as there is a rapid "V-shaped" recovery but not if it takes longer to refloat the economy," said Dejan Krusec, the ECB's financial stability expert."If this is 'U-shaped', the banks will have problems. There are 25 banks we monitor that are strategically important," he said.According to Krusec the problem is not 2009."Euro-area banks are well enough capitalised to cover losses. The problem is 2010. We are concerned about the length (of recession)."The ECB has slashed its forecasts, predicting a 4.6 % contraction this year and a further fall of 0.3 % next year, with no recovery until mid-2010. This precludes any chance of a V-shaped rebound.
INVESTMENTS:
German investors lured by Bulgaria's business climate
"The German Investors may find a good market niche if they get involved in the infrastructure and environment projects yet to be implemented," Bulgaria's Deputy Prime Minister in charge of EU funds absorption Meglena Plugchieva said at a meeting with the German-Bulgarian Trade and Industrial Chamber. "Moreover, the German companies may even apply for EU funds if registered in Bulgaria," Plugchieva added. Bulgaria's Minister of Economy and Energy Petar Dimitrov, who was among the guests, clarified that the commodities exchange between Bulgaria and Germany reached 4 billion euros in 2008. Unfortunately, in the first quarter of this year the German investments shrunk by 100 million euros, the exchange of commodities between Bulgaria and Germany dropped by 21,6 percent, the export to Germany dwindled by 12 percent along with the import, which also lost 23,5 percent of its size.The Chair to the chamber of German investors for Eastern and Central Europe commented on behalf of 80 percent of German investors in Bulgaria, that they were satisfied with the business climate in Bulgaria and would reinvest.
GERB leader Borisov Vows to create best Conditions for Foreign Investors
Sofia Mayor and GERB party leader, Boyko Borisov, has vowed that a potential GERB government would create maximum good conditions for foreign investors.In an interview for Novinite.com, Borisov used the opportunity to address foreign investors stating they were welcome to invest in Bulgaria, and that his party GERB would do its best to secure favorable conditions for them if it formed Bulgaria's next government after the Parliamentary Elections in July."Now is the time to invest", Borisov declared pointing to agriculture, business entrepreneurship, and high-tech industries as GERB's priorities in the economic sphere on which the party would concentrate to combat the effects of the financial crisis.The Sofia Mayor pointed out that while there have been massive investments in Bulgaria, and especially in Sofia in the recent years, most of them had been in real estate, and few had been in high-tech parks and plants.A milestone of Borisov's economic program is the destroying of unfair competition but combating contraband. According to the Sofia Mayor and former Interior Ministry Secretary, more than 50% of all foreign goods in Bulgaria were smuggled.
Intersnack sticks to crisps project
Inersnack Bulgaria, a subsidiary of Germany’s leading manufacturer of salted crisps and snacks, will go ahead with its plans to build a crisps factory in the western town of Ihtiman in the face of the economic downturn and the shrinking markets. The EUR 8.3 million project is scheduled for completion in 2010, said Inersnack Bulgaria financial director Yuliana Nikolova. one of the first market players to source its raw materials almost exclusively from domestic producers, Inersnack Bulgaria has recorded a 10-15% rise in its output over the past years. The company has contracts with hundreds of farmers, providing seeds and fertilisers from this year. At the same time, Bulgaria’s potato production took a slide due to low selling prices. Annual output totals 300,000 tonnes, which is marketed at BGN 0.30-0.90 per kilogram.
Asarel Medet opens waste treatment unit
Bulgarian open pit copper miner Asarel Medet completed the installation of a waste water treatment facility. An antiseep screen and a gravity pipeline have been put in place to carry drainage water to the western part of an embankment at the site of the Panagyurishte-based company. The project swallowed BGN 1.366 million.
Bulgaria among the countries with greatest drop down of FDI
Bulgaria is among the countries with greatest drop down of the foreign direct investments (FDI) in Eastern Europe. This shows a report of the Vienna institute for comparative economic analyses (WIIW), cited by AFP and BGNES.The foreign direct investments in Eastern Europe have decreased with over 50% this year because of the world economic crisis. Their volume will probably melt to 20 billion euro in the ten newly accepted EU member state compared to 44.86 billion in 2008, show data from the institute, which marks that in separate countries the investments have decreased from 20 to 80% in the first quarter.The FDI have already dropped down with 9% in 2008 after they were growing gradually in the last years. The foreign investments have decreased at the most in countries like Poland, Bulgaria and the Baltic countries, while in Romania and Slovenia they mark some growth.In 2009 the foreign investments should be concentrated on smaller and target projects, mainly in the field of services and renewable energy sources at the expense of the big industrial projects and the bank sector, believes the WIIW.
COMPANIES:
Bulgaria's Trace Group Hold wins €1 M sewerage system contract
Bulgarian construction firm Trace Group Hold said on Monday it has won a 2.0 million lev ($1.4 million/1.0 million euro) contract to build a sewerage system in the city of Asenovgrad, in southern Bulgaria. The construction works should be completed in 268 days, the company said in a statement. Trace Group completed sewerage and water system projects worth a combined 6.7 million levs last year, it added. Shares in Trace fell 2.09% to 48.71 levs on the Bulgarian Stock Exchange on 8th June. The statement was released after the end of the trading session.
State saves Bulgaria railroads company from bankruptcy
The state will return immediately part of the tax credit it owes to the Bulgarian State Railroad (BDZ)company to save it from inevitable bankruptcy.This was announced Friday by the Transport Minister, Petar Mutafchiev, in an interview for the Novinar Daily.During the next week the company must pay loans of BGN 26 M to large western financial institutions.Nearly BGN 20 M must be paid to the German KfW Bankengruppe, which financed the delivery of the new Siemens trains.Another BGN 6 M the railroad company must transfer to the World Bank on a loan financing the scheme of arrangement from 1995.In the syndicates opinion, there is a possibility that salaries may be delayed (BGN 15 M a month), and BDZ remains with no money for exploitation expenses.The syndicates are worried that this may lead to bankruptcy.
Greek entrepreneur announces Bulgaria coffee shop plans
Greek entrepreneur Vassilis Mouchtaris has announced plans to open 30 coffee shops and develop shopping centres across Bulgaria by 2012, as part of his business expansion plans.The outlets will be developed through Mouchtaris' local firms Welcome Holdings and Vita Mi Holdings, kamcity.com reported Monday.Welcome Holdings will develop coffee shops both under its own brand and as a franchisee of Canadian chain Coffee Time, which operates 450 outlets across the world. The 30 outlets are expected to generate sales of EUR 8-10 M in three years.The first two outlets will be opened in the city of Varna in summer 2010, with another three-four outlets to open there later, followed by 10 outlets in the capital Sofia.Mouchtaris added that he plans to use the Bulgarian chain of coffee shops as a springboard to enter the neighbouring Turkish market.Meanwhile, Vita Mi Holdings plans to develop at least three shopping centres with a gross leasable area of at least 55 000 sq.m. each. The firm is currently in talks to buy four to six hectares of land in Sofia where it plans to build its first shopping centre.
Two Bulgarian companies in Hewitt ranking
Two Bulgarian companies have been included in the Hewitt ranking for the best employers in Central and Eastern Europe for 2008/2009. They are Avendi (a company of VM Finance Group) and McDonalds Bulgaria. Some 160,000 employees and 4,000 top managers from 11 countries in the region took part in the research of Hewitt Associates international human resources company. Ten companies ranked as The Best Employer in at least three countries at the same time.
GLOBAL FINANCIAL CRISIS ANALYSIS AND NEWS:
No-Crisis Dimension
Author: Georgi Choranov, www.novinite.com
As we all can see, there is a global financial crisis going on here. Not a usual period of recession. It is something bigger. Annalysts have started arguing whether the decline is over, and a recovery has started, or the worst is still to come.The important thing here is that many people have lost their jobs, homes, dreams.And still, there is a country where all this does not exist. Or at least it seems so. Or someone is trying to make us think there is no problem at all.Bulgaria is in a no-crisis dimension. Well, I may be wrong, but our government thinks so. It acts as there is no such thing like a financial crisis.In the beginning, there was the Silence. The Bulgarian government was simply denying the existence of a crisis in Bulgaria eight or nine months ago. It was self-confident, and I cannot deny its motives.In the last quarter of 2008 it turned out there would be quite an impressive budget surplus. While other countries, not only in the EU, where preparing for severe financial damages, and were trying to reconsider and recalculate 2009 budgets, the Bulgarian government passed a quite optimistic budget.The only anti-crisis measure it was foreseeing was a 10% buffer, which would be activated when things became tough. They already did, by the way.In the beginning of 2009 the government started realizing that Bulgaria is not situated on the Moon, but in Europe, and we cannot get away from the already worldwide spreading financial crisis. It silently commented on the negative research results, and warning from international authorities, that the effects of the recession will come in Bulgaria, sooner or later. Still, no actions.The Prime Minister was assuring us there was nothing to worry about. What a coincidence. People, who lived through Communism, may be remember that the regime denied accepting the existence of an inflation rate. It just could not affect the strong Communist economy. After the fall of the Red regime, all Bulgarians had the honor to meet a thing, called hyperinflation - inflation's bigger brother. Enough history.The government did almost nothing. For example, the Baltic countries were severely affected by the crisis. They recalculated their budgets, and significantly reduced expenses.The Bulgarian government simply announced that it salaries in the administration would not be raised. on the contrary pensions were raised. With all my respect to elderly people, this did not seem like a part of an anti-crisis policy. Not at all.A month ago the Financial Minister, and the Prime Minister wanted everybody to here that Bulgaria did not need any financial help from international organizations (they meant the International Monetary Fund; EU fund are also international help and the government is desperate to access them). In their words, Bulgaria could rely on its own budget surplus.Now I ask, where is the surplus, gentlemen? It simply vanished, who knows where. Elections are coming. Commercials are expensive, especially prime time TV ones. Bulgarian citizens are not stupid. There are rumors that votes cost over BGN 100. This is expensive, too.The government not only did not reduce budget expenses, even worse. It increased them. And the picture is further filled by the dramatic decrease in the budget incomes. The first that people and companies stop paying in a time of crisis are taxes. Incomes in the national health system went drastically down. All companies delay paying Value Added Tax-VAT, budget's biggest income.It seems funny, but the government cannot do anything about it. It forgot to develop a working system to collect taxes. The authorities, responsible for that were too busy in the last few years to drain VAT money. Now, there is a state, which cannot collect what belongs to it.Annalysts predict that the budget surplus will be sufficient until mid 2009. What happens after that? Well, they also predict 1 % budget deficit. That is what is going to happen. The government started optimistic and... Oh, yes, who knows, probably it will not be the next government. What does it care for those who will have to deal with the ruined budget? And if it rules again... "Well, we are in a global financial crisis you know! Everything happens", it will say.The government did nothing to protect the nation from the negative effects of the global financial crisis. Even worse, it made everything possible to push us towards the edge. And beyond the edge is an abyss of international loans, and declining economy.Not so bright future, is it?The government did one thing. Actually, it only tried to. It so desperately tried to convince us that we live in a no-crisis dimension.Sleep, my children, and dream! Dream of a no-crisis dimension!Dear, government. The noise of you falling into the abyss of your lies just has woken us up.We are no longer in the no-crisis dimension. We have a crisis to deal with!
ECB fears new banking crisis
A new banking crisis may be a fact in 2010 in case the recession persists, European Central Bank's financial stability expert Dejan Kusec told the Daily Telegraph. Officially, Bulgaria is now in step with the rest of Europe as it turned out to have lost 1.6 percent of GDP in the last quarter of 2008, and another 5 percent in the first quarter of 2009. The improvement of the Bulgarian economy depends largely on how fast the rest of EU recovers as 60 percent of Bulgaria's foreign trade is with the EU member states. Krusec said the banks are strong enough to weather the current downturn so long as there is a rapid "V-shaped" recovery but not if it takes longer to refloat the economy. "If this is 'U-shaped', the banks will have problems. There are 25 banks we monitor that are strategically important," he told a Fitch Ratings conference on Eastern Europe. "The problem is not 2009. Euro-area banks are well enough capitalised to cover losses. The problem is 2010. We are concerned about the length of recession," Krusec said.