BULGARIAN ECONOMIC TOP NEWS DIGEST
WEEKLY REPORT ( 17 – 24 JULY 2009 )
Sections/headline briefs:
MACROECONOMY:
· Moody's: Bulgaria's economy shrinks by 5%
· Solar systems to oust broadband in Bulgaria’s rural areas
· Bulgaria textile, clothes export expected to drop by 20%
· Bulgaria registers 7.6% drop in tourism
- Bulgaria Port Varna with 10% smaller freight traffic in H1 of 2009
· Merkel congratulates GERB's Borissov on mandate
· IMF can lift Bulgaria’s quota by USD 72 М
- Finance Minister nominee: Bulgaria has to cut BGN 2,5 B expenses
· Bulgaria GERB government may cancel Burgas-Alexandroupolis oil pipeline
· Economy ministry provides EUR 1.5 M for technology parks
INVESTMENTS:
· Direct foreign investments in construction, real estates down by 59%
· The Bulgarian-Belgian operation set to transform the region
· Yovkovtsi water firm to make power from waste
COMPANIES:
· India's Suzlon to supply Bulgarian firm with turbines
· Deal Watch: Advent in exclusive talks to buy Devin
· Sofia water utility owner revising Bulgarian operations
· Radomir Metal Industries to offload a further 100 staff
ANALYSIS:
· Economic crisis in the Balkans: The ticking bomb
Articles:
MACROECONOMY:
Moody's: Bulgaria's economy shrinks by 5%
International rating agency Moody's forecasts a 5% drop in Bulgaria's economy by the end of 2009. According to Moody's latest report, Bulgaria's nominal GDP will reach US$ 44 billion in 2009. The new prognoses of the agency read that Bulgaria will face more serious hardships in 2009 mainly due to the slump in the domestic demand whose boom is about to end. The shrinking of the country's GDP will be accompanied by a decrease in Bulgaria's export due to the collapse of Bulgaria's leading commercial partners in Europe. The tighter credit granting in Bulgaria will worsen the situation, according to Moody's. In the previous years the softer requirements for getting credits helped Bulgaria reach an accelerated economic growth. Despite that, Moody's specify that the economic drop in Bulgaria will be temporary and the levels of incomes will remain stable.Moody's gives a positive evaluation of the work of Bulgaria's former cabinet which accumulated budget surpluses in the last years. As a result of that, the decrease of the incomes in the budget sector can now be compensated, Moody's state. The agency forecasts a budget 2.7-percent deficit of the country's GDP, which is one of the lowest levels in the EU. At the same time, Moody's say there is a risk of a significant increase of Bulgaria's foreign debt.
Solar systems to oust broadband in Bulgaria’s rural areas
The additional EUR 33.5 million the European Commission granted to rural areas under the European Economic Recovery Plan will be ploughed into renewable energy development instead of broadband infrastructure.Approved budget funding brings the total to EUR 36.8 million by 2013, according to the proposal for allocation of the extra financial package sent by the Bulgarian farming ministry to Brussels. The proposal has been coordinated with the industry association, the ministry said.At the end of last year, the Council of Europe approved a package of just over EUR 1 billion of the European Agricultural Fund for Rural Development (EAFRD) that will be divvied up among member states to adjust their economies to the new conditions. Each member state had to identify its priorities in one of five areas including Internet broadband access, renewable energy investments, water resources management, preservation of biodiversity or dairy sector restructuring. Analyses by European experts singled out Bulgaria and Romania as the countries with the poorest fibre-optic infrastructure in rural areas. Teodor Zahov, chairman of the Society for Electronic Communications (SEC) and of the Bulgarian Association of Information Technologies (BAIT) and executive director of alternative Internet telecom Spectrum Net, said the industry was surprised by the farming ministry’s decision to allocate the money to clean energy projects given that the government has drawn up a special strategy to develop broadband Internet access. Ivaylo Todorov, chairman of the Bulgarian farming producers’ association, which made the proposal to invest the funding in renewable energy, said that the projects will be implemented quickly and will help Bulgaria derive 16% of its energy from sustainable sources by 2020, satisfying a commitment in its EU accession treaty.The association said that almost 300 solar, hydropower and biomass projects have already been prepared and are now pending regulatory approval.
Bulgaria textile, clothes export expected to drop by 20%
Bulgaria's export of textile products and clothes is expected to decline by 15%-20% in the fall of 2009 and the winter of 2010.This is the forecast of Valeria Jekova, Chair of the Bulgarian Association of Apparel and Textile Producers and Exporters (BAATPE). Most of the Bulgarian textile firms work for foreign contractors.Jekova said the textile producers would probably have to lay off workers in order to optimize their expenses. She believes that the companies in the sector generally manage to pay off regularly their loans but that the situation in the whole industry was rather grim.
Bulgaria registers 7.6% drop in tourism
Bulgaria has recorded a 7.6% drop in the number of tourists end-May, shows the data of the State Agency for Tourism (SAT). The decrease in the number of tourists from the EU is 5.2%. The revenues from tourism in the first five months of 2009 make 556,3 million euro or by 7.6% less compared to the same period of 2008. According to SAT, fewer tourists visited Bulgaria in June, too, but in July and August they expect a bigger number of foreign holidaymakers.
Bulgaria Port Varna with 10% smaller freight traffic in H1 of 2009
Bulgaria's port of Varna has 10% smaller freight traffic in the first half of 2009 compared to the same period of 2008.The data was announced Saturday by Danail Papazov, CEO of Port Varna, who said that the freight traffic till the end of June 2009 had been 3 million tons vs. 3,3 million tons in January-June 2008.However, Papazov also stressed that the decline was not that shocking given the raging global economic crisis.Port Varna's greatest decline in freight traffic has come from the factories in the nearby town of Devnya that produce cement and fertilizers as they had been forced to reduce their manufacturing activities. The Devnya factories have provided 50% smaller freight traffic.At the same time, the processing of freight loads containing equipment for wind power stations has registered an increase of 250%, apparently as a result of the many wind energy projects under way in Northeast Bulgaria.The greatest share of the freight volume that goes through Port Varna comes from grain and container trade. Yet, in the first half of 2009 the import and export of goods through container shipping declined by 14% compared to the same period of 2008.
Merkel congratulates GERB's Borissov on mandate
Angela Merkel, Federal Chancellor of Germany and leader of the ruling Christian Democratic Union (CSU), on Saturday congratulated GERB leader Boiko Borissov over the success of his party at the parliamentary elections and the mandate to form a government. This happened at the congress of the CSU's traditional coalition partner from Bavaria, the Christian Social Union (CSU), which Merkel attended.Besides Borissov, the Bulgarian delegation included GERB Chairman Tsvetan Tsvetanov and Roumyana Zheleva MEP, Deputy Chairman of the Group of the European People's Party (Christian Democrats) and European Democrats (EPP-ED) in the European Parliament."I would like to congratulate you on the indisputable victory at the elections for National Assembly and the mandate you have been given to form a government. As a future Prime Minister, you will have the vital task to pull your country out of the economic crisis," Merkel said. It is good news for the CDU that yet another centre-right party, which is a member of the EPP, will head a government in Europe, she said. In her words, this will help along the EPP initiative of promoting a social market economy in Bulgaria and in Europe, as well as the implementation of the relevant reforms, Merkel told Borissov at their meeting.Borissov familiarized Merkel with GERB's government programme and introduced Tsvetanov to her as the future interior minister. The German chancellor invited them to visit her the soonest possible after taking office.Borissov, Tsvetanov and Zheleva conferred with Gunther Beckstein, former interior minister and minister-president of Bavaria, the GERB press office told BTA.The sides reached agreement on a number of joint projects in security. The measures which GERB will take to fight corruption and guarantee the rule of law in Bulgaria were in the focus of the conference. Changes in the Interior Ministry system were also discussed.The GERB representatives met with Werner Langen, leader of the German delegation of the EPP in the European Parliament. The sides discussed the frozen EU funds and the possibility of Bulgaria getting EU money. Borissov, Tsvetanov and Zheleva stated the GERB government would work for regaining the confidence of Bulgaria's European partners, for transparent expenditure of EU funds and for eliminating corruption in the high echelons of power.The Bulgarian delegation had talks with Horst Seehofer, Minister-President of Bavaria and CSU Chairman, as well as with Bavarian Interior Minister Joachim Herrmann. Borissov and Herrmann discussed GERB's programme for security and the possibility of reducing trans-border crime. Herrmann if expected to visit Bulgaria shortly at Borissov's invitation.
IMF can lift Bulgaria’s quota by USD 72 М
Bulgaria’s quota in the International Monetary Fund (IMF) could be increased by USD 72.5 million to just over USD 1 billion if a proposal for a USD 250 billion Special Drawing Rights (SDRs) allocation gets members’ go-ahead in a vote scheduled for early August. The SDRs, an international reserve asset and the fund's internal unit of account, are disbursed in proportion to each member's IMF quota. The first step of the procedure was made on Monday, when the IMF’s Board of Governors approved the proposal. This means that Bulgaria will raise the cap of the financing it can tap from the fund to USD 12 billion. "The SDR allocation is a key part of the fund's response to the global crisis, offering significant support to its members in these difficult times," IMF managing director Dominique Strauss-Kahn told Reuters in a statement. Bulgaria has an IMF membership quota of SDR 640.2 million (almost USD 1 billion), which accounts for 0.29 percent of all SDRs. The SDRs are disbursed in proportion to each member's quota, which means that Bulgaria will receive USD 72.5 million. The proposal will be voted by member states on August 7. If if gets the green light, the new SDR allocation should be disbursed by August 25. The IMF soothed concerns in some countries that the allocation would fuel inflation, saying it only made 0.33% of GDP.
Finance Minister nominee: Bulgaria has to cut BGN 2,5 B expenses
The future Finance Minister in the GERB cabinet, Simeon Djankov, believes that Bulgaria needs to reduce its state expenditures by BGN 2,5 B as part of the modification of the state budget.In an interview for the 24 Chasa Daily, Djakov reveals that he had been meeting regularly with the outgoing Finance Minister Oresharski over the last 10 days in order to ease the transfer of power in the Ministry.Djankov, a former senior economist at the World Bank, declared that the aim of his new measures would be ending the year with a minimum budget surplus of 0,5%, and to gradually switch from cutting the expenditures to increasing the state revenue.On Monday, the outgoing Finance Minister Oresharski announced that Bulgaria concluded the first half of 2009 with a surplus of BGN 173 M on the consolidated state budget, down from BGN 675 M in January 2009.
Bulgaria GERB government may cancel Burgas-Alexandroupolis oil pipeline
Bulgaria's new government of the GERB party might be ready to call off the project for the construction of the Russian-sponsored Burgas-Alexandroupolis Oil Pipeline.This became clear from a statement of Rosen Plevneliev, the most likely Regional Development Minister in the future GERB cabinet."We have seen no reasonable grounds for the Burgas-Alexandroupolis project, and we have no intention to carry out projects that are ends in themselves", Plevneliev told the Bulgarian National Radio Tuesday morning.Upon winning the recent Parliamentary Elections, the GERB leader Borisov requested from the outgoing Minister of Energy and Economy Dimitrov that all work on the large-scale energy projects of the previous government be terminated.The Burgas-Alexandroupolis Oil Pipeline is supposed to transport Russian oil to Greece circumscribing the Bosphorus. The Bulgarian Black Sea municipalities of Burgas, Pomorie, and Sozopol have voted against the project in local referendums over environmental concerns.The share of the participants in the project is 51% for Russia, and 24,5% for each Bulgaria and Greece.
Economy ministry provides EUR 1.5 M for technology parks
The economy ministry has opened a procedure for projects for the construction of technology parks under operational programme competitiveness. Under the procedure BGN 2.9mn (EUR 1.5mn) will be provided as grants to successful project proposals. The newly established technology parks are to support the access of companies to knowledge and to stimulate the scientific research commercialisation. At the same time, the ministry has extended the procedure for proposing projects for the establishment of innovative enterprises under the same operational programme. The overall amount of the grants is BGN 27.2mn. The main objective of the procedure is to increase the number of newly created innovative companies and provide support for developing innovative products. No deadlines for application under the two procedures have been defined. The projects are to be realised with the financial support of the EU Structural Funds. The approved projects are to receive grants in the sequence of the application and until all available resources are spent.
INVESTMENTS:
Direct foreign investments in construction, real estates down by 59%
Direct foreign investments in construction and real estates in the first six months of the year amount to EUR 208,0 million that is a decrease by 59%, compared to the same period of 2008, when the result was EUR 511,2 million. The average decrease in sale prices of trade areas in Bulgaria over the first six months of 2009 is 6,71%, a report of Foros National Real Estate Company on the survey of trade areas in the first half of the year shows. The average drop in rents of trade facilities is 2009 is 18,03%. In 2009 two large shopping centers have opened – Mall Plovdiv (with a gross leasable area 20 000 of square meters) and Burgas Plaza (with a gross leasable area 26 000 of square meters) and the mentioned centers are the first malls in Burgas and Plovdiv. The average rate of the trade area’s profitability in Bulgaria is 10,86% and 9,58% in Sofia. By the end of June 2009, the ratio of trade area per 1000 people in Bulgaria raised to 31 square meters compared to 25 square meters as of the end of 2008. The new projects for malls from the beginning of 2009 are only three and it is not clear when or whether they would be realized. The trend for leaving trade facilities in main shopping streets in large towns, which appeared at the end of 2008, continues and, unlike previous years, there are already opportunities for buying such facilities. Over the first half if 2009, 35 433 purchases of real estates have been made, which is a drop by 37.27% compared to the same period in 2008, when 56 483 purchases have been made.
The Bulgarian-Belgian operation set to transform the region
In times of prevailing hardship, economic stagnation and austerity, the Fenix Invers project has shown how direct business relations between two countries, in this particular case, Bulgaria and Belgium, can be successful in the midst of adversity. The newly operational plant shows how during a global economic downturn, through production diversification and vanguard technology, workplaces can be created in the sector of green technology that boost local employment and the local economy as well as being full of potential for healthy domestic and international expansion.Fenix Invers OOD has inaugurated the first factory in Eastern Europe for the production of installations for waste water treatment, in the northern Bulgarian town of Lovetch.On June 5 2009, the new industrial environmental production plant was initiated, in the presence of Belgian ambassador Marc Michielsen, the director of the Bulgarian Investment Agency, Stoyan Stalev, and professor Krastyo Petkov, managing director of Best2Be - Bulgarian branch. The main investment in the project comes from Bulgarian firm Fenix Invers, based in Lovetch, with Mihail Mihailov as managing director, while Belgian company Bela Alfa Forum provided the consulting assistance, as well as facilitating the supply, transfer and installation of technical equipment in the factory.Concurrently, the Bulgarian–Belgian association Best2Be has granted its support for the establishment of bilateral partnerships between both countries, aiming to facilitate and boost mutual co-operation between industrial entrepreneurs from both countries. “The new high tech, state of the art production line will attain 'revolutionary measures' in the development and infrastructure of houses, small and medium-sized factories and rural villages,” according to an official company statement.Through purification installations the plant aims to provide for the needs of as many as 100 people. The standards and quality will be in full accord with the European directive for environmental protection and for the protection of rural areas which lack developed sewage and draining infrastructure. The system itself consists of three operational aspects: pre-treatment, treatment and post-treatment phases. In the first regard, crude purification treatment is conducted in a large reservoir of waste water, interspersed with special enzymes and anaerobic microorganisms, facilitating the decomposition of waste matter. The solution dissolving the waste substance consists entirely of homogenous elements, which, in turn, decompose easily at the end of the process. The second phase envisages purging in an oxygen enriched environment – accomplishing the dissipation of aerobic bacteria in the optimum manner possible. Lastly, the post-treatment process, conducted in a third reservoir, encompasses the complete extraction of all other “remaining and suspended matter”. The outcome is purified water which is safe for cleaning, washing and watering.The new plant will employ a permanent staff of 10 people, but “with logistical support and the affiliated marketing operation, staff will increase significantly,” Petkov says.Interest in the new environmental facilities currently emanates mainly from Bulgarian organisations – construction companies, architectural firms, municipalities, consulting firms and individuals. A marketing network, however, is being primed to allow for market expansion both in Bulgaria and neighbouring countries. “For the moment, the factory is sufficient to satisfy domestic demand in the Bulgarian market,” Petkov says. “Should we manage to establish a foothold in the Romanian, Turkish and western Balkan countries, we will contemplate an expansion of operational capacity.” A measure of more immediate strategy, however, anticipates Best2Be organising forums this autumn aimed at educating architects and consultants about the new technology and operational procedures.
Yovkovtsi water firm to make power from waste
Water utility Yovkovtsi, which operates the waste water treatment facility in Bulgaria’s northern municipalities of Gorna Oryahovitsa and Lyaskovets, has developed two co-generation units, each rated at 142 KW. The energy watchdog, the State Energy and Water Regulatory Commission (SEWRC), has already considered the company’s application to determine the tariffs at which it will supply electricity to E.ON Bulgaria, the local unit of the German mega-utility. It should come up with a decision at its Monday session. The two facilities now run at 50% of their nameplate capacity. The company’s chief energy expert, Danail Tsvetanov, said that they need 50 cubic metres of gas per hour to operate at 75% of their capacity, adding that the co-generation cost is factored in the proposed prices. The company uses the produced thermal energy to meet its own needs. Last year the local governments of Gorna Oryahovitsa and Lyaskovets transferred the management of the treatment plant to the water utility for a three-year period. The power produced from co-generated capacities comes with higher prices, which is based on 80% of the average selling price for power distributors. Yovkovtsi has request a tariff of BGN 132 per MWh. For comparison, power from small-scale hydropower plants of up to 10 MW is priced BGN 105 and wind power between BGN 172 and BGN 189. Solar power has the biggest price tag of BGN 755 to BGN 823 per MWh.
COMPANIES:
India's Suzlon to supply Bulgarian firm with turbines
Suzlon Energy, India's largest and world's sixth largest wind-energy provider, announced it has signed a deal with a Bulgarian firm to supply six turbines.Suzlon will supply the turbines to Technomash Bulgarian Industrial Group in the current fiscal year that began April 1, it said in a note to the Bombay Stock Exchange.Financial details of the contract were not immediately available.The project will come up in the province of Dobrich in North-East Bulgaria. The turbines will have a total capacity of 12.6 megawatts.Suzlon provides total solutions in wind power generation with cohesive integration of consultancy, design, manufacturing, installation, operation and maintenance services. Its products include the integrated service for the wind turbines and wind parks.
Deal Watch: Advent in exclusive talks to buy Devin
Global private equity fund Advent International has started exclusive talks with Soravia Group to acquire the controlling stake in Bulgarian water bottler Devin, reported the Deal Watch website, which examines M&A deals in emerging markets. The portal was the first to report about a possible change in ownership of the Bulgarian company. Devin executive director Tsvetan Lazhanski said he had no power to comment on the matter but reiterated the company’s confirmation that a sale is on the drawing board. Advent was also tight-lipped. According to the publication, Advent is negotiating to take over 82% of Devin, where Austria’s Soravia now holds 75.3%. The talks started on Monday following months of competition between prospective buyers, mostly financial investors. The parties have not yet signed an agreement or a preliminary accord but Deal Watch says the deal might fall through unless they agree on specific terms and conditions, prompting Devin to seek other investors. Private equity firms Argus Capital and Balkan Accession Fund are also tipped as possible suitors for the bottling company. Sources in the know told Dnevnik that the two have made it to the shortlist of prospective buyers, which contains a fourth, unnamed candidate, according to Deal Watch. Talks with Advent will continue over the next three weeks. Market insiders say the sellers have set a price tag of around eight times the company’s Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA), which is close to the company’s current share price of BGN 3 and makes around BGN 42 million for the majority stake. But the announcement of the sale at the end of May catapulted the company’s stocks by 15%. DealWatch said Soravia is seeking to offload its stake in a move to plug a yawning funding gap. In May the company confirmed reports that change of ownership is on the agenda but played down speculations that it was short of cash, explaining it was considering whether to retain its investment in the bottling company or focus exclusively on real estate. Soravia has poured over EUR 200 million into Bulgarian properties. Devin controls around 30% of the Bulgarian bottled water market, also distributing Granini fruit juices and nectars and Red Bull energy drink. Last year the company launched its own brand of fruit-flavoured carbonated water Devin Fresh. Devin booked a 6% year-on-year rise in sales to BGN 14 million in the first quarter but the profit slipped to BGN 193,000 from BGN 327,000 a year before.
Sofia water utility owner revising Bulgarian operations
British water company United Utilities is reviewing key divisions that could lead to the sale of assets worth more than GBP 800 million, The Independent reported. The list of assets that could go on the chopping board includes Sofia water utility Sofiyska Voda. The UK’s largest listed company plans to offload assets that are not regulated by local authorities and terminate a meter installation contract with British Gas Trading, a water facilities upgrading contract in Townsville, Australia, and discontinue operations in Bulgaria, Estonia, Poland, and the Philippines. "There could be a sale process as early as September, with the assets fetching more than GBP 800 million. But the business is patchy, with many different contracts in different areas, so it could be broken up,” a banker said. However, a senior utilities adviser said that a price tag of GBP 800m would be "toppy" for the business. The reason for the sale now is not clear, but chief executive Philip Green has previously made sales to clean up the business and return cash to shareholders. In 2007, he sold United's electricity distribution assets to North West Electricity Networks, which provided the bulk of the GBP 1.5 billion cash returned to investors in 2008. Sofiyska Voda executive director Ivan Ivanov said he had not been informed of United Utilities’ decision to divest of its Bulgarian holdings and could not comment. A spokesman for United Utilities contacted by The Independent declined to elaborate. United Utilities operates water, wastewater, electricity and gas throughout the North-west of the UK, and handles about 60% of outsourced UK utility markets.
Radomir Metal Industries to offload a further 100 staff
Radomir Metal Industries, the largest factory in the Radomir Municipality, is poised to make a further100 people redundant, according to a company statement by executive director Lyudmil Alexandrov, as quoted by Investor.bg"The measure is in light of the deteriorating economic crisis. The redundancies will encompass all branches and sectors of the factory," he said.This is the second time Radomir Metal Industries cuts staff, following the 600 workers let go in March 2009. More than 60 per cent of the staff of the company are currently employed part time. Towards the end of August, an additional 10 per cent of employees will be on reduced working hours."Our traditional clients have been silent, we are getting no orders," said Alexandrov, quoted by Bulgarian news agency BTA."The factory is surviving because of small-scale orders from South East Asia – we have no European clients whatsoever," he said.Production output has been slashed by 3.5 times as opposed to the first two quarters in 2009. Before the crisis, Radomir Metal Industries employed more than 1100 people, and more than 95 per cent of production was meant for export.
ANALYSIS:
Economic crisis in the Balkans: The ticking bomb
Publication: bne Southeast Europe Daily List
Provider: Bne Media Ltd.
On July 1, in an unexpected move that shocked the entire nation, Croatian Prime Minister Ivo Sanader announced his resignation. Sanader blamed his departure "at least in part" on the politics of the European Union, which could not overcome the Slovenian veto on Croatia's accession. Croatia was set to enter the EU by next year, but was blocked by Slovenia -- already an EU member state -- over an unresolved territorial dispute.But while the accession crisis has put pressure on Croatia, it may be only part of the story behind Sanader's resignation. The country is in bad shape economically. Having entered into serious recession in the first quarter, it is having difficulty servicing its huge external debt (close to €40 billion). Rumors are rife that the government is on the verge of bankruptcy, and that it could be just a matter of time before it is unable to pay salaries. That could spell serious social unrest.Croatia is not the only Balkan country in such dire straits. Last week, Macedonian Prime Minister Nikola Gruevski suddenly reshuffled his government, replacing several ministers. Again, the move seemed provoked, at least partially, by the European agenda. The cabinet shuffle followed just a couple of days after the resignation of the strongly pro-European deputy prime minister in charge of European integration, Ivica Bocevski. Analysts interpreted Bocevski's mysterious resignation, offered while he was on a visit to the U.S., as the result of tensions with the more Euro-skeptical Gruevski.Like Croatia, Macedonia also has a huge obstacle on the road towards EU accession: a Greek veto over the so-called name issue. Greece objects to the use of the name "Macedonia" by its northern neighbor, fearing encroachment on the sovereignty of a Greek province of the same name. Athens blocked Macedonia's entry into NATO for the same reason last year, and has made it clear that it will not allow the country to enter the EU before the issue has been resolved.Following Bocevski's resignation, Gruevski replaced several more ministers, most of whom went with their heads down. But the minister of finance, Trajko Slavevski, refused to sign the offered letter of resignation, forcing the prime minister to discharge him after a lengthy debate in parliament. In the ensuing discussions, Slavevski came clean about the actual severity of the economic crisis in Macedonia, which he had done his best to deny over the preceding weeks. He said the government had come several times to the limit of liquidity, just barely producing the cash necessary to pay salaries.Macedonia is also in a spiral of recession. Its exports have slumped, as some major exporters in the metal industry had to temporarily shut down production due to low prices on international markets. The country's tax revenue has shrunk by some estimates up to 20 percent, and its trade deficit has exploded. The government has been securing cash by issuing bonds with hefty interest, essentially pumping cash out of the economy. The business community has recently warned that should it continue, there might not be any economy left after the summer.Economic experts agree that the autumn could yet bring the peak of the crisis, with the accompanying potential for social unrest. In anticipation of such a development, the government in Serbia just revised the labor code, extending the time limit for paid leave from work. This mechanism allows employers to send workers home at 60 percent of their salary when demand for labor falls.Analysts saw the move as a way to keep dissatisfied workers at home, rather than have them agitate in the factories. In recent weeks, Serbia has seen a wave of radicalized labor protests. Workers have blocked rail transport by lying over tracks. Others have gone on hunger strikes. According to Serbia's Minister of Labor and Social Policy Rasim Ljajic, the severity of the crisis has spread popular sentiment that drastic action is the only way to draw the government's attention.Like Macedonia, Serbia has been financing its budget by issuing high-yield bonds, with comparable damage done to the economy.All the governments in the region have resorted to slashing their budgets, one or multiple times. Some have also resorted to radical saving schemes. Montenegro even considered cutting teachers' salaries, but had to withdraw the proposal in the face of threatened strikes. Government employees' use of cell phones, air conditioners, office vehicles, business trips and bonuses have all undergone drastic cuts.But in all likelihood, these measures will not be enough. The region's private sectors have been shedding workers since the beginning of the year. If governments also have to resort to layoffs in the comfortable, job-secure, yet oversized public administrations come the fall, it could easily exact a high political cost.European enlargement, the ultimate political goal in the region, has been in crisis for a while now. This is also due, in part, to the global financial crisis. At the same time, the constant imperative to make progress in the process of European accession puts tremendous political pressure on governments in the Balkans, in particular when they are faced with zero-sum choices. This additional pressure seems to become too much to handle when governments have to worry about social peace at home.The EU seems to have gotten the message. Last week, the European Commission -- the EU's executive body -- recommended visa-free travel for the citizens of Macedonia, Montenegro, and Serbia. If approved by the European Council in the fall, the measure will come into effect by the beginning of 2010. This, though, has been the only piece of good news from Europe in quite a while. It will definitely bring some cheer to the region's citizens, and some ease to its governments, who will need both in order to confront their many other problems.Risto Karajkov is a Ph.D. student in development and a freelance analyst. He writes frequently on Balkan affairs for a number of media outlets and think tanks.