Bulgaria's image suffers as crime flourishes

By Anna Mudeva

SOFIA (Reuters) - Little over a year after joining the rich boys' club, European Union newcomer Bulgaria has seen its reputation hit a low, marred by its failure to tame chronic graft and crime.

Some investors say the situation in the Balkan country has become worse than in neighboring Romania, ranked the most corrupt EU nation by Transparency International. Investing in Bulgaria without paying bribes or encountering the mafia is almost impossible, they say.

Economists say corruption is damaging Bulgaria's investment image and competitiveness.

"It hasn't prevented investment but clearly it is a concern," said Jon Levy, an analyst at Eurasia Group.

"It probably makes Bulgaria less competitive in comparison even to some other destinations in eastern Europe," he said.

With the incentive of EU membership gone, Sofia and Bucharest have succumbed to reform fatigue. Their anti-corruption efforts are also stymied by hesitant policy-makers, political feuds and inefficient state administration.

Skeptical EU members question the decision to let the two nations join the bloc so early and are pushing Brussels to impose sanctions against Sofia, whose list of misdeeds is mounting: More than 150 unsolved high-profile contract killings this decade; suspected fraud with EU funds and police officers passing secrets to drug traffickers; failure to charge a single high-level official with corruption.

Even U.S. Democratic presidential candidate Barack Obama has said any failure to address graft and organized crime could jeopardize Bulgaria's future cooperation with the EU.

Morale at home is low.

Bulgarians say they have lost faith that the EU's poorest country of 7.6 million people can put corrupt officials and crime bosses behind bars any time soon.

"I have the feeling we live in a lawless country," said Maria Georgieva, a retired teacher. "I no longer trust a single politician, their only goal is to enrich themselves."

Opinion polls show corruption has exceeded low incomes as people's biggest problem and a World Bank survey said 46 percent of companies considered graft the largest hurdle.

"There is a problem with the political elite in this country. New, clean faces are needed," said Rumiana Bachvarova, political analyst with polling agency Market Links.

INVESTMENT APPEAL WEAKENS

Sofia boasts it has attracted some 6 billion euros ($9.3 billion) in foreign investment annually in the past two years but economists say the quality and composition of the investment is worrying.