Economic Crisis and Reform in Bulgaria, 1989-92

"Bulgarian common sense rejects [socialist principles], nor will they now or ever fmd favorable soil in Bulgaria."-Ivan Vazov, Under the Yoke (1889) Bulgaria's economy began a deep and prolonged collapse in 1989, exactly one hundred years after the noted Bulgarian novelist Ivan Vazov published his stirring novel opposing the tyranny of the Ottomans and warning of the mistaken road of socialism. The 1989 collapse was partially a reflection of the external political upheavals among Bulgaria's trading partners in Eastern Europe, which were rejecting socialist principles. But it was also a reflection of the weaknesses imbedded in the economy after 30 years of central planning. Political instability within Bulgaria, market reforms, and attempts at privatization contributed further to economic uncertainty resulting in a continued output decline. The almost thirty percent fall in real Gross Domestic Product ("GDP") over the period 1989-1992 left approximately one-half million workers unemployed, and many more underemployed in this country of approximately nine million people. This paper examines the reasons for the collapse of the macroeconomy