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EU Prospects and Security in South Eastern Europe: Hidden Economy, Transborder Crime and Development
The international conference EU Prospects and Security in South Eastern Europe: Hidden Economy, Transborder Crime and Development, organized by the Center for the Study of Democracy with the support of the Friedrich Ebert Foundation and the Japan Foundation, took place on 28-29 October 2005 in Hilton hotel in Sofia.

The conference is a continuation of CSD efforts to assess the social, business, national and regional aspects of security in the Southeast European countries in the context of the EU enlargement, more specifically in the areas of informal economy, corruption, and illegal cross-border activities which remain major obstacles to the development in the region and represent serious threats to the European security.

In this context, the main objective of the event was to contribute to the design of an approach to the informal economy, informal labour and undeclared work, and transborder crime that is both targeted and comprehensive. To achieve this, it brought together researchers from prominent scientific institutions in Europe to share their views and discuss possible solutions of the above problems.

Dr. Ognian Shentov, CSD Chairman, and Dr. Arnold Wemhoerner, Resident Representative of Friedrich Ebert Foundation, made opening remarks.

Dr. Piet Renooy, Managing Director of Regioplan, The Netherlands, presented the results from a research on the informal economy conducted in the 25 EU member states and the candidate countries Bulgaria and Romania. Dr. Renooy outlined several reasons for the fact that 40% of the households and 30% of all companies are involved in the grey economy: lack of trust in the government, the tolerance during the communist times and the specific national culture. Mario Holzner, an Economist from The Vienna Institute for International Studies made a presentation on the amount of tax evasion and avoidance in the consumption of goods and services in the EU plus Bulgaria, Romania, Croatia and Turkey for the period 2000-2003. According to him, Bulgaria has 42.7 % concealed consumption share in percent of the total consumption of taxable goods and services. Afterwards, Dr. Predrag Bejakovic, Researcher from the Institute of Public Finance in Croatia continued the topic by giving more information on underground economy in South and East Europe. He stated that the key problems leading to and stimulating this economy are the weak public governance, the high unemployment and high tax burden of tax and contributions.

The presentation of the CSD Senior Fellow Dr. Konstantin Pashev was related to the flat tax rate and evoked discussions on whether is it going to change the situation for the better if introduced in Bulgaria. Hristina Mitreva, Chief Director of Planning and Projections Department at the Bulgarian National Social Security Institute was positive that flat rate could not be paid on the insurance installments. She also outlined the lack of control and sanctions for the offenders as well as the lack of coordination between the institutions as the main reasons for the tax evasion. Mr. Javier Ruiz-Martinez from Carlos III University of Madrid linked this to the problem of corruption and said that the social behavior and the political culture should be changed so that it will be the people’s own initiative to pay taxes. Dr. Piet Renooy agreed by stating that gaining trust in the government should be a major priority. Politicians setting positive personal examples could achieve this. In addition, there should be transparency so that the citizens could see where the money is going. Some of the participants expressed an opinion that the problem is more practical and not that linked to the national culture. CSD Research Fellow Philip Gounev supported the idea of the influence of people’s perceptions saying that while some of the Americans are also not happy with the use of the money the Bulgarians would actually take the step not to pay taxes.

In the second panel Prof. Petrus van Duyne from the Tilburg University, the Netherlands talked about the illegal organization of labor and put the question whether it should be valued as organized crime. Hristina Mitreva made a presentation on the positive impacts of the introduction of the registration of labor contracts and minimal insurance installment. In her opinion, the increased revenue from those installments has led to a better insurance culture especially of the employers. Elka Dimitrova, Director for Labor Market Policy at the Ministry of Labor and Social Policy of Bulgaria continued the topic by giving information on the unregistered and unregulated employment which concerns mainly employees in the secondary and tertiary economic sectors (e.g. employed in restaurants etc.). She informed the participants that a campaign called “Protect Your Labor Right” is due to start in April.

The participants shared the opinion that one of the problems with the insurance installments is that the people are worried more about the present than the future. Mr. Javier Ruiz-Martinez pleaded for a tighter control of the state. There is too much flexibility and the key is a balance between encouragement and control over the employers, he concluded. Prof. Petrus van Duyne added that the law enforcement and the taxation is no longer a matter of only one country and that the problems have crossed the national borders. Dr. Renooy agreed and gave the Netherlands as an example of а country that is excessively tolerant. He described the enforcement of a new law of the chain responsibility which the local authorities want to abolish because the main problems are of trans-border character.

In his presentation Prof. Brice De Ruyver from the Institute for International Research on Criminal Policy in Ghent University, Belgium talked about itinerant criminal groups and noted the increasing involvement of offenders from Central and Eastern European countries in property crimes. He said that the registered groups in July 2005 were 83 and that their flexibility is improving. Prof. Óscar Jaime-Jiménez, Director of the Institute for Policing Studies in Spain, underlined that the increasing presence of offenders must not go unnoticed. He said that this is a big challenge because while terrorism is an obvious threat, organized crime leaks into institutions, merges with the legal business and undermines democracy. According to the official data, the Bulgarian citizens hold a second position, after the Romanians, among the rest of the Balkan residents in committing crimes in Spain. The police have responded by making strategic, operational and organizational restructuring with the most relevant measure being the establishment of a new Territorial Intelligence Units as well as Groups for Special Response to Organized Crime (GRECO). Afterwards, Tihomir Bezlov, Senior Analyst at CSD, explained the structure of the Bulgarian organized crime, its evolution and similarities with the Russian mafia.

In the discussion that followed Philip Gounev asked Prof. Jaime-Jiménez what had been the effect of the GRECO and could they be applied in Bulgaria. Prof. Jaime replied that unfortunately their establishment had been very recent and it is too early to make an evaluation. However, a Research Line has also been created in order to help them evaluate in the future, probably in a year’s time. He then went into allocating some of the biggest obstacles in the work of the Spanish police. He said that the officers often have to investigate cases in other languages and that it is also a question of power to prosecute criminals in another country. He complained that the information shared internationally is very limited, therefore common policies should be implemented. Mr. Vassil Yanarliev from the Institute of Criminology at the Bulgarian Ministry of Interior then inquired whether there is a special law for organized crime. Prof. Jaime explained that Spain had developed a special instrument which involves more human and technical resources which had already proved its effectiveness. He also said that another reason why there is not a special law is because the problem is relatively recent. The main problem currently is how to prosecute businesses that operate simultaneously in the white, grey and black economy.

Agenda of the conference (MS Word, 57 kb)

Informal Work in Europe, presentation of Dr. Piet Renooy, Regioplan, the Netherlands (PowerPoint, 147 kb)

Tax Evasion in Consumption, presentation of Mario Holzner, The Vienna Institute for International Studies, Austria (PowerPoint, 271 kb)

The Underground Economy in South and East Europe with attention to Croatia 1990-2000, presentation of Dr. Predrag Bejakovic, Institute of Public Finance, Zagreb (PowerPoint, 283 kb)

Illegally organising labour, presentation of Prof. Petrus van Duyne, Tilburg University (PowerPoint, 68 kb)

Do Flat Taxes Encourage Compliance, presentation of Dr. Konstantin Pashev, Senior Fellow, CSD (PowerPoint, 475 kb)

Itinerant groups committing property crimes, presentation of Prof. Dr. Brice de Ruyver, Ghent University (PowerPoint, 278 kb)

Crime Prevention Training for the CEECs: Key Proposal for a European Policy against Transnational Crime, presentation of Mr. Javier Ruiz Martínez, University Carlos III of Madrid

Transborder Crime in the New Europe: a Vision from Spain, presentation of Prof. Oscar Jaime-Jimenez, Institute for Policing Studies, MoI of Spain (PDF, 50 kb)

Evolution of Organized Crime in Bulgaria, presentation of Tihomir Bezlov, CSD Senior Analyst (PowerPoint, 4,6 Mb)

Media coverage (in Bulgarian)
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