Bloomberg News

Bulgarian President to Make Last Tries to Avert Snap Poll

February 25, 2013

Bulgaria's Premier Boyko Borissov and President Rosen Plevneliev

Bulgaria's outgoing Premier Boyko Borissov (L) turns down a mandate for a new cabinet to President Rosen Plevneliev at the presidency in Sofia . Photographer: Nikolay Doychinov/AFP via Getty Images

Bulgarian President Rosen Plevneliev will make two more attempts to find parties willing to form a new Cabinet and avert early elections after outgoing Premier Boyko Borissov’s party refused.

Plevneliev will ask the Socialists to cobble together a new administration on Feb. 27, and if that fails the ethnic Turk Movement for Rights and Freedoms on March 1, though all the Balkan country’s parties have said they prefer a snap vote. If the move fails, the president has said he’ll call a special ballot for late April or May.

The ruling party “Gerb rejected the mandate to form a government,” Plevneliev told reporters in Sofia today. Borissov quit Feb. 19 after street violence broke out in the European Union’s poorest member. “If all three political forces refuse” on March 4 “I will make a statement, clearly outlining the priorities of the caretaker government. The members of the caretaker government will probably be named between next Wednesday and Friday.”

Bulgaria is experiencing political turbulence after anti- austerity protests that have sunk prime ministers across Europe forced out Borissov, a former special-forces soldier elected on an anti-corruption platform in 2009. His government focused on budget cuts to ward off bailouts and turbulent bond markets, boosting unemployment to the highest in eight years.

Mass Demonstrations

Thousands marched yesterday in the capital Sofia and several other cities including Plovdiv and Varna opening a third week of protests against high utility bills, low wages and corruption. Dozens were injured in clashes between police and demonstrators last week, who pelted the parliament building and officers with stones, paint and firecrackers, smashed windows and damaged cars. More protests are planned for 5:30 p.m. in Sofia.

Protesters handed Plevneliev a five-page declaration yesterday with their demands ranging from nationalization of power distributors controlled by Prague-based CEZ AS, Austria’s EVN AG (EVN) and Energo-Pro, to imposing a ban on payment of December utility bills and changing the constitution and the political system. In a brief address to protesters, the president pledged to set up a Public Council with representatives of the protesters to discuss their demands.

“Bulgaria is under the spotlight not only from its citizens, but also from Europe and all of the world,” Plevneliev said. “I expect responsible behavior from all and everyone. This week is very important.”

Plevneliev said he will convene the National Security Council tomorrow to ensure law and order are observed and address Parliament on Feb. 28.

‘Best Option’

“The best option now is to go through the consultations quickly, schedule early elections and appoint an interim Cabinet, which in itself will be a difficult task,” Daniel Smilov a political scientist at the Center for Liberal Strategies in Sofia said on Feb. 22.

The benchmark Sofix (SOFIX) stock index fell 1.09 percent to 383.45 at 2:08 p.m. in Sofia, after it plunged 2.7 percent on Feb. 20, its biggest drop since Oct. 30. The yield on Eurobonds maturing in July 2017 4 basis points, or 0.04 percentage points, to 2.1135 percent. The yield rose 10 basis points on Feb. 20 to the highest this year.

‘Negative Implications’

The fall of Bulgaria’s Cabinet “has negative implications for fiscal consolidation,” Moody’s Investors Service said in a report today. “Whichever party comes into power next, it will be mindful of voter opposition to continued austerity and a desire for stimulus spending and increased welfare payments and subsidies.”

Higher electricity and heating bills caused by cold weather combined with low wages and rising joblessness triggered the nationwide demonstrations.

Bulgarians have lived under strict fiscal and financial rules since 1997, when a crisis closed one-third of the country’s banks. Gross domestic product expanded 0.5 percent from a year earlier in the three months through December, the consecutive 10th quarter of growth. Unemployment rose to 11.9 percent in January, the highest since April 2005.

Minister Fired

Borissov fired Finance Minister Simeon Djankov, who had won EU and International Monetary Fund plaudits for tight spending controls. Borissov’s government froze incomes and delayed value- added-tax reimbursements to businesses, which forced many of them into bankruptcy, fueling unemployment and poverty, according to Bozhidar Danev, chairman of the Bulgarian Industrial Chamber.

The cost of insuring the country’s debt with credit-default swaps rose 2.34 percent to 132.9 at 11:45 a.m. in Sofia today, the highest intraday level since Oct. 24, according to data compiled by Bloomberg.

The swaps, which rise as perceptions of creditworthiness worsen, pay the buyer face value in exchange for the underlying securities or the cash equivalent should an issuer fail to adhere to its debt agreements.

Government debt was 18.7 percent of GDP at the end of the third quarter, the EU’s second lowest behind Estonia, compared with the 27-nation bloc’s average of 85.1 percent, according to Eurostat. The government wants to keep this year’s budget deficit at 1.3 percent of GDP, the same level as last year.

Policy Direction

Bulgaria will exceed Moody’s budget-deficit estimate of 1.8 percent of GDP, the rating service said today.

“The lack of a fully functioning government creates uncertainty about policy direction until a new government settles in, damaging investor and consumer confidence and undermining the 2013 outlook for an already weak economy,” Moody’s said.

Borissov’s Gerb party, which has 117 lawmakers in the 240- seat assembly, won’t participate in an interim Cabinet, he said.

The opposition Socialists control 40 seats and the ethnic Turks’ Movement for Rights and Freedoms, a former coalition partner of the Socialists, has 35 seats. Borissov has previously relied on the support of some of the 24 independent lawmakers.

“Obviously we are moving toward a caretaker government,” Plevneliev told reporters in Sofia on Feb. 22. “The capacity of the 41st National Assembly is depleted at this point.”

To contact the reporter on this story: Elizabeth Konstantinova in Sofia at ekonstantino@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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