By Tsvetelia Tsolova and Angel Krasimirov
SOFIA (Reuters) - Bulgaria's government sacked Finance Minister Simeon Djankov on Monday, a day after nationwide protests over electricity prices, dumping the man who has kept a tight rein on spending as the European Union's poorest member gears up for elections.
Djankov's dismissal comes as Prime Minister Boiko Borisov tries to shore up support before a July poll, raising questions over whether the government will loosen the purse-strings as it seeks a second term.
"The government is getting rid of those who stand in the way of its re-election," said Georgi Angelov, chief economist at the Sofia-based Open Society Institute, after the government announced the move in a statement.
The 42-year-old finance minister brought the budget deficit down to 0.5 percent of gross domestic product last year from 2 percent in 2011, gaining him respect in the EU as many nations in the bloc battle to get their public debt under control.
Tight fiscal policy also helped Bulgaria maintain its currency peg to the euro even as its economy shrank more than 5 percent in 2009. It has recovered only slowly since.
But Bulgaria's economic stability in recent years has come at the expense of living standards, with the country's average salary clocking in at a meager $460 per month.
Djankov, an economist at the World Bank from 1995 until he became finance minister in 2009, has been an unpopular figure for his blunt manner, and his sacking may improve the government's image without any major policy changes.
The country's current EU funds minister, Tomislav Donchev, will double up as finance minister, the government said.
Analysts said Donchev had a good record in use of EU funds, an area in which Bulgaria has traditionally struggled, and Djankov's sacking should not have a major impact on financial stability given the election is due in less than five months.
"Djankov managed to maintain fiscal stability, but this was not enough to boost people's income and improve living standards," said Svetla Kostadinova, economic analyst with the Institute for Market Economics, a Bulgarian think-tank.
Support for Borisov, a former bodyguard who won election in 2009 on pledges to restore economic growth and crack down on organized crime and graft, has fallen and his GERB party is now barely ahead of the opposition Socialists in opinion polls.
GERB support was also hit after it abandoned a plan to build a nuclear plant at Belene on the Danube river, which many Bulgarians had hoped would create jobs and cut power bills.
There are also signs Bulgaria's economy is slowing down. It is expected to have expanded by about 1.0 percent in 2012, below earlier government forecasts.
The country also posted a current account deficit of 0.7 percent of annual gross domestic product in 2012, compared with a 0.3 percent surplus a year earlier, mainly due to a rise in imports, central bank data showed on Monday.
Still, the deficit was narrower than the government forecast for a shortfall of 1.5 percent of GDP. But the cabinet expects the gap to widen out this year to 2.8 percent of GDP.
Current account deficits made Bulgaria dependent on foreign cash flows and vulnerable to external risks in the past. ($1 = 1.4650 Bulgarian levs)
(Writing by Sam Cage; Editing by Hugh Lawson)
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