By Tsvetelia Tsolova and Angel Krasimirov
SOFIA (Reuters) - Bulgaria's government sacked Finance Minister Simeon Djankov on Monday, dumping the man who has kept a tight rein on spending in the EU's poorest member amid nationwide protests over electricity prices.
Djankov's dismissal comes as rightist Prime Minister Boiko Borisov is seeking a second term in a July election and raises questions over whether the government will loosen the purse-strings as it tries to shore up support.
The sacking did little to soothe protesters' anger and several thousand people gathered around the country to continue Bulgaria's biggest demonstrations since 1997, when a banking crisis and hyperinflation caused national unrest.
"We can't take it any more. How can I have a bill for 200 levs for electricity and all the job offers that I find are for salaries of 300 to 500 levs per month?" said jobless Monika Vasileva, 25, among a crowd in central Sofia.
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 European Union as many nations 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.
The main Socialist opposition demanded the whole government resign and call early elections, as did two other smaller parties, the ethnic Turkish MRF and nationalist Attack.
"The way out is only political, with new elections at which the people should give their support to the ones they trust," Socialist leader Sergei Stanishev told reporters.
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.
Djankov had also refused to pay about 1 billion levs ($683 million) in subsidies to farmers - funds which will now be paid from the state's fiscal reserves, averting planned protests.
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.
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 for the 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.
With the jobless rate at a 10-month high and many people in work struggling to make ends meet, 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 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.
($1 = 1.4649 Bulgarian levs)
(Writing by Sam Cage; Editing by Hugh Lawson and Toby Chopra)
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