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By Tsvetelia Tsolova

SOFIA (Reuters) - Prime Minister Boiko Borisov sought to calm protests on Tuesday by promising to slash electricity prices and punish foreign-owned power companies, setting Bulgaria on a collision course with EU partner the Czech Republic.

A day after sacking his finance minister, Borisov said the distribution license of central Europe's largest listed company, Czech-based CEZ will be revoked, and other firms fined after the latest round of increasingly violent protests.

But the moves did not defuse discontent over high energy costs, power monopolies and low living standards in the EU's poorest country, which holds parliamentary elections in July. Protesters also seek re-nationalization of power distributors.

Chanting "Mafia" and "Resign", thousands took to snowy streets in Sofia and at least 10 other cities despite Borisov's pledges.

In the capital, protesters clashed with police at a road junction, hurling fire crackers. Eight people were taken for medical treatment, a spokeswoman for the Sofia emergency hospital said.

"It is not just about the electricity, it is for Bulgaria," said Ludmila Manova, a protest organizer in Blagoevgrad, one of the main centers of demonstrations.

Austerity has felled governments around Europe but Borisov, a former bodyguard to Soviet-era dictator Todor Zhivkov, had seemed relatively immune until recent weeks, in part because he froze salaries and pensions rather than cutting them.

Bulgarians make 800 levs ($550) a month on average, while unemployment rose to a 10-month high 11.9 percent in January.

"I am worried for the small incomes of people and the prices - and the fact that we have only a limited scope to react," the prime minister told reporters, in his first public comments since nationwide protests spread on Sunday.

Borisov was opposed to nationalization of power distributors, which also include another Czech company, Energo-Pro, and Austria's EVN.

But the government would propose an 8 percent cut in electricity prices from March to the energy regulator, the process of revoking CEZ's license had started and the three power companies had also been fined.

The Czech government, which owns 70 percent of CEZ, has already stepped into a row between the company and Albania, which revoked the company's license last month. Czech Prime Minister Petr Necas said Bulgaria's move was highly politicized and asked for an explanation.

HEFTY BILLS

CEZ shares extended losses in Prague after the news, falling nearly 1 percent to a three-week low. EVN shares fell 4 percent in Vienna and Sofia-listed Energo-Pro shares plunged 10 percent.

Borisov did not disclose the amount and reasons for fining EVN and Energo-Pro or why only CEZ would lose its license but the economy ministry cited breaches of public procurement law.

CEZ, central Europe's biggest power provider which supplies 1.9 million clients in western Bulgaria, denied wrongdoing.

The premier is wary of succumbing to the fate of a Socialist administration in 1997, which resigned days after protesters stormed parliament due to a banking crisis and hyperinflation.

His GERB party's lead over the opposition Socialists has almost disappeared with only four months until an election. His image has been damaged by the economy and failure to crack down on corruption and organized crime.

Bulgaria raised the costs of electricity - politically sensitive since bills eat a huge part of modest incomes - by 13 percent last July, but the real impact was not felt until households started using electrical power for heat in winter.

Analysts said Borisov's pledge to cut energy prices may allay discontent temporarily, but he has to come up with a clear vision on tackling unemployment and low incomes to win support.

"The promised price cut is adequate, but for the protests to cease Borisov has to deliver much more and say how he plans to raise incomes and deal with the rising unemployment", said Boryana Dimitrova at pollster Alpha Research . ($1 = 1.4649 Bulgarian levs)

(Additional reporting by Angel Krasimirov in Sofia and Jason Hovet in Prague; Editing by Jason Webb)

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