By Tsvetelia Tsolova and Angel Krasimirov

SOFIA (Reuters) - The mayor of the Bulgarian city of Varna resigned on Wednesday under public pressure after the death of a man who set himself on fire there last month, the latest politician felled by protests that have already toppled the government.

Plamen Goranov, a 36-year-old artist, became the symbol of protests against low living standards when he doused himself in petrol and set himself alight on February 20 to demand the resignation of Varna Mayor Kiril Yordanov.

Goranov died of his injuries on Sunday.

The protests, sparked by high power prices but spreading due to wider dissatisfaction with the state of the country, highlight the issues of governance, the rule of law and corruption still plaguing Bulgaria, the European Union's poorest member, six years after it joined the bloc.

Yordanov served 13 years as mayor of Varna and protesters accused him of improper ties with a powerful group of businesses that they say exerts control over Bulgaria's third largest city, which lies on the Black Sea coast.

Yordanov denied any wrongdoing and said he resigned under public pressure because his reputation had been damaged.

"The events are too hot to allow us to make a sober assessment," he told reporters.

The protests have left Bulgaria in political limbo, facing early elections in May that will almost certainly result in a parliament split between factions unwilling to work together.

That has raised questions over whether it can maintain tight fiscal policy, needed to maintain a currency peg to the euro, particularly given the economy grew only 0.8 percent in 2012 and could be damaged by the uncertainty.

On a visit to Brussels, President Rosen Plevneliev said Bulgaria would maintain fiscal discipline over the next 1-2 years but had space to develop policies that would improve social care and help create jobs.

Many in the country of 7.3 million blame rampant corruption and inappropriate links between political elites and business for stifling development and the rule of law. The average salary is 400 euros ($520) a month and pension less than half that.

Bulgaria is excluded from the EU's passport-free Schengen zone and its justice is subject to Brussels monitoring because of graft concerns and the country is ranked second-worst in the bloc for corruption by watchdog Transparency International.

LAND OF DARKNESS

Hundreds of people attended a memorial service on Wednesday in the Black Sea city for Goranov, dubbed "the Bulgarian Jan Palach" after the Czech student who set himself on fire in 1969 in protest at the Soviet occupation of Czechoslovakia.

Goranov was one of three people who set themselves on fire since the demonstrations started last month, bringing down the austerity minded government of Boiko Borisov.

"Plamen set himself on fire to illuminate our future because we are still living in a land of darkness," Milena Angelova, one of the mourners, told local media.

A journalist has proposed a statue of Goranov on the spot where he set himself alight.

Bulgaria's economy is only slowly recovering from a deep recession after a credit boom burst in 2009 and that, combined with protester demands for more spending, is likely to mean the budget deficit rises from just 0.5 percent of national output last year. The government targets 1.3 percent for 2013.

"The budget is clear, it is not going to be changed. But with the budget there is a smart option to do more social policies," Plevneliev told reporters.

(Editing by Jon Hemming)