By Tsvetelia Tsolova and Matthias Williams
SOFIA (Reuters) - Bulgaria's president and business leaders urged politicians on Tuesday to agree on a new government and avoid another election after a weekend snap poll delivered a messy result that raises the threat of further instability in the Balkan nation.
The center-right GERB party won Sunday's election but fell dozens of seats short of a majority, setting the stage for weeks of difficult talks with potential allies to cobble together Bulgaria's fifth government in two years. One GERB official warned of another vote by Christmas if the talks fail.
The negotiations could leave Bulgaria, the European Union's poorest member state, with another fragile coalition unable to push through sorely-needed economic reforms and vulnerable to the mass street protests and no-confidence votes that dogged its Socialist-led predecessor.
The delay is also another setback to efforts to sort out Bulgaria's worst financial crisis since the 1990s, which saw runs on two major domestic lenders in June and has left tens of thousands of customers still unable to access their deposits.
"I am absolutely convinced that elections after the elections are not a solution," President Rosen Plevneliev told reporters, likening the situation to forcing voters to re-sit school exams.
"We cannot tell the Bulgarian people 'you did not vote correctly, now go do a re-take'."
The election has produced the most fractured result on the lowest voter turnout since the fall of communism 25 years ago as widespread disillusion with Bulgaria's political class has strengthened the attraction of fringe players.
Only 12 percent of Bulgarians trust parliament, according to a Gallup poll taken before the vote.
"Our politicians are so greedy and irresponsible that I expect new elections and huge costs for the state around New Year," said 29-year-old Valentin Grekov, who works as a courier.
The GERB party's win could mean a return to power for its leader Boiko Borisov, a former bodyguard and fireman who was prime minister from 2009-2013 and who was eventually toppled by protests over high electricity prices and low living standards.
GERB was due to begin consultations with other parties on forming a new government from next Monday.
"With a record eight parties in the parliament, forging a new coalition government may prove a formidable challenge," said a note by UniCredit bank on Tuesday. "We see the formation of a minority government as the most likely outcome of what promises to be a protracted and traumatic round of coalition talks."
The political turmoil and banking crisis have further soured Bulgaria's business climate. Economic growth is sluggish and foreign investment has fallen by more than a fifth this year.
Standard & Poor's downgraded Bulgaria's credit rating to one notch above junk in June, while Fitch on Tuesday warned that the election result could create more uncertainty.
The next administration will have to persuade parliament to let the government raise new debt to fund a higher fiscal deficit, provide liquidity buffers for the banking system and plug a large financial hole in the energy sector. It will also have to persuade Brussels to unfreeze hundreds of millions of dollars worth of EU development funds blocked since last year.
"Bulgaria needs to quickly form a government and restore stability," Ognian Donev, the president of a leading business group, the Confederation of Employers and Industrialists in Bulgaria (KRIB), told Reuters after the group met Borisov.
"We cannot afford months of uncertainty. New elections will be damaging to business," he said.
(Additonal reporting by Angel Krasimirov; Editing by Gareth Jones)