New Bulgarian government may struggle to govern

Reuters News
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Posted: May 29, 2013 6:39 AM
New Bulgarian government may struggle to govern

By Tsvetelia Tsolova

SOFIA (Reuters) - Bulgaria's new Socialist-led government won a parliamentary vote of confidence on Wednesday, ending months of political impasse but lacking the broad backing that may be required to steer the economy and attract much needed investment.

The European Union's poorest member has been without a permanent administration since February, when street protests against low living standards and corruption toppled a government led by the center-right GERB party.

The minority government received 119 votes in favor and 98 against. Backed by the Socialists and their ethnic Turkish MRF allies, it will be led by Plamen Oresharski, 53, a non-partisan former finance minister.

"Maybe we won't be able to become rich and prosperous, but our minimum task is for Bulgarians to have bigger hope and more confidence that we are on the right track at the end of our term," Oresharski told reporters.

The new finance minister, economist Petar Chobanov, 36, said avoiding risks to a currency peg to the euro will be his priority. Bulgaria operates in a currency board regime which prevents its central bank from setting interest rates, leaving fiscal policy as the main tool to influence the economy.

One in five Bulgarians still live under the poverty threshold, six years after EU entry. The population has an average monthly salary of just 400 euros and pensions half that, a fraction of EU's average.

To soothe public anger, the government will also have to work to improve incomes and hold electricity costs at bay or risk renewed demonstrations - no easy task while keeping a tight rein on spending.

NATIONALIST BACKING

The leader of the nationalist Attack party, Volen Siderov, provided the one vote needed to open the parliament session and elect the government. But he said his party would withdraw its silent support if it sees the new administration was not working for "the national interest".

After hours of political bickering, Boiko Borisov - the leader of the largest party GERB, which failed to secure enough support to form a cabinet - said having a government was better for Bulgaria than continued uncertainty.

The government's lack of broad support will make it hard to push reforms in inefficient labor, healthcare and education but analysts said it was unlikely to allow uncontrolled spending given lessons from the 2009 credit boom and bust.

"While his position will be precarious in the perfectly hung parliament, Attack and GERB will not have the necessary majority to remove him, until we start to see some parliamentary deserters from his own party or their MRF allies," said Otilia Simkova, an analyst with political risk consultancy Eurasia.

Finance minister Chobanov said he would target a fiscal shortfall of 1.3 percent of national output this year, up from 0.8 percent in 2012.

Oresharski appointed another economist, Dragomir Stoynev, to overhaul the inefficient energy sector and keep electricity prices unchanged to avoid new protests over power bills, which eat up a large part of Bulgarian incomes in the winter.

When finance minister, Oresharski oversaw a period of dizzying economic boom and bust in a previous Socialist-led government in 2005-2009. He plans to attract more foreign investment to boost growth of about 1 percent expected this year.

(Additional reporting by Angel Krasimirov; Writing by Radu Marinas; Editing by Angus MacSwan)