Bulgaria Fires Finance Minister After Spending Protests

Bulgarian Finance Minister Simeon Djankov, who’s been praised by the European Union for reining in spending, was fired after thousands of people marched in protest at austerity four months before general elections.

Prime Minister Boyko Borissov, who faces re-election July 7, wants the remit of Tomislav Donchev, the minister in charge of EU funds management, widened to include the Finance Ministry, the government said today in an e-mailed statement from the capital, Sofia. Regional Development and Public Works Minister Liliana Pavlova will assume Djankov’s duties as a deputy premier, it said.

Bulgarians demonstrated yesterday in dozens of cities, blocking main roads to demand higher wages and lower energy bills. Four people were arrested after clashes in Sofia, while protesters threw stones and broke windows at the office of Czech utility Energo-Pro in the Black Sea city of Varna, police said.

Djankov, who’d been finance minister since 2009, won EU and International Monetary Fund plaudits for his tight spending policy as Bulgaria navigated the global economic crisis without borrowing abroad. The economy of the EU’s poorest country by per-capita output expanded 0.5 percent from a year earlier in the three months through December, the 10th quarter of growth.

‘Bad Signal’

The yield on Bulgaria’s euro-denominated government bond due 2017 rose 12 basis points to 2.116 percent at 5:01 p.m. in Sofia, according to data compiled by Bloomberg.

Djankov’s exit is “a bad signal to international markets” as the minister was seen as “a guarantor of financial stability,” George Prohaski, head of the Center for Economic Development in Sofia, said today by phone. “It would be unwise for reasonable spending policy to be overtaken by excessive spending in the few months before the election to sooth various forms of social unrest.”

In addition to the anti-austerity rallies, far-right activists burned an EU flag in Sofia and farmers awaiting overdue subsidy payments threatened a nationwide protest.

The government transferred 840 million lev ($573 million) from the fiscal reserve on Feb. 15 for farm subsidies that the EU will reimburse within 45 days, the Agriculture Ministry in Sofia said today. The Finance Ministry had delayed the payments from Jan. 31 because of a lack of funds after Bulgaria repaid 835 million euros of bonds that matured Jan. 15.

‘Long Overdue’

“This resignation was long overdue,” Konstantin Trenchev, leader of the Podkrepa trade union, said in an interview with National Bulgarian Radio today. “His austerity policies led many small companies into bankruptcy, raising unemployment and causing widespread poverty.”

Djankov, 43, who worked previously at the World Bank in Washington, instigated a cap on future budget deficits that lawmakers approved last month. The gap, which the government plans to keep at 1.3 percent of gross domestic product in 2013, will be limited to 2 percent to ensure fiscal prudence. GDP will grow 1.2 percent this year, according to official estimates.

“I thank Prime Minister Borissov and my Cabinet colleagues for the long hours of joint work and successes we achieved,” Djankov said today in an e-mailed statement. “I also thank the Finance Ministry experts, with whose help Bulgaria recovered its financial health. I’ll continue helping in any way I can in the future.”

Donchev, 40, joined Borissov’s Cabinet in 2010 after serving as mayor of the city of Gabrovo in central Bulgaria since 2007.

“I don’t expect a policy shift as Mr. Donchev subscribes to EU values and would continue spending cautiously,” Kaloyan Staikov, an economist at the Institute for Market Economics in Sofia, said today by phone. “I hope the government resolves spending demands through dialogue, rather than by caving in to street pressure.”

To contact the reporter on this story: Elizabeth Konstantinova in Sofia at ekonstantino@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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