Bulgaria Heads to Early Poll as Premier Borissov Departs

Bulgarian lawmakers approved the resignation of Prime Minister Boyko Borissov, moving the nation toward early elections after protests sparked street violence in the European Union’s poorest member.

The motion passed by a vote of 209 to five, with one abstention, four months before elections. The Cabinet and Parliament will be dissolved and President Rosen Plevneliev will call a new vote if the current parties in the assembly refuse to form a new government. Talks with political leaders will start tomorrow and Plevneliev said he will give Borissov’s Gerb party the first chance to form a government on Feb. 25.

“The government is going, the problems are staying,” Plevneliev told reporters in Sofia today. “If political forces return the mandate to form a government, elections must be scheduled at the earliest date possible.”

Borissov, an ex-bodyguard of Bulgarian leaders including the former communist dictator Todor Zhivkov, fell victim to anti-austerity movements that have shaken governments across Europe from Spain to Greece. His focus since taking office in 2009 on budget cuts, which kept Bulgaria out of bailouts and turbulent international bond markets, boosted unemployment to the highest in eight years, cut incomes and angered voters.

Move Quickly

“Bulgaria must move quickly to form a caretaker government and schedule early elections, which will probably be at the end of April or beginning of May,” Daniel Smilov, a political scientist at the Center for Liberal Strategies in Sofia, said by phone today. “The financial situation is stable for the time being. My concern is whether there’ll be a clear majority in the next parliament.”

The benchmark Sofix (SOFIX) stock index gained 0.3 percent to 383.77 at 2:50 p.m. in Sofia, rebounding after it plunged 2.7 percent yesterday, its biggest drop since Oct. 30. The yield on Eurobonds maturing in July 2017 fell three basis points, or 0.03 percentage points, to 2.1717 percent by 2:54 p.m. in Sofia. The yield rose 10 basis points yesterday to a 2013 high.

Borissov’s resignation is “mildly negative for bonds, given that there is low tolerance for the prevailing fiscal rectitude,” Barbara Nestor, an emerging-markets strategist at Commerzbank AG in London, said by e-mail yesterday. “Panic selling would not be rational as Bulgaria’s debt profile and fiscal fundamentals are quite strong compared to peers.”

Higher electricity and heating bills caused by cold weather combined with low wages and rising joblessness triggered nationwide demonstrations against energy utilities on Feb. 9, escalating into anti-government protests on Feb. 17.

Protests Continue

Dozens were injured and 25 people were detained as protesters threw stones, paint and firecrackers against the police, smashed windows and damaged cars on Feb. 19, Chief Commissioner Valeri Yordanov said. Demonstrators a day earlier pelted the Parliament building with stones. Marches against the energy utilities continued yesterday throughout the country.

About 1,000 supporters of Borissov rallied outside Parliament today, as lawmakers exchanged accusations of instigating violence in the protests, more of which are planned for today.

“Everyone who violates public order is no supporter of mine, but a common hooligan,” Borissov told the rally after Parliament accepted his resignation. “Please go home now and express your support for us in the coming elections.”

Austerity Measures

Bulgaria’s austerity measures contributed to higher unemployment and the bankruptcies of small businesses, according to Parvan Simeonov, a political scientist at Gallup BBSS in Sofia. Gross domestic product expanded 0.5 percent from a year earlier in the three months through December, the consecutive 10th quarter of growth. Unemployment rose to 11.9 percent in January, the highest since April 2005.

Government debt was 18.7 percent at the end of the third quarter, the EU’s second lowest behind Estonia, compared with the 27-nation bloc’s average of 85.1 percent, according to Eurostat. The government wants to keep this year’s budget deficit at 1.3 percent of GDP, the same level as last year.

Borissov fired Finance Minister Simeon Djankov, who had won EU and International Monetary Fund plaudits for tight spending controls, and pledged to revoke the license of power distributor CEZ AS (CEZ) following violent street protests.

Limited Mandate

Plevneliev urged politicians to try and form a government within the current Parliament, because an interim government’s powers are limited as it works without a Parliament “and everything that requires legislative initiative will be postponed,” he said.

“Dissolving the Parliament means to delay the solution of a great deal of the problems that took the Bulgarian people to the streets,” Plevneliev said. “I’ll talk openly with party leaders tomorrow about what needs to be done urgently in the country and in Parliament before it’s dissolved, if it comes to that. We’ll discuss whether confidence in this Parliament is depleted.”

The cost of insuring the country’s debt with credit-default swaps increased two basis points to 122 today, the highest intraday level since Nov. 6, according to data compiled by Bloomberg.

The swaps, which rise as perceptions of creditworthiness worsen, pay the buyer face value in exchange for the underlying securities or the cash equivalent should an issuer fail to adhere to its debt agreements.

Gerb Support

Borissov’s Gerb party, which has 117 lawmakers in the 240- seat assembly, won’t participate in an interim Cabinet, he said. The opposition Socialists control 40 seats and the ethnic Turks’ Movement for Rights and Freedoms, a former coalition partner of the Socialists, has 35 seats. Borissov has previously relied on the support of some of the 24 independent lawmakers.

Borissov was a communist-era special forces soldier and ran a security company after the collapse of communism in 1990. He guarded Zhivkov after his 1989 ouster as well as the former king and ex-Prime Minister Simeon Saxe-Coburg-Gotha before being appointed as police chief by Simeon II’s coalition in 2001. He was the mayor of Sofia from 2005 to 2009.

Gerb is tied with the Socialists at 22 percent each, according to a Jan. 31-Feb. 7 survey of 1,004 people by the polling company Gallup BBSS.

The ruling party had 24.5 percent support last month, compared with 19.5 percent for the largest opposition group, a Jan. 16-20 poll of 1,000 people by the National Center for Public Opinion Research showed. Both surveys had an error margin of 2.5 percentage points.

CEZ License

Borissov on Feb. 19 said he wants to revoke the power distribution license of CEZ, the biggest Czech utility, after a financial inspection found “evasion” of public procurement laws. Bulgaria’s energy regulator started a license revocation procedure and gave CEZ seven days to set a deadline to iron out irregularities before the regulator’s next hearing on April 16.

The Czech government, the majority shareholder in CEZ, pledged to take every legal step to secure its fair treatment. CEZ dropped 2.9 percent to 588 koruna at 1:56 p.m., its lowest in almost four months.

Borissov’s government improved the use of EU aid, part of which was withheld under the previous government on allegations of corruption, and sped up construction of highways and modernization of railroads, Smilov said. The Cabinet delayed efforts to modernize the inefficient pension and health-care systems and cumbersome state energy utilities, which account for high utility bills, he said.

“Whoever comes to power won’t be able to resolve these problems with a magic wand,” Deputy Prime Minister Tsvetan Tsvetanov said. “There are problems that were compounded by years of inaction.”

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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