July 24 (Bloomberg) -- Bulgarian lawmakers approved on Prime Minister Plamen Oresharski’s resignation after the government was blamed for failing to avert the worst banking crisis in 17 years.
Lawmakers in the Balkan nation’s capital Sofia voted 180 to eight, with eight abstentions, to end the 16-month-old administration’s rule, opening the door to elections in October, three years ahead of schedule.
The ruling Socialists, who came to power after a previous government shakeup, lost control after the opposition Gerb party of former Premier Boyko Borissov won European Parliament elections and accused the Socialists of bringing the country to ruin following bank runs this month at the nation’s third- and fourth-largest lenders. Elections will give the country its fifth prime minister since joining the European Union in 2007.
“This resignation opens the possibility to heal the political system,” Daniel Smilov, an analyst at the Center for Liberal Strategies in Sofia, said by phone yesterday. “This government didn’t have the needed support and strength to carry out serious reforms. It depends very much on whether the government that will come after the elections will master the support and the will for painful reforms.”
The yield on Bulgarian Eurobonds maturing in July 2017 fell four basis points, or 0.04 percentage point, to 1.64 percent by 12:28 p.m. in Sofia, extending a six basis-point drop yesterday. The Sofix equity index fell 0.3 percent, according to data compiled by Bloomberg.
The Socialist-led coalition came to power in May 2013 on pledges to boost growth and spending on social benefits. It was beset by recurrent rallies against what Bulgarians considered a corrupt political system in the poorest EU member, which led to a weak showing in May 25 European Parliament elections.
“My cabinet worked in unprecedented conditions of hostility,” Oresharski said just before the vote. “Despite that we achieved good results. All business indicators improved in the year we ruled”
After years of political vulnerability from protests over wages and corruption, the latest downfall stemmed from anger over two bank runs in the past month that gave Oresharski’s political foes a theme to push for his demise.
“Despite the criminally triggered bank crisis, the situation is stable,” said Atanas Merdkanov, the head of Socialists parliamentary group, in parliament before the vote. “The reason this parliament couldn’t function is that the biggest group in the assembly, Gerb, chose to act as a sabotage group rather than an opposition.”
The central bank placed Corporate Commercial Bank AD under supervision on June 20 after it ran out of liquidity amid media reports about a feud between the majority shareholder and a large depositor, a member of parliament who withdrew his funds.
The European Commission gave the government approval to extend a 3.3 billion-lev ($2.27 billion) credit line to lenders after police arrested men they said triggered a another run on First Investment Bank AD. The run on First Investment, which paid 800 million lev in deposits to clients in one day, was contained, Oresharski said on July 4.
Now authorities rely on Corp Bank’s shareholders to seek ways to rescue it from bankruptcy after parliament shot down a cabinet proposal to recapitalize the bank.
“This government is going because of its close links with corporate circles,” said Daniel Smilov, a political analyst at the Center for Liberal Studies. “It is leaving the country in a difficult situation.”
President Rossen Plevneliev said on July 21 he expects the interim cabinet “to have a new approach in many sectors,” including energy policy, according to an e-mailed statement.
Oresharski pushed ahead with the South Stream natural-gas pipeline project intended to ship Russian fuel under the Black Sea across the Balkans to Europe.
He was forced to say he’s halting it last month after the EU’s executive arm sent a letter asking for work to be suspended because of concerns the Balkan country may have broken the bloc’s public procurement laws by favoring local and Russian bidders.
The cabinet also signed a preliminary agreement on Dec. 12 with Westinghouse Electric Co. LLC to build a new unit at the Kozloduy nuclear power plant.
“We are leaving the country in a stable financial condition despite ungrounded talks of bankruptcy,” outgoing Finance Minister Petar Chobanov told reporters in Sofia today. “The fiscal reserve is more than 8 billion lev, which gives room for flexibility and dealing with undesirable challenges.”
Bulgaria’s economy expanded 1.2 percent in the first quarter after a 1.1 percent growth rate in the previous three months, driven by exports and consumption.
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