Bulgarian President Sets Early Elections for May 12

Bulgarian President Rosen Plevneliev called early elections for May 12 after Prime Minister Boyko Borissov’s Cabinet resigned amid protests against high energy prices and poverty that turned violent.

Bulgaria needs a new Parliament with much higher confidence and credibility than the current one, Plevneliev said in a speech to lawmakers in Sofia today. He will make one more attempt on March 5 to find a party willing to cobble together a government before dissolving Parliament and appointing a caretaker administration by the end of next week.

Bulgaria is mired in turbulence after anti-austerity protests that have sunk prime ministers across Europe forced out Borissov, a former bodyguard elected on an anti-corruption platform in 2009. His government focused on budget cuts to ward off bailouts and turbulent bond markets, boosting unemployment to the highest in eight years.

“Our compatriots want simple things, to be governed by decent people, not to be robbed and to live well,” Plevneliev said. “They are protesting against unfulfilled promises and inefficient institutions. We created the problems, we have to resolve them. The sooner, the better. We are all in the same boat, the protesters, the politicians and the state.”

Street Protests

Bulgaria is in its third week of protests against poverty, demanding nationalization and change of the political system. Doctors and medical workers across the country will join the protests later today, after the money allocated to hospitals by the state-run National Health Fund for the half year, ended in the first two months.

The ethnic Turk Movement for Rights and Freedoms is the third-biggest party that will be asked to form a government on March 5, after the ruling Gerb party and the Socialists rejected the offer. The Movement said on Feb. 26 they’ll also refuse. The meeting was postponed from tomorrow, the President’s office said in an e-mailed statement today.

Plevneliev rejected calls for nationalization of power distributors run by CEZ AS, the biggest Czech utility, Austria’s EVN AG and Prague-based Energo-Pro, saying it will “scare away investors, cause chaos, fuel unemployment and poverty.”

Power prices will be cut next month after Parliament amended the Energy Law yesterday that allows the regulator to change power prices more frequently than once a year as previously. he said. Pensions will be raised starting April 1 as was planned in this year’s budget, Plevneliev said.

Perception ‘Disconnect’

“Bulgaria bears little resemblance to its crisis-stricken southern European peers,” Nicholas Spiro, managing director of Spiro Sovereign Strategy Ltd. in London, said in an e-mailed note today. “From a debt market and fiscal fundamentals perspective, Bulgaria stands out as the strongest European sovereign whose government has collapsed because of anti-austerity protests. There’s somewhat of a disconnect between Bulgaria’s credit story and the political situation.”

The cost of insuring the country’s debt with credit-default swaps rose 0.24 percent to 135.9 at 3:45 p.m. in Sofia today, after rising 2.8 percent on Feb. 26, the highest intraday level since Oct. 11, 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.

Excessive Austerity

Excessive austerity brought down Bulgaria’s Cabinet, Nouriel Roubini, the New York University professor who predicted the 2008 global financial crisis, said in a Feb. 26 interview.

Borissov’s government was forced to freeze wages and delay value-added-tax reimbursements to businesses to narrow a widening budget deficit and stave off the impact of the euro-area debt crisis.

Government debt was 18.7 percent of GDP 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.

The fall of the Cabinet will fuel spending before elections and have “negative implications for fiscal consolidation,” Moody’s Investors Service said on Feb. 25.

The lack of a fully functioning government “creates uncertainty about policy direction,”damages “investor and consumer confidence” and undermines “the 2013 outlook for an already weak economy,” Moody’s said.

The benchmark Sofix stock index rose 2 percent to 380.9 at 3:54 p.m. in Sofia, after it plunged 4.4 percent Feb. 26, its biggest drop since Feb. 2, 2009, according to data compiled by Bloomberg.

The yield on Eurobonds maturing in July 2017 fell one basis point, or 0.01 percentage point, to 2.1831 percent. The yield rose 19 basis points on Feb. 26 to the highest this year.

Borissov, who was hospitalized on Feb. 26 for treatment of high blood pressure, was released today, BTA news wire reported, citing the facility’s director, Lyubomir Spasov.

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