The Wall Street Journal

by Sean Carney

A small, nationalist party that accuses foreign companies of robbing Bulgaria has become the kingmaker in negotiations to form a new government, after voters denied any party a clean victory in parliamentary elections.

With 96% of votes from Sunday's balloting counted, Ataka, or Attack in English, had 8%, the Central Electoral Committee said Monday. That result gives it enough seats to allow either the main right- or left-leaning party to secure the needed majority in the country's 240-seat parliament.

Much of Ataka's campaign involved railing against foreign corporations that dominate parts of the local economy. The party wants to see contracts renegotiated and if that isn't possible in key areas, such as the energy sector, it favors re-nationalization. Ataka also wants to see a much higher minimum wage.

The previous fiscally conservative government was led by Citizens for European Development of Bulgaria, or GERB, which finished first in Sunday's voting, but with only 31% of the vote—well below the 40% it polled in 2009.

The Socialist Party was second with 27% and already has the support of the Movement for Rights and Liberties, a party made up of mostly Bulgarians of Turkish ethnicity, which won roughly 10% of the vote.

GERB, which will have 98 seats in the new parliament, gets first shot at forming a coalition government, and Ataka is the most likely partner. It supported GERB in parliament in 2010 and 2011, but last year stopped voting with the government, saying it had lost faith.

Timothy Ash, head of emerging market research at Standard Bank PLC, said GERB's most likely partner would still be Ataka, which has 23 seats. With GERB, they would have 121 votes in parliament, a majority.

Ataka has said it wouldn't support GERB but local analysts believe that position could change.

The Socialist Party has 86 seats and the Movement for Rights and Liberties has 33 seats. They too would need at least some of Ataka's votes to hold a majority in the new parliament. The three parties could find a way to form a functioning government without declaring it an official coalition, as voters have become increasingly frustrated by coalition politics.

Analysts say a "grand coalition" with the GERB and Socialists is highly unlikely.

"Forming coalitions will be challenging," Mr. Ash said. "The prospect of repeat elections is looming."

The previous government stepped down in February amid widespread demonstrations against low living standards and public perceptions that politicians were doing little to clamp down on the cronyism and mafia-style business practices that international observers say hamper economic growth.

Bulgaria had avoided needing an international bailout during the financial crisis, but the GERB's 15% across-the-board spending cuts hit the country's poor hardest and increased joblessness.

Protests have quieted down substantially compared with the mass demonstrations earlier this year. On election night only a small group—with torches for dramatic flair—gathered in front of the National Palace of Culture. They were not affiliated with any of the four main political parties.

Support for the conservative party fell in recent weeks following allegations that it was involved in illegal wiretapping and the illegal printing of an additional 350,000 ballots that were confiscated by security services a day before the election. GERB's leader, Boyko Borisov, has denied responsibility.

Austria's Institute for Social Research and Consulting, or SORA, which Bulgarian opposition parties hired to do a parallel vote count, said the discovery of illegal ballots was worrying, but that because the state prosecutor discovered them in time they didn't influence the election results. It confirmed the official, partial results.

Eoghan Murphy, head of the Organization for Security and Cooperation in Europe's delegation to Bulgaria, also had some 200 observers on the ground.

The most serious violations happened during the campaign, the said, and although the election "wasn't as free as it should be," the outcome "reflects people's choices."
—OSCE

Despite the likelihood of prolonged negotiations, the country's fiscal position remains solid, with public debt low at roughly 20% of gross domestic product. Its fiscal deficit is below 2% of GDP, Mr. Ash said.

However, GDP will likely remain stagnant and the political layout, little changed from the previous parliament, looks unlikely to bring the country out of its economic malaise, Mr. Ash said.

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