WSJ: Bulgaria Gets Interim Government

By Joe Parkinson

The Wall Street Journal

Bulgaria's president on Tuesday picked a career diplomat to lead an interim administration tasked with safeguarding political and financial stability after the center-right government quit last month amid swelling protests against austerity and corruption.

President Rosen Plevneliev said that Marin Raikov, a former ambassador to France who served as deputy foreign minister in two previous administrations, would lead the government until elections on May 12. Kalin Hristov, the deputy central bank governor since 2009 tasked with managing the peg linking Bulgaria's currency to the euro, will run the finance ministry.

The move to pick bureaucrats with no overt political affiliations was aimed at showing protesters there has been a clean break with a political class they view as corrupt and unable to improve living standards in the European Union's poorest member country.

The appointment of experts considered consensus figures among Bulgaria's polarized political establishment is also seeking to reassure investors that Sofia would resist protesters' calls to dramatically increase spending and renationalize utilities.

In comments to reporters, Mr. Raikov sought to emphasize consensus. "While we follow strictly the 2013 budget framework, we will take steps to improve the incomes of pensioners and the poorest," he said. "We won't allow fiscal policy that can endanger the currency board."

Analysts said Mr. Raikov's experience would help him navigate a difficult political terrain.

"Raikov has been chosen because basically he meets two criteria: He isn't seen as a partisan figure and hasn't been at the forefront of party politics. Secondly, he knows how the administration functions, which will help him safeguard stability," said Daniel Smilov, program director at the Center for Liberal Strategies, a Sofia-based think tank.

Bulgaria's new government will be the latest technocratic administration to take office in Europe after cuts in social-welfare spending, flagging economies and waning public tolerance for corruption have combined to fuel voter anger at incumbents.

The Continent's post-communist countries have seen sharp shifts. After large-scale protests against spending cuts and alleged corruption, Romania changed its prime minister twice last year. Slovakia and Lithuania voted out their pro-austerity politicians. Slovenia's prime minister is trying to hang on at the helm of a minority government amid mounting protests over austerity and corruption.

Mr. Raikov's administration will take office amid demonstrations that have gripped Bulgaria for more than a month. The protests turned violent in February, forcing the rightist government of Boiko Borisov to resign. Three people have died after setting themselves on fire.

But the size of demonstrations has fallen sharply over the past two weeks and protest leaders have failed to form a new single group that could stand in the May election, making it likely that the current main parties, unpopular as they may be, will still dominate the next parliament.

But the new government will face tough budget decisions.

The departing government cut electricity prices by an average of 7% and launched a process to revoke the license of Czech power distributor CEZ AS, fueling investor fears that a more populist policy platform could destabilize Bulgaria's economy. The steps have so far failed to quell public discontent.

Although outside the euro zone, Bulgaria is overwhelmingly dependent on the bloc's larger economies for growth. Brussels praised Sofia when it reduced its budget deficit to 0.5% of gross domestic product last year from 2% in 2011.

But analysts say the markets are increasingly nervous that no political party will win the May election outright and any coalition will be unable to maintain a tight fiscal policy.

"For investors, the main signal will be the result of the election and right now it seems none of the parties would be able to build a government without a coalition," said Otilia Simkova, an analyst with Eurasia Group, a London-based political-risk consultancy.

"The situation really isn't clear but markets are looking beyond this interim administration to the election results," she said.

• 1