On 21 February 2013, the parliament accepted almost unanimously the resignation of the centre-right government that was handed in by PM Borisov in a surprising move. The decision was made after several days of massive and violent protests that were set off by large price hikes that showed up on citizens’ energy bills in January. In a first attempt to cool down civil demonstrations, the PM said he would remove the licence granted to the Czech electricity provider CEZ and dismissed his finance minister and deputy PM. However, this was not sufficient, and street protests turned into a more general protest against the political class, its alleged corruption and against low living standards. After the resignation, none of the three largest parties in parliament were willing to form an interim government, leaving the president no option but to call early elections, which should take place in May, two months before they were initially due. Lawmakers made a number of concessions with respect to the energy price on 27 February.

Impact on country risk

Although Borisov’s GERB party has been leading the polls since its election in July 2009, its popularity has eroded quickly over the past few weeks and the result of the anticipated elections is very uncertain. In spite of its exposure to the euro area through trade and financial linkages, the Bulgarian economy has remained quite resilient over the last years and Borisov has implemented credible fiscal consolidation policies that allowed the public deficit to shrink rapidly. A new majority could stop the austerity policy. What is more, the current political instability risks putting pressure on the foreign exchange reserves.

Analyst: Florence Thiéry, f.thiery@credendogroup.com