* Bulgaria to push for entry to EU banking union -president
* New PM Bliznashki pledges transparent government
* Construction on South Stream frozen for now -president
* No solution in sight to banking crisis
(Adds quotes, details, background)
By Tsvetelia Tsolova and Matthias Williams
SOFIA, Aug 5 A Bulgarian law professor and
former Socialist lawmaker was named caretaker prime minister on
Tuesday until the next election, as the Balkan state grapples
with the fallout of its worst banking crisis since the 1990s.
Georgi Bliznashki, 57, took over as premier while Rumen
Porozhanov, a 49-year-old former senior civil servant, will be
finance minister, President Rosen Plevneliev said in a televised
statement to the nation.
The interim government follows the resignation of the
Socialist-led coalition at the end of July, paving the way for a
snap election on Oct. 5, the second in less than two years.
Bliznashki inherits a raft of problems to sort out. In the
past year, Bulgaria has struggled with sluggish economic growth,
months of street protests against corruption, a diplomatic
dispute over the Russian-led South Stream pipeline, deadly
floods and a sovereign credit rating downgrade in June.
Most pressing is the fate of Corporate Commercial Bank
(Corpbank), Bulgaria's fourth largest lender, which was
hit by a run on deposits in June. It remains shut pending a full
audit into its books ordered by the central bank.
Efforts by the outgoing government to rescue the lender were
scuttled by parliament last month, and there is no agreement yet
on to what extent the bank's depositors and bondholders will be
protected in a possible state rescue.
Making matter worse, lawmakers on Monday blocked a proposal
for the interim government to raise new debt that could have
been used to rescue Corpbank, limiting Bliznashki's options to
solve the crisis.
"In conditions of political crisis, we will work for more
stability, dialogue and transparency in governance," Bliznashki
Corpbank's problems have put renewed scrutiny on the
investment climate in Bulgaria, the European Union's poorest
member state and one of its most corrupt. Holders of dollar
denominated bonds, which mature on Friday, may sue the
government if they don't get their money back.
The interim government will get the ball rolling for
Bulgaria to join the EU's banking union, work to unfreeze
blocked EU aid, and prepare a revision plan for the budget,
The president had appealed to parliament to allow his
government to raise new debt and make changes to the budget,
warning that a failure to do so would hamper his administration
and risked hurting the economy.
The debt could also have been used to pay workers at
state-run construction projects and pay fines to Brussels in
order to unfreeze EU aid programmes.
"Unfortunately the parliament in its last days remained deaf
to the necessary revision of the budget ..." Plevneliev said.
"The responsibility will lie not with the interim government
but with those who, led by their tactical considerations and
party propaganda, missed the interest of the Bulgarian people."
Bliznashki was formerly a senior member of the Socialist
party but was kicked out earlier this year, after he openly
endorsed an anti-government, anti-corruption student occupation
of Sofia University.
An outspoken critic of the outgoing coalition, Bliznashki
also drew fire from his party by becoming the head of a
committee that collected over 560,000 signatures to support an
initiative by the president for voting reform.
Porozhanov has held various positions at the finance
ministry and was also on the supervisory board of the
state-controlled Bulgarian Development Bank until last month -
one of two institutions invited to help rescue Corpbank.
Bliznashki will also have to decide whether to approve an
agreement with Westinghouse Electric Company - signed by the
outgoing government - that enables the construction of a new
nuclear reactor estimated to cost $5 billion.
The agreement would help Bulgaria reduce its energy
dependence on Russia at a time of increased tensions between
Moscow and Brussels over Ukraine. Bulgaria at present is one of
five EU states totally dependent on Russia for nuclear fuel.
Plevneliev further said that construction work on South
Stream, a pipeline that would pump 63 billion cubic metres of
gas per year to Europe via the Black Sea, bypassing Ukraine,
would remain frozen until Brussels green-lights the project.
The main opposition GERB party, which had ruled the formerly
communist country until it was brought down by street protests
in February 2013, is tipped to win the October election.
Bulgaria has been dogged by two years of political
instability, which prompted Standard & Poor's to downgrade its
sovereign credit rating to one notch above junk in June.
Plevneliev also said his government would nominate
Kristalina Georgieva as Bulgaria's candidate for the next EU
Commission, without specifying for which post. Georgieva is seen
as a possible contender for the EU's foreign policy chief.
(Additional reporting by Angel Krasimirov; Editing by Mark