* Street protests wane but threat to government persists
* European vote a test for Socialist-led government
* Government woos voters with lower electricity bills
* Moves in energy sector may scare off foreign investors
By Tsvetelia Tsolova
SOFIA, Jan 30 A few months ago Bulgarian Prime
Minister Plamen Oresharski's government looked as though it
would fall as ten of thousands joined protests against endemic
Without clear leaders, the protesters ran out of steam and
now only a handful remain outside the parliament of the small
Balkan country, outflanked by so many riot police they joke it
feels like a police rally.
The government looks likely to hang on at least until the
European elections in May. However its vulnerable position means
it lacks the clout to reform the corrupt political system or the
slow and inefficient judiciary.
"Because of the political uncertainty, there is a big
reluctance to carry out any reforms that would lower public
trust even further," said Ivan Krastev, a political analyst in
"Everybody is in survival mode - the government, the
opposition and different political parties."
Moreover, the Socialist-led coalition has upset investors by
slashing household electricity bills twice in six months, adding
to the state power utility NEK's debt and squeezing local power
producers and foreign distributors such as the Czech CEZ
and Austrian EVN AG.
The move was a bid to shore up the government's position as
power costs eat up a large part of household incomes in winter.
Protests over high prices and low living standards brought down
the previous, centre-right government last February.
Oresharski's government in December went after the sector it
blamed for pushing up costs - green energy. It imposed a
surprise 20 percent charge on wind and solar plants, squeezing
many foreign investors that had earlier poured into Bulgaria to
take advantage of generous renewable subsidies.
Energy companies said the charge, which was pushed through
parliament without ever being debated, would cause bankruptcies
and scare off foreign investors, at a time when foreign direct
investment fell 30 percent in the first eleven months of 2013.
"Recent rapid changes in energy policy and regulations have
raised significant concerns in the investor community and has
impacted the attractiveness of investment," Daniel Berg, the
office head for Bulgaria for the European Bank for
Reconstruction and Development (EBRD), told Reuters.
"Better policymaking can help improve the country's image,
and this will help attract additional investment."
The government's prospects have been helped by an improved
economic outlook. Growth has been slow since Bulgaria exited a
deep recession in 2010 but this year it is expected to quicken
to 1.8 percent, up from 0.6 percent in 2013.
The country's stock exchange shrugged off last year's
political turmoil, with its turnover jumping 124 percent in 2013
and another stellar performance is predicted this year.
Oresharski's administration has won cautious praise for its
efforts to speed up government clearances for businesses, who
must obtain dozens of different permits and licences in a
process that can stall projects for years. It has also paid
business back 500 million levs ($350 million) in tax rebates, a
process that had been held up for months.
But the government's overall lack of reformist drive - and
the uncertain political climate - still feed a perception that
little has changed for the better since Bulgaria joined the
European Union with high hopes of prosperity in 2007.
Brussels in January delivered its harshest report yet since
Bulgaria's accession, calling its progress in fighting graft
"not sufficient and fragile". It remains the second most corrupt
EU member according to Transparency International, and has yet
to send a corrupt high level official to jail.
The British ambassador to Sofia called the report
"depressing reading" on his Twitter account, adding Bulgaria had
made "a few tiny steps forward; some big steps back."
Prospects of slow foreign inflows for this year, coupled
with weak domestic demand and political uncertainty, prompted
ratings agency Standard and Poor's to change the outlook on
Bulgaria's investment grade rating to negative in December.
Fitch Ratings kept its outlook as "stable" in a January note,
but flagged the risk of fresh unrest in 2014.
The spark for the protests was the attempted appointment of
Delyan Peevski, a controversial media figure, to a top security
job. For many, it was seen as a depressing reminder of the cosy
relationships between politicians and vested interests.
Having already survived two confidence votes, the government
has batted back demands for a snap election, arguing that it
could harm Bulgaria's nascent economic recovery, and would
likely produce the same results as last year's vote.
But anger against the political class still festers. One in
five people surveyed by pollster Gallup International in January
said they would take to the streets again.
"I was and I am still furious," says Rafael Chichek, 42, who
runs a furniture business. "You pay your taxes, you pay your
bills, and for what? They put the money in their pockets and
refuse to do anything."
The Socialists are still vulnerable. The party is plagued
with internal squabbles, while the government's approval rating
languishes at around 20 percent. A key test will be their
performance at the European elections in late May, as a poor
showing could spark fresh demands for early polls.
Their prospects have already been dented by the decision by
a former president and socialist leader to run a separate list
of candidates from the ruling party for the vote. That is likely
to play into the hands of the main opposition GERB.
"The government looks a tad more stable now, but it is far,
far from a lasting stability," said Andrei Raichev, a political
analyst with Gallup International.
"Because the protests may have died, but the discontent has
not died at all," he said.
Should the government make another mistake similar to
Peevski's appointment, then "nothing can save them."