Bulgarian President Rosen Plevneliev on March 11 appointed a technocratic caretaker government to replace the centre-right government of Boiko Borisov that resigned in February over public protests over austerity policies and high utility prices, which will serve until early parliamentary elections are held May 12.

Plevneliev said in a statement that the caretaker government, led by Marin Raykov, Bulgaria's current ambassador to France, would take office on Wednesday, March 13. It will include as finance minister deputy central bank governor Kalin Hristov. 

The preparation of fair elections and stability of state institutions would be the main tasks of his government, Raykov said. He also vowed to stick to the 2013 budget and is committed to maintaining a currency peg to the euro. "While we follow strictly the 2013 budget framework, we will take steps to improve the incomes of pensioners and the poorest," Raikov told reporters.

Analysts say the interim government needs to urgently restore trust in state institutions or risk exacerbating an already dire economic situation in the EU's poorest country. "If protests continue and political instability drags on, it is set to pose problems for the economy by pushing new investors away and prompting those already here to postpone any development plans," Institute for Market Economics analyst Kaloyan Staykov told AFP.

Georgy Angelov of the Sofia branch of the Open Society Institute in a Presa newspaper editorial, that failure to find a relatively swift way out of the political crisis "risks resulting in an economic downturn, the loss of hundreds of thousands more jobs and growing poverty."

The previous government was marked by fiscal discipline, which involved keeping its currency, the lev, being pegged to the euro. It squeezed the public deficit to just 0.5% of GDP in 2012 and public debt to 15-19%, one of the lowest across the 27-nation EU.

But this has come at the price of drastic government spending cuts, and freezing public sector salaries at an average of 400 euros over the past three years. Average pensions in the rapidly ageing nation have remained stuck at 138 euros.

Hence a sharp rise in utility bills in February prompted thousands to take to the streets in the biggest upsurge of public discontent in 16 years, with demonstrators fighting running battles with riot police. Three people died after setting themselves on fire. Borisov's decision to throw in the towel has however failed to soothe people's anger, with several thousand people taking to the streets of the capital Sofia and other cities on Sunday, brandishing banners like "Out with the Mafia".