By Edward McAllister
Dec 11 (Reuters) - The resignation of Bulgaria's government on Thursday puts an end to an increasingly unpopular coalition but is likely to usher in a period of prolonged political instability on the eve of the Black Sea nation's entry into the euro zone.
The European Union and NATO member state has held seven national elections in the past four years as consecutive governments failed to keep control of a fractured parliament.
The outgoing government, in power since January, had looked set to oversee the transition to the euro on January 1, but Prime Minister Rosen Zhelyazkov handed in his government's resignation after weeks of street protests against state corruption and a new budget that would have increased taxes.
Even Bulgaria's largely ceremonial head of state, President Rumen Radev, had called for Zhelyazkov to resign.
The reaction was muted on the streets of Sofia after the resignation but some were quietly optimistic on one point: the government had listened to the protesters.
"It was about time. Long overdue. There are certainly intelligent, sensible people (in parliament) who can come up with something meaningful and put an end to the abuses we’ve seen," said IT specialist Hristiyan Marinov.
Still, Bulgaria faces more elections in the coming months if no new government steps up.
"There is a great risk that we actually end up with another series of elections," said Dimitar Markov, Director of the Law Program at the Center for the Study of Democracy in Sofia.
PROTESTS FORCE OUT UNPOPULAR GOVERNMENT
The protests began in late November when Zhelyazkov's government, composed of three parties, proposed a draft budget that included an increase in social security contributions and taxes on dividends to finance higher state spending.
Some of that spending was earmarked for police, security services and the judiciary - the very bodies that many Bulgarians have grown to despise over years that have seen Bulgaria ranked as one of the EU's most corrupt countries. The budget was withdrawn, but popular anger has persisted.
Many were already upset by other government actions, including a perceived crackdown on the liberal, pro-EU opposition that saw Blagomir Kotsev, mayor of the coastal resort of Varna, jailed for months on allegations of corruption, which he strongly denies.
The protests swelled and by Wednesday tens of thousands of people were on the streets of cities and towns across Bulgaria calling for the government to step down.
They represented some of the biggest anti-government gatherings since the end of communism in 1989 and the broad demographics and politics of the protesters set them apart from other recent demonstrations, political analysts said.
"This was an accumulation of things. The tension has been growing over time, and the budget was the tipping point," Markov said.
Many of the protesters were urban professionals who back Bulgaria's adoption of the euro and want to see it join the European mainstream after a difficult transition to democracy marred by organised criminal networks and corrupt politicians.
But the demonstrators have also included those who fear that joining the euro will fuel inflation or who oppose Bulgaria's official pro-Western stance on issues such as the Ukraine war, preferring to repair ties with Moscow, Sofia's historic ally.
Some analysts said the protests could lead to real change.
"People realise that their will, when they express it, matters," said Vessela Tcherneva, deputy director at the European Council on Foreign Relations in Sofia. "Whoever the next government is will be more aware and will need to be more accountable."
POLITICAL UNCERTAINTY AS EURO MEMBERSHIP LOOMS
The president will now give the largest party in parliament, GERB, the mandate to form a new government but it is likely to struggle to find wider support in a fragmented parliament containing some nine parties, some of them very small.
If GERB fails, or rejects the mandate, two other parties will be given the opportunity. If they fail or refuse, President Radev will appoint an interim government and call a snap election. This could pitch Bulgaria back into a cycle of repeated polls if no one can form a functioning coalition.
Bulgarians remain split over the euro, polls show, and there is some concern that without strict government oversight, retailers will take advantage of public confusion over the conversion to jack up prices.
"The state has a critical role to make sure there are no major shocks to the system," said Mario Bikarski, Senior Europe Analyst at risk consultancy Verisk Maplecroft.
"In the absence of a budget and the absence of a government, the risks to the system are increasing quite a bit."
(Reporting by Edward McAllisterEditing by Gareth Jones)
