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UPDATE 2-President says Bulgaria will stick to spending controls

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(Globalpost/GlobalPost)

* President vows to keep fiscal prudence

* Varna mayor resigns after man set himself on fire

* Protests and government resignation are risks to economy (Recasts, adds president's comments)

By Tsvetelia Tsolova and Angel Krasimirov

SOFIA, March 6 (Reuters) - Bulgaria's president tried to reassure Sofia's European Union partners on Wednesday that any new government in his country would not ease controls on spending to appease a tide of public anger that brought down the last administration.

The protests were sparked by higher power prices but spread due to anger about the struggling economy, poor governance, injustice and corruption that plague the European Union's poorest country six years after it joined the bloc.

Early elections in May will almost certainly result in a parliament split between factions unwilling to work together, raising questions over whether it can maintain tight fiscal policy needed to maintain a currency peg to the euro.

Those concerns are particularly acute given that the economy grew by only 0.8 percent in 2012.

President Rosen Plevneliev occupies what is normally only a figurehead position, but take on a particular significance as it is he who will choose an interim government on March 13 to take the country to the elections and he will also have influence over the formation of a new coalition after the polls.

"Bulgaria is an island of fiscal discipline," Plevneliev told reporters on a visit to Brussels. "The budget is clear, it is not going to be changed. But with the budget there is a smart option to do more social policies."

Many in the country of 7.3 million blame rampant corruption and shady links between political elites and business for stifling development and the rule of law. The average salary is 400 euros ($520) a month and pensions less than half that.

Bulgaria is excluded from the EU's passport-free Schengen zone and its justice is subject to Brussels monitoring because of graft concerns. The country is ranked second-worst in the bloc for corruption by watchdog Transparency International.

MAYOR RESIGNS

Bulgaria's economy is only slowly recovering from a deep recession after a credit boom burst in 2009 and that, combined with protester demands for more spending, is likely to mean the budget deficit rises from just 0.5 percent of national output last year. The government targets 1.3 percent for 2013.

"What we will be seeing in the next 1-2 years in Bulgaria is not any break of fiscal discipline," Plevneliev said. "But on the other side a switch to more productive policies in favour of employment and social care."

Widespread anti-austerity protests in which three people set fire to themselves forced rightist Prime Minister Boiko Borisov to resign two weeks ago, but demonstrations have continued.

The mayor of Varna became the latest politician to be felled by protests on Wednesday, caving in to public pressure and resigning after a man who set himself on fire in the Black Sea city last month died on Sunday.

Plamen Goranov, a 36-year-old artist, became a symbol for the protests after dousing himself in petrol and setting himself alight on Feb. 20.

Protesters accused the mayor, Kiril Yordanov, of improper ties with a powerful group of businesses that they say exerts control over Bulgaria's third largest city.

Yordanov, mayor of Varna for 13 years, denied any wrongdoing but said he had resigned because his reputation had been damaged. "The events are too hot to allow us to make a sober assessment," he told reporters.

Hundreds of people attended a memorial service in Varna on Wednesday for Goranov, dubbed "the Bulgarian Jan Palach" after the Czech student who set himself on fire in 1969 in protest at the Soviet occupation of Czechoslovakia.

"Plamen set himself on fire to illuminate our future because we are still living in a land of darkness," Milena Angelova, one of the mourners, told local media. (Additional reporting by Justyna Pawlak in Brussels)

http://www.globalpost.com/dispatch/news/thomson-reuters/130306/update-1-bulgarian-mayor-resigns-after-man-sets-himself-fire