FACTBOX-Key political risks to watch in Bulgaria

By Tsvetelia Tsolova

SOFIA, Oct 3 (Reuters) - Bulgaria has managed to navigate the euro zone's debt crisis with little damage thanks to tight fiscal policy at the expense of slow growth that is keeping living standards among the European Union's lowest.

Prime Minister Boiko Borisov's centre-right GERB party remains the leading political faction ahead of a summer 2013 election, though its support has been eroding.

Following are the main political risks for Bulgaria: GOVERNMENT SUPPORT

While support for Borisov's GERB has been hit by a jump in electricity prices, high unemployment and low incomes, his party remains the leading political faction.

Government popularity has been further hit by inconsistent policies on a new nuclear plant at Belene - a plan dropped in March and now subject to a referendum as Bulgaria seeks to be less dependent on Russian energy.

What to watch:

- Will the lacklustre economy and bad publicity over Belene erode Borisov's ratings and push him into proposing populist measures such as increases in public pay? Political tensions could increase the country's cost of borrowing.


Growth should be about 1 percent this year, compared with 6-7 percent prior to the economic downturn in 2009 and leaving living standards far behind the rest of the EU.

The government has managed to keep its deficit at one of the lowest levels in the bloc, at 1.3 percent of GDP, and can now raise state pensions after a three-year freeze.

What to watch:

- Will the government be able to avoid lavish spending in an election year which may swell the fiscal deficit and increase risks for the currency peg to the euro?


Corruption and organised crime still blight Bulgaria 20 years after the end of communist rule, deterring investors, hindering growth and delaying its entry into the EU's Schengen zone of borderless travel.

What to watch:

- Will the government show it can fight corruption by convicting a top official? This is unlikely to move markets in the short term but would send an important signal that Bulgaria was becoming an easier place to do business.

(Editing by Dan Lalor)


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