By Tsvetelia Tsolova
SOFIA (Reuters) - New Bulgarian interim Prime Minister Marin Raikov pledged on Tuesday to retain fiscal discipline with a cabinet of professionals that aims to maintain market confidence and placate protesters ahead of an election on May 12.
President Rosen Plevneliev's choice of Raikov and other independents as ministers is designed to prove to protesters there has been a clean break with a political class they view as corrupt and unable to improve living standards in the European Union's poorest member.
But Plevneliev is also trying to reassure the EU and foreign investors that Bulgaria is in safe hands, will maintain tight fiscal policy - needed to maintain confidence in a currency peg to the euro - and not cave into demands to spend more.
Raikov, a former deputy foreign minister and current ambassador to France, will serve until the election in May, Plevneliev said. Kalin Hristov, a central bank deputy governor, will be finance minister.
"While we follow strictly the 2013 budget framework, we will take steps to improve the incomes of pensioners and the poorest," Raikov told reporters after he was named. "We will not allow fiscal policy that can endanger the currency board."
Bulgarians have demonstrated across the country over the past month, forcing the rightist government of Boiko Borisov to resign. Three people died after setting themselves on fire.
The size of demonstrations has fallen sharply this week and protest leaders have failed to form a new single group that could stand in a May election, indicating the current main parties will also dominate the next parliament.
While that may make it easier to form a new coalition government, it will probably also mean the current political class, the focal point of protesters' rage, remains in power and frustrations may yet bubble up again.
On Tuesday, about 300 people gathered outside parliament before it was dissolved, brandishing brooms to "sweep away the trash" and demanding the law be changed to allow normal citizens to stand for parliament without having to be members of a party.
PUBLIC FRUSTRATION
The Socialists, who run neck-to-neck with Borisov's GERB party in opinion polls, said the interim government needed to prove it was non-partisan by sacking political appointees of GERB in regional governments and the Interior Ministry to allow for fair elections.
"Otherwise a suspicion that this government is a second, reserve team of GERB team will be affirmed," Socialist leader Sergei Stanishev said.
Plevneliev was elected president in 2011 on GERB's ticket and four of the interim ministers, including Raikov, have served as deputy ministers in Borisov's administration.
Bulgaria has sought to ease public frustration by cutting electricity prices and revoking the licence of Czech electricity distributor CEZ, measures that analysts say go against EU norms of due process.
The concessions have raised questions over economic policy, which is important as Bulgaria needs to keep debt low to maintain confidence in the pegged rate of its lev currency to the euro.
Raikov, 52, is a career diplomat and well-known on the EU scene, having helped start Bulgaria's process of joining the bloc when deputy foreign minister in 1998. He has twice been ambassador to France, including from 2009 until now.
Hristov, 42, has been in charge of the currency board regime as deputy central bank governor since 2009, maintaining a peg to the euro even as Bulgaria suffered a deep recession and helping to maintain investor confidence in policy.
"Raikov matches the profile," said Daniel Smilov, a political analyst with Sofia-based Centre For Liberal Studies. "He is more or less politically neutral and has no links to different business groupings - these are the two most important conditions."
(Additional reporting by Angel Krasimirov; Editing by Alison Williams)
