The snap elections - answers or further questions?
After the snap parliamentary elections on 11 July, six parties will enter the parliament, similar to the last regular elections in April this year, when a government could not be formed. The turnout on 11 July was one of the lowest ever: 42.2%, compared to 50.6% in April. The new populist party of the TV showman Trifonov (ITN) and the party of the long-standing former prime minister Borisov (GERB) gained the most votes.
The final data shows only insignificantly differing results: ITN has 24.1% of the votes, while GERB (EPP Member) has 23.5%, followed by the Socialists (BSP) with 13.4%, the Democratic Bulgaria party (center right, pro EU: a coalition between EPP affiliates and the Greens) with 12.6%, the party of the Turkish minority DPS (ALDE member) with 10.7%, and the third “protest” party: “Stand up! Mafia out!” with 5% of the votes. For comparison, April's election yielded the following results: GERB 26.2% (-2.7pp in July), ITN 17.7% (+6.4pp in July), BSP 15.1% (-1.7pp in July), DPS 10.5% (-0.2pp in July), Democratic Bulgaria 9.6% (+3.0pp in July), “Stand up! Mafia Out!”: 4.7% (+0.3pp in July).
Compared to the regular elections in April the three protest parties (ITN, Democratic Bulgaria and Stand up!) increased their result by 20 seats to 112 — below the majority threshold of 121 members of the parliament. The populist-right-wing Patriots, who were a coalition partner of the former ruling GERB party couldn’t pass the 4% hurdle required to enter the parliament.
According to the constitution, the president will give the mandate for forming a government to the two largest parliamentary groups (first ITN and then GERB). If they fail, the president chooses another party. If the third attempt is not successful, new snap general elections will follow.
Surprisingly, even before the final results came out, with 65 MPs (out of a 240 seats parliament), Mr. Trifonov, the leader of ITN, proposed a new (minority) government, saying he would not enter into coalition agreements with other parties. The move was provoking rather negative reactions by the other parliamentary parties.
The political situation currently is complicated. Still, there are several options out of which look more likely:
A minority government by ITN;
A coalition government with the third mandate given by the president to the BSP (most likely) or to Democratic Bulgaria; as a government proposed by the second strongest GERB is unlikely to be voted into parliament.
We believe that other snap elections are rather improbable as all parties declared willingness to form a government in the new parliament.
Overall, turbulent political times continue, and the next government will have a challenging environment relying most likely on floating majorities in the parliament for its legislative initiatives.
CPI inflation surprised to the upside in Russia and Hungary this week, revealing the mounting pressure on their respective central banks. Next weeks' data will reveal whether these surprises will be mirrored in the US and throughout the CEE region. The pressure will likely entice the Russian central bank to hike their key rate later this month. Another surprise was the announcement of the completion of the ECB strategic review this week, which will be implemented later this month already. Meanwhile, industrial production is set to continue its sluggish development in the euro area, whereas the dynamic is falling but remains solid in selected CEE countries.