Rob Whitford and Nicholas Watson -

Bulgaria's centre-right party headed by Sofia Mayor Boiko Borisov is the clear winner of the general election, according to final results released by the central electoral commission on July 8.

Citizens for the European Development of Bulgaria, known by its Bulgarian acronym of GERB, garnered 39.72% of the vote, which translates into 116 seats in parliament, just shy of the 120 needed for an outright majority in the 240-seat parliament. Borisov, who has already said he is ready to become the next prime minister, is due to hold coalition talks this week with the small right-wing Blue Coalition that garnered 6.76% and 15 seats, which would secure him a working majority.

This Blue Coalition, the traditional anti-communist right, is a logical partner for GERB and has conspicuously got its act together in recent months. That wasn't a foregone conclusion: successful in government in 1997-2001, the right has been fragmented and fractious since it was electorally humiliated in 2001, and it was real progress when its two main splinter groups – the hardline Democrats for a Strong Bulgaria (DSB) and the milder Union of Democratic Forces (UDF) – agreed this year to run together in this Blue Coalition.

Borisov, former bodyguard of communist leader Todor Zhivkov, went from being Bulgaria's top cop to a successful independent runner for the Sofia mayor's post in 2005 – and, in 2006, to setting up his own political force GERB. Strong on law and order, the centre-right GERB has also developed a pro-business economic platform and still relies heavily on the macho "action man" appeal of the charismatic Borisov. Charisma fades with time, however, and a reasonably successful, but far from miraculous, term as Sofia mayor has provided some "reality check."

One of Borisov's first jobs will be talking to the International Monetary Fund and EU for financial assistance, something he has insisted he will do, unlike the previous government under outgoing PM Sergei Stanishev, who vehemently resisted calls to turn to the IMF.

According to analysts, the intended and immediate impact of the loan would be to shore up Bulgaria's external financing position, which is groaning under a current account deficit of about 24%. Capital Economics estimates that Bulgaria faces a $25bn external financing gap this year and around $20bn in 2010. It points out that that's less than in neighbouring Romania, which recently agreed a $25bn package with the IMF/EU, so any programme for Bulgaria is likely to be correspondingly smaller, perhaps closer to $15bn.

The loan should also ease pressure on Bulgaria's currency board, which pegs the lev to the euro. Like Latvia, Bulgaria will almost certainly insist to the IMF that it wants to keep this peg, meaning that without a devaluation all the stress has to fall on budget cuts, which will only serve to deepen the current recession. "Admittedly, given the relative health of Bulgaria's public finances, this is likely to be on a much less crippling scale than in Hungary or Romania," says Neil Shearing of Capital Economics. "Still, with revenue falling as the economy contracts, spending cuts of around 2% of GDP may be needed to keep the deficit below the Maastricht criteria of 3% of GDP."

All this means that there won't be any quick recovery for Bulgaria - Bulgaria's economy is expected to contract by 5% this year - which is likely to put a further dent in Borisov's popularity.

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