Bulgarian Leaders Clash Over Who Should Lead Bank Into Euro Area

(Bloomberg) -- Bulgaria's ruling coalition descended into bickering over the choice for a new central bank governor, laying bare fissures in Prime Minister Kiril Petkov's fragile alliance two years before the country aspires to adopt the euro.

Governor Dimitar Radev's term at the central bank expired last year and lawmakers are still struggling to allay the crisis to appoint his successor. While the spat doesn't pose an urgent danger to the coalition, it sheds a light on political infighting in a European Union member state aims for euro accession in 2024.

Petkov's ruling party, which won an upset election last year that helped topple long-ruling conservative leader Boyko Borissov, nominated its parliamentary caucus leader, Andrey Gyurov. An academic who once oversaw credit control at Austria's Vienna-based Volksbank, Gyurov's nomination came the day of the deadline.

But Petkov's choice to head the central bank is being challenged by an anti-establishment junior partner run by a flamboyant talk show host, Stanislav Trifonov. The party has put forward Lyubomir Karimansky, a lawmaker and former executive at Investbank AD until 2015.

Bulgaria has entered the pre-euro exchange-rate mechanism, ERM-2, meaning that a new central bank chief will need to prepare the nation's entry -- even if the candidate has less leeway over monetary policy and bank supervision.

The duelling appointments have heightened tension in Sofia, raising the risk that failure to agree on a new governor could require the new nominee to rely on votes from the opposition. That could spur a full-blown political crisis.

Petkov's chief of staff, Lena Borislavova, told broadcaster BTV that blocking Gyurov will “cast serious doubt over the will to control the banking system.” Karimansky read the comments as an attack, calling them “attempts at defamation” that would undermine the central bank's independence in a video statement on Sunday.

Bulgaria's economy has been weighed down by banking woes in the past. It had to strengthen two lenders, Investbank and one of the country's biggest locally-owned units, First Investment Bank, in its efforts to join the EU's pre-euro exchange mechanism. It was also forced to join the bloc's banking union.

Petkov's party has pledged to stamp out corruption in Bulgaria. But the episode underscores his plight overseeing a coalition with four main factions consisting of several parties with contradicting views.