SOFIA (Reuters) - Bulgaria's parliament on Thursday accepted the government's decision to resign in the face of anti-austerity protests, opening the way for an early election that may benefit fringe parties and make it hard to form a stable government.
Outgoing Prime Minister Boiko Borisov, praised by investors for cutting the budget deficit, lost support from voters in the European Union's poorest state over his failure to raise living standards or stamp out graft.
After mass protests set off by high energy bills, Borisov stepped down on Wednesday -- the latest administration to fall in Europe's four-year-old debt crisis.
Parliament voted on Thursday to accept the move and President Rosen Plevneliev will now ask the three biggest parties if they want to form a government to rule until a parliamentary election due in July.
But both Borisov's GERB party and the main opposition Socialists have said they do not want to participate in a caretaker cabinet, so Plevneliev could schedule an election for as early as April. Opinions polls put both parties on about 22-23 percent, suggesting no clear majority in the new parliament.
"We are open for dialogue with all parties but GERB, who ruined everything," said Socialist leader Sergei Stanishev, whose party was level in polls with Borisov's before the protests and may have benefited from the unrest.
The cabinet's departure brought some calm after a chaotic week of rallies against the government and foreign-owned power utilities and a threat by Bulgarian officials to strip one of them, Czech power group CEZ, of its licence.
Boriana Dimitrova, an analyst with pollster Alpha Research, said it could push voters towards the political fringe.
"The two key political powers are not strong enough to form a stable government," she said. "The recent protests indicate there is growing support for radical, populist parties, which will also make it harder to form a cabinet."
Borisov, a former guard to Soviet-era dictator Todor Zhivkov, won adoration from voters by building highways and improving roads so badly pot-holed that cars could lose wheels and travel across the small country could take up most of a day.
Around 2,000 Bulgarians waving GERB party flags, including farmers driving tractors and a truck full of pigs, cheered in front of parliament in support of Borisov.
"If all possibilities are exhausted...I will form an interim government, quickly and responsibly," said Plevneliev.
Borisov's administration also impressed foreign portfolio investors by freezing wages and pensions and cracking down on the grey economy by digitally linking firms ranging from the largest factory to the smallest kiosk to the tax office.
But those moves angered many in the Black Sea state of 7.3 million, who are also frustrated at his failure to make good on his 2009 election pledge to stamp out endemic corruption and reform inefficient healthcare and education systems.
"Am I pleased with Borisov's resignation? He's just the same as the ones before. They're all corrupt and they don't care about people," said Filip Ivanov, a 37-year-old taxi driver.
Borisov's popularity has suffered due to growing frustration over the slow plod from poverty of a country which has failed to grow convincingly since recession hit in 2009. Living standards are about 45 percent of the EU average, the bloc's lowest.
For many here, where wages average about 400 euros a month and pensions about half that, the final straw was winter power bills which at times exceeded incomes due to price rises that began to bite as temperatures fell.
In protests this month, tens of thousands blocked roads and some clashed with police and attacked offices of power distributors CEZ, Czech Energo Pro and Austrian EVN. The utilities say the increase was in line with a government approved hike in prices last year and said they had done nothing wrong.
Borisov's threat to strip CEZ of its power distribution licence has also put Sofia at odds with fellow European Union member the Czech Republic and raised eyebrows over its adherence to the bloc's stipulation that its members follow due process.
But Bulgaria's power regulator appeared to soften its stance slightly on Wednesday, saying CEZ may be able to keep its license if it reverses violations of the public procurement law. CEZ shares fell 2.8 percent on Thursday to a four-year low and Prague urged the European Union to step in.
Before stepping down, Borisov tried to appease voters by sacking Finance Minister Simeon Djankov, a lightning rod for criticism for his leading the charge on belt tightening, and promising a cut in power bills as of March.
For their part, the Socialists have pledged to raise taxes on the rich and scrap a flat 10 percent income tax rate it introduced in 2009 They also want to raise the minimum wage, restart the Russian-backed Belene nuclear power project and to impose strict control on utilities and fight monopolies. that has been a draw for foreign investors.
Editing by Philippa Fletcher