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SOFIA (Reuters) - Bulgaria's centre-right GERB party signed a coalition agreement on Thursday with a nationalist alliance that will bring former prime minister Boiko Borisov back to power for his third term since 2009.
The deal came after GERB agreed to demands from United Patriots (UP), an alliance of three nationalist parties, to raise the minimum state pension in the European Union's poorest country.
Borisov, a 57-year-old former bodyguard and fireman, will have until May 4 to present his government for a vote of confidence in parliament, where the coalition has a one-seat majority, but is supported by the small populist Will party.
The government, which brings nationalists into power for the first time, will respect the Black Sea state's commitments to the European Union and NATO and will try to raise incomes that still lag well behind the EU average.
"We have signed the coalition agreement. We have tried to cover all points so that we can guarantee stable governance," Borisov told reporters after accepting a mandate from President Rumen Radev to form a government.
Borisov said ministerial appointments were yet to be discussed. Vladislav Goranov is expected to regain the post of finance minister he held in the previous GERB government, political sources say.
The UP, which used strongly anti-migrant and anti-Turkish rhetoric during the election campaign, may strain Bulgaria's ties with neighbouring Turkey and also raise concerns in the EU, which is facing a surge of support for right-wing populism.
Political analysts said the new government was likely to survive at least until July 2018 and to maintain fiscal stability, but they doubted it would make much headway with much-needed reforms to tackle graft and improve public services.
"We will see a stable government at least until next year when Bulgaria holds the EU's rotating presidency. This is the main goal," said Daniel Smilov of the Centre for Liberal Strategies in Sofia.
"I don't expect any significant reforms apart from the mild revision of income policy. I don't expect to see any changes in the judicial system as well," he said.
Bulgaria, which joined the EU in 2007, will hold the bloc's rotating presidency from Jan. 1 to June 30 next year.
Under the coalition agreement, GERB and UP will set up a council to take consensus decisions on policies that is likely to meet every week, said Valeri Simeonov, one of UP leaders.
GERB and UP have committed to boost economic growth, double teachers' salaries and raise the average monthly wage by 50 percent during the four-year parliament.
The new government is expected to maintain income and corporate taxes, among the lowest in the EU, unchanged at 10 percent and to keep the lev currency pegged to the euro until Bulgaria joins the euro zone.
Borisov resigned as prime minister late last year after GERB's candidate was defeated in a presidential election. This triggered the snap parliamentary poll in March, which GERB won but without an outright majority.
Reporting by Tsvetelia Tsolova; Editing by Gareth Jones