Bulgaria's central bank warned the coalition government on Wednesday that its spending spree aimed at shoring up the economy from the global crisis could cause a budget deficit which Sofia could not afford.

"We need calm and not to act stupid," Central Bank Governor Ivan Iskrov told an economic forum that discussed the planned government anti-crisis measures.

"Our economy will adjust itself to the new realities as long as we have financial stability and (fiscal) discipline".

The government, worried about its plummeting support ahead of parliamentary elections due between June and August, have said it would pour billions of levs (dollars) into the real economy to protect it from the crisis and create new jobs.

It also plans to raise pensions, public sector wages and aid to the poor to appease angry voters. Bulgaria has been hit by a wave protests with people saying they wanted measures against the crisis and better living standards.

Over 70 percent of the 7.6 million population in the poorest European Union nation say they want the government to go.

NO-CONFIDENCE MOTION

The government's popularity could erode further after opposition parties on Wednesday submitted a parliamentary no-confidence motion against the government, accusing it of "overall policy failure". [ID:nLI306038]

The seventh vote of no-confidence against the Socialist-led three-party coalition is unlikely to topple the government which has an overwhelming majority in the 240-seat chamber.

Some of the government's planned spending will come from cuts in administrative funds but the government is relying mainly on achieving yet another hefty fiscal windfall this year of 3 percent of GDP, the same as in 2008.

Economists and opposition parties say the budget surplus could evaporate because declining economic activity and foreign investment will reduce tax revenues. Hundreds of companies have shut down production and some face bankruptcies.

European Union Economic and Monetary Affairs Commissioner Joaquin Almunia said on Wednesday: "From the point of view of public finances of their budgetary strategy, I have to recommend them to keep doing what you are doing."

"If I am not wrong ...the Bulgarian surplus had been 3 percent, will be 3 percent, and will continue to be 3 percent according to the programme ...The only thing that I can tell the Bulgarian authorities is please keep doing so."

SPENDING PLANS

Iskrov said Bulgaria's access to foreign cash had been sharply reduced by the global financial woes and the Balkan country could not afford budget deficits at this stage.

"The access to unlimited credit resources at a low price no longer exists," he said. "Bulgaria is a small country ...and would not be able to sell global bonds or they would be too expensive."

"We must achieve at least a budget balance to avoid creating risky situations," Iskrov added.

Bulgaria has so far led one of the tightest fiscal policies in the EU as a result of a currency board arrangement which significantly limits monetary operations and leaves fiscal policy as the main tool to influence the economy.

A loosening in times of tight global liquidity and declining foreign investment, needed to fund a huge current account deficit, raises the risk for the emerging economy, analysts say.

Like elsewhere in eastern Europe, Bulgaria's booming growth from the past decade has come at the expense of an external gap that hit 24.3 percent of GDP last year as consumers took loans to buy imported goods after decades of communist austerity.

Prime Minister Sergei Stanishev defended his government's spending plans, saying other countries had been doing the same.

"One way to counter the crisis is through government public investment ...This is happening in the United States too and one can hardly argue against it," Stanishev said, speaking at the same economic forum as the central bank chief.

He said the government will spend over 6.0 billion levs ($3.9 billion) on infrastructure projects, buildings repairs and education and healthcare projects to create nearly 80,000 jobs.

It will also give over 320 million levs in aid to protesting farmers on top of EU subsidies to compensate them for falling prices.

Companies which have asked their employees to work part-time instead of firing them would get 27 million levs to pay small salaries, Stanishev said.