FDA approves new targeted breast cancer drug

WASHINGTON (AP) — The Food and Drug Administration has approved a first-of-a-kind breast cancer medication that targets tumor cells while sparing healthy ones.

The drug Kadcyla from Roche combines the established drug Herceptin with a powerful chemotherapy drug and a third chemical linking the medicines together. The chemical keeps the cocktail intact until it binds to a cancer cell, delivering a potent dose of anti-tumor poison.

Cancer researchers say the drug is an important step forward because it delivers more medication while reducing the unpleasant side effects of chemotherapy.

"This antibody goes seeking out the tumor cells, gets internalized and then explodes them from within. So it's very kind and gentle on the patients — there's no hair loss, no nausea, no vomiting," said Dr. Melody Cobleigh of Rush University Medical Center. "It's a revolutionary way of treating cancer."

Cobleigh helped conduct the key studies of the drug at the Chicago facility.

The FDA approved the new treatment for about 20 percent of breast cancer patients with a form of the disease that is typically more aggressive and less responsive to hormone therapy. These patients have tumors that overproduce a protein known as HER-2. Breast cancer is the second most deadly form of cancer in U.S. women, and is expected to kill more than 39,000 Americans this year, according to the National Cancer Institute.

The approval will help Roche's Genentech unit build on the blockbuster success of Herceptin, which has long dominated the breast cancer marketplace. The drug had sales of roughly $6 billion last year.

Genentech said Friday that Kadcyla will cost $9,800 per month, compared to $4,500 per month for regular Herceptin. The company estimates a full course of Kadcyla, about nine months of medicine, will cost $94,000.

FDA scientists said they approved the drug based on company studies showing Kadcyla delayed the progression of breast cancer by several months. Researchers reported last year that patients treated with the drug lived 9.6 months before death or the spread of their disease, compared with a little more than six months for patients treated with two other standard drugs, Tykerb and Xeloda.

Overall, patients taking Kadcyla lived about 2.6 years, compared with 2 years for patients taking the other drugs.

FDA specifically approved the drug for patients with advanced breast cancer who have already been treated with Herceptin and taxane, a widely used chemotherapy drug. Doctors are not required to follow FDA prescribing guidelines, and cancer researchers say the drug could have great potential in patients with earlier forms of breast cancer

Kadcyla will carry a boxed warning, the most severe type, alerting doctors and patients that the drug can cause liver toxicity, heart problems and potentially death. The drug can also cause severe birth defects and should not be used by pregnant women.

Kadcyla was developed by South San Francisco-based Genentech using drug-binding technology licensed from Waltham, Mass.-based ImmunoGen. The company developed the chemical that keeps the drug cocktail together and is scheduled to receive a $10.5 million payment from Genentech on the FDA decision. The company will also receive additional royalties on the drug's sales.

Shares of ImmunoGen Inc. rose 2 cents to $14.32 in afternoon trading. The stock has ttraded in a 52-wek range of $10.85 to $18.10.

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Investors face another Washington deadline

NEW YORK (Reuters) - Investors face another Washington-imposed deadline on government spending cuts next week, but it's not generating the same level of fear as two months ago when the "fiscal cliff" loomed large.

Investors in sectors most likely to be affected by the cuts, like defense, seem untroubled that the budget talks could send stocks tumbling.

Talks on the U.S. budget crisis began again this week leading up to the March 1 deadline for the so-called sequestration when $85 billion in automatic federal spending cuts are scheduled to take effect.

"It's at this point a political hot button in Washington but a very low level investor concern," said Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. The fight pits President Barack Obama and fellow Democrats against congressional Republicans.

Stocks rallied in early January after a compromise temporarily avoided the fiscal cliff, and the Standard & Poor's 500 index <.spx> has risen 6.3 percent since the start of the year.

But the benchmark index lost steam this week, posting its first week of losses since the start of the year. Minutes on Wednesday from the last Federal Reserve meeting, which suggested the central bank may slow or stop its stimulus policy sooner than expected, provided the catalyst.

National elections in Italy on Sunday and Monday could also add to investor concern. Most investors expect a government headed by Pier Luigi Bersani to win and continue with reforms to tackle Italy's debt problems. However, a resurgence by former leader Silvio Berlusconi has raised doubts.

"Europe has been in the last six months less of a topic for the stock market, but the problems haven't gone away. This may bring back investor attention to that," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

OPTIONS BULLS TARGET GAINS

The spending cuts, if they go ahead, could hit the defense industry particularly hard.

Yet in the options market, bulls were targeting gains in Lockheed Martin Corp , the Pentagon's biggest supplier.

Calls on the stock far outpaced puts, suggesting that many investors anticipate the stock to move higher. Overall options volume on the stock was 2.8 times the daily average with 17,000 calls and 3,360 puts traded, according to options analytics firm Trade Alert.

"The upside call buying in Lockheed solidifies the idea that option investors are not pricing in a lot of downside risk in most defense stocks from the likely impact of sequestration," said Jared Woodard, a founder of research and advisory firm condoroptions.com in Forest, Virginia.

The stock ended up 0.6 percent at $88.12 on Friday.

If lawmakers fail to reach an agreement on reducing the U.S. budget deficit in the next few days, a sequester would include significant cuts in defense spending. Companies such as General Dynamics Corp and Smith & Wesson Holding Corp could be affected.

General Dynamics Corp shares rose 1.2 percent to $67.32 and Smith & Wesson added 4.6 percent to $9.18 on Friday.

EYES ON GDP DATA, APPLE

The latest data on fourth-quarter U.S. gross domestic product is expected on Thursday, and some analysts predict an upward revision following trade data that showed America's deficit shrank in December to its narrowest in nearly three years.

U.S. GDP unexpectedly contracted in the fourth quarter, according to an earlier government estimate, but analysts said there was no reason for panic, given that consumer spending and business investment picked up.

Investors will be looking for any hints of changes in the Fed's policy of monetary easing when Fed Chairman Ben Bernake speaks before congressional committees on Tuesday and Wednesday.

Shares of Apple will be watched closely next week when the company's annual stockholders' meeting is held.

On Friday, a U.S. judge handed outspoken hedge fund manager David Einhorn a victory in his battle with the iPhone maker, blocking the company from moving forward with a shareholder vote on a controversial proposal to limit the company's ability to issue preferred stock.

(Additional reporting by Doris Frankel; Editing by Kenneth Barry)

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Iran appears to advance in construction of Arak nuclear plant

VIENNA (Reuters) - Iran appears to be advancing in its construction of a research reactor Western experts say could offer the Islamic state a second way of producing material for a nuclear bomb, if it decided to embark on such a course, a U.N. report showed.

Iran has almost completed installation of cooling and moderator circuit piping in the heavy water plant near the town of Arak, the International Atomic Energy Agency (IAEA) said in a confidential report issued to member states late on Thursday.

Nuclear analysts say this type of reactor could yield plutonium for nuclear arms if the spent fuel is reprocessed, something Iran has said it has no intention of doing. Iran has said it "does not have reprocessing activities", the IAEA said.

In its previous report on Iran, in November, the Vienna-based U.N. agency said installation work at Arak was continuing, without giving any indication of how far advanced it was.

Iran rejects Western allegations it seeks to develop a capability to assemble nuclear weapons, saying its atomic program is entirely peaceful and that the Arak reactor will produce isotopes for medical and agricultural use.

Iran says it plans to begin operating the facility in the first quarter of 2014, the IAEA said. Tehran last year postponed the planned start-up from the third quarter of 2013, a target that Western experts said always had seemed unrealistic.

The Arms Control Association, a Washington-based research and advocacy group, said late last year that it was questionable whether Iran would be able to meet the new target date as well, in view of "significant delays and impeded access to necessary materials" because of international sanctions imposed on Iran.

Western worries about Iran are focused largely on uranium enrichment plants at Natanz and Fordow, as such material refined to a high level can provide the fissile core of an atomic bomb. But experts say Arak may also be a proliferation issue.

The Arak facility is a "growing source of concern", said Mark Fitzpatrick, director of the non-proliferation and disarmament program of the International Institute for Strategic Studies (IISS), a London-based think-tank.

Israel, believed to be the Middle East's only nuclear-armed state, sees Iran's nuclear program as a serious danger and has threatened to attack its atomic sites if diplomacy and sanctions fail to resolve the decade-old dispute.

If it does, the nuclear sites at Natanz, Fordow and Arak in central Iran are likely to be targets. Fitzpatrick said it could be Arak that triggers a conflict because attacking it after it is launched could cause an environmental disaster.

TESTING FUEL FOR ARAK REACTOR

Thursday's quarterly IAEA report showed Iran expanding its uranium enrichment program in defiance of tightening Western sanctions, installing advanced centrifuge machines at its main enrichment plant near the town of Natanz.

The report, issued just a few days before six world powers and Iran are due to resume negotiations after an eight-month hiatus, underlined the tough task facing the West in seeking to pressure Tehran to curb its nuclear activities.

Cliff Kupchan, Middle East director at the Eurasia consultancy, said Iran had adopted a defiant policy of pressing ahead with its nuclear program, despite harsh sanctions.

"As a result, Israel and the U.S. Congress will press a receptive U.S. administration to move forward with new and even harsher sanctions," he said in a research note.

Enriched uranium can fuel nuclear power plants, Iran's stated aim, but also provide the explosive core of a nuclear weapon if refined much further. Making plutonium from spent fuel is a second way of obtaining potential bomb material.

The Institute for Science and International Security (ISIS), a U.S. think-tank, noted that Iran planned to use a medical research reactor in Tehran, known as TRR, to test fuel for Arak.

"The TRR is now more than a medical isotope production reactor, Iran's stated use for the reactor, and is necessary for the operation" of Arak, it said in a report.

If operated optimally, the heavy-water plant could produce about nine kilograms (20 pounds) of plutonium a year, or enough for about two nuclear bombs annually, ISIS has said previously.

"Before it could use any of the plutonium in a nuclear weapon, however, it would first have to separate the plutonium from the irradiated fuel," it added on its website.

Iran has repeatedly declared it has no plans to reprocess the spent fuel. But, "similarly sized reactors ostensibly built for research" have been used by India, Israel, North Korea and Pakistan to make plutonium for weapons, Fitzpatrick said.

(Editing by Mark Heinrich)

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Buffed & Bronzed: How Stars Get Oscars Ready

Before Emily Blunt, Jessica Chastain and more even RSVP to an awards show like the Oscars, they book an appointment with top beauty pros for some serious pre-event primping

Credit: Paul A. Hebert/Getty

Updated: Thursday Feb 14, 2013 | 04:00 PM EST

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Flu shot doing poor job of protecting older people

ATLANTA (AP) — It turns out this year's flu shot is doing a startlingly dismal job of protecting older people, the most vulnerable age group.

The vaccine is proving only 9 percent effective in those 65 and older against the harsh strain of the flu that is predominant this season, the Centers for Disease Control and Prevention said Thursday.

Health officials are baffled as to why this is so. But the findings help explain why so many older people have been hospitalized with the flu this year.

Despite the findings, the CDC stood by its recommendation that everyone over 6 months get flu shots, the elderly included, because some protection is better than none, and because those who are vaccinated and still get sick may suffer less severe symptoms.

"Year in and year out, the vaccine is the best protection we have," said CDC flu expert Dr. Joseph Bresee.

Overall, across the age groups studied, the vaccine's effectiveness was found to be a moderate 56 percent, which means those who got a shot have a 56 percent lower chance of winding up at the doctor with the flu. That is somewhat worse than what has been seen in other years.

For those 65 and older, the vaccine was only 27 percent effective against the three strains it is designed to protect against, the worst level in about a decade. It did a particularly poor job against the tough strain that is causing more than three-quarters of the illnesses this year.

It is well known that flu vaccine tends to protect younger people better than older ones. Elderly people have weaker immune systems that don't respond as well to flu shots, and they are more vulnerable to the illness and its complications, including pneumonia.

But health officials said they don't know why this year's vaccine did so poorly in that age group.

One theory, as yet unproven, is that older people's immune systems were accustomed to strains from the last two years and had more trouble switching gears to handle this year's different, harsh strain.

The preliminary data for senior citizens is less than definitive. It is based on fewer than 300 people scattered among five states.

But it will no doubt surprise many people that the effectiveness is that low, said Michael Osterholm, a University of Minnesota infectious-disease expert who has tried to draw attention to the need for a more effective flu vaccine.

Among infectious diseases, flu is considered one of the nation's leading killers. On average, about 24,000 Americans die each flu season, according to the CDC.

This flu season started in early December, a month earlier than usual, and peaked by the end of year. Hospitalization rates for people 65 and older have been some of the highest in a decade, at 146 per 100,000 people.

Flu viruses tend to mutate more quickly than others, so a new vaccine is formulated each year to target the strains expected to be the major threats. CDC officials have said that in formulating this year's vaccine, scientists accurately anticipated the strains that are circulating this season.

Because of the guesswork involved, scientists tend to set a lower bar for flu vaccine. While childhood vaccines against diseases like measles are expected to be 90 or 95 percent effective, a flu vaccine that's 60 to 70 percent effective in the U.S. is considered pretty good. By that standard, this year's vaccine is OK.

For senior citizens, a flu vaccine is considered pretty good if it's in the 30 to 40 percent range, said Dr. Arnold Monto, a University of Michigan flu expert.

A high-dose version of the flu shot was recently made available for those 65 and older, but the new study was too small to show whether that has made a difference.

The CDC estimates are based on about 2,700 people who got sick in December and January. The researchers traced back to see who had gotten shots and who hadn't. An earlier, smaller study put the vaccine's overall effectiveness at 62 percent, but other factors that might have influenced that figure weren't taken into account.

The CDC's Bresee said there is a danger in providing preliminary results because it may result in people doubting — or skipping — flu shots. But the figures were released to warn older people who got shots that they may still get sick and shouldn't ignore any serious flu-like symptoms, he said.

___

Online:

CDC report: http://www.cdc.gov/mmwr

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French hostages seized in Cameroon found safe: report

PARIS (Reuters) - Seven French hostages kidnapped in Cameroon have been found alive in a house in northern Nigeria and are safe with Nigerian authorities, French television reported on Thursday.

The hostages, four children and three adults, were captured by Islamist militants this week while on a tourist excursion to the Waza national park near the Nigerian border with Cameroon.

It was the first case of foreigners being seized in the mainly Muslim north of Cameroon, a former French colony, but the region is considered within the operational sphere of Islamist sect Boko Haram and fellow Nigerian Islamist militants Ansaru.

"The hostages are safe and sound and are in the hands of Nigerian authorities," BFMTV quoted an officer from Cameroon's army as saying.

France's minister for veterans' affairs, who told parliament on Thursday that seven hostages abducted from Cameroon had been released, said minutes later there was no official confirmation that they had been freed.

A French diplomatic source said there would be no official confirmation until French authorities had received physical proof the hostages had been freed or they were in French hands.

(Reporting By Emile Picy and Nicholas Vinocur in Paris; Additional reporting by Joe Brock in Abuja; Editing by Pravin Char)

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American Idol: Women Face Sudden-Death Round

American Idol

By Jamie Bufalino

02/20/2013 at 11:00 PM EST

Mariah Carey

Mario Anzuoni/Reuters/Landov

American Idol threw yet another new twist at its 40 remaining contestants: a sudden-death round.

"One song, one chance, no mercy," Ryan Seacrest said as the first group of 10 female contestants gathered in Las Vegas to try to finally sing their way – in front of a boisterous studio audience – through to the "America votes" phase of the competition.

Five women moved on, five went home.

Kentucky high school junior Jenny Beth Willis, whose rendition of a Trisha Yearwood song earned mixed reviews from the judges, was the first up. Although Keith Urban appreciated her "effortless confidence," Nicki Minaj said her performance lacked excitement (a comment that elicited the first audience boos of the season). Final result: It was the end of the road for Willis.

Tenna Torres, 28, – who attended Mariah Carey's camp for kids as a youngster – took the stage next and impressed the judges with her take on the Natasha Bedingfield's "Soulmate." But she lost style points with Minaj, who didn't like one particular aspect of her look. "Lose the hair," said Minaj, who felt the contestant's coif aged her. Final result: She made it through to the Top 20.

The three most powerful performances of the night all made it to the next round: Nashville's Kree Harrison, who despite taking a decidedly plain-Jane approach to styling, wowed the judges with her version of Patty Griffin's "Up to the Mountain." "You sang the hell out of that song," said Carey.

Angela Miller, 18, of Massachusetts, belted out Jessie J's hit "Nobody's Perfect." But she pretty much was.

And Amber Holcomb, an assistant teacher from Texas, closed the show with a rousing (and well received) rendition of "My Funny Valentine."

For the final spot of the night, it came down to Anchorage, Alaska, resident Adriana Latonio, 17, who tackled Aretha Franklin's "Ain't No Way," and Shubha Vedula, a Michigan high school senior who sang Lady Gaga's "Born This Way."

Although the judges saw potential in both contestants, they ultimately picked Lantonio's powerhouse vocals in a final emotional moment.

Thursday will bring out the guys. The first round of 10 will take the stage to try to make the top 20 – but once again, five will go home.

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Adults get 11 percent of calories from fast food

ATLANTA (AP) — On an average day, U.S. adults get roughly 11 percent of their calories from fast food, a government study shows.

That's down slightly from the 13 percent reported the last time the government tried to pin down how much of the American diet is coming from fast food. Eating fast food too frequently has been seen as a driver of America's obesity problem.

For the research, about 11,000 adults were asked extensive questions about what they ate and drank over the previous 24 hours to come up with the results.

Among the findings:

— Young adults eat more fast food than their elders; 15 percent of calories for ages 20 to 39 and dropping to 6 percent for those 60 and older.

— Blacks get more of their calories from fast-food, 15 percent compared to 11 percent for whites and Hispanics.

— Young black adults got a whopping 21 percent from the likes of Wendy's, Taco Bell and KFC.

The figures are averages. Included in the calculations are some people who almost never eat fast food, as well as others who eat a lot of it.

The survey covers the years 2007 through 2010 and was released Thursday by the Centers for Disease Control and Prevention. The authors couldn't explain why the proportion of calories from fast food dropped from the 13 percent found in a survey for 2003 through 2006.

One nutrition professor cast doubts on the latest results, saying 11 percent seemed implausibly low. New York University's Marion Nestle said it wouldn't be surprising if some people under-reported their hamburgers, fries and milkshakes since eating too much fast food is increasingly seen as something of a no-no.

"If I were a fast-food company, I'd say 'See, we have nothing to do with obesity! Americans are getting 90 percent of their calories somewhere else!'" she said.

The study didn't include the total number of fast-food calories, just the percentage. Previous government research suggests that the average U.S. adult each day consumes about 270 calories of fast food — the equivalent of a small McDonald's hamburger and a few fries.

The new CDC study found that obese people get about 13 percent of daily calories from fast food, compared with less than 10 percent for skinny and normal-weight people.

There was no difference seen by household income, except for young adults. The poorest — those with an annual household income of less than $30,000 — got 17 percent of their calories from fast food, while the figure was under 14 percent for the most affluent 20- and 30-somethings with a household income of more than $50,000.

That's not surprising since there are disproportionately higher numbers of fast-food restaurants in low-income neighborhoods, Nestle said.

Fast food is accessible and "it's cheap," she said.

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Shares, euro extend losses as Europe recovery hopes dim

LONDON (Reuters) - European shares and the single currency fell sharply on Thursday when surprisingly weak euro zone economic data dashed hopes of an early recovery for the recession-hit region this year.

Economists had forecast the euro zone purchasing managers' indexes (PMIs), based on surveys of business activity, would add to tentative signs a recovery was under way, but instead they pointed to a first-quarter contraction of up to 0.3 percent.

"The expectation was the trend of improvement for the euro zone as a whole would continue and it hasn't, so that is a disappointment," said BNP Paribas economist Ken Wattret.

The euro tumbled to a fresh six-week low below $1.32 on the news, having already suffered at the hands of a resurgent greenback following signals from the U.S. Federal Reserve on Wednesday that it was considering an end to monetary stimulus.

Signs that Fed policymakers were becoming increasingly reluctant to continue aggressive monetary easing, revealed in the minutes of the last policy meeting, had sparked a worldwide selloff in riskier asset markets.

MSCI's world equity index <.miwd00000pus>, already down 0.5 percent on the doubts about future Fed policy, took another step down after the PMI data to be one percent lower for the day, having touched its best levels since mid-2008 on Wednesday.

Europe's Eurofirst 300 index <.fteu3> shed 1.25 percent, on track for its second biggest daily loss of the year. London's FTSE 100 <.ftse>, Paris's CAC-40 <.fchi> and Frankfurt's DAX <.gdaxi> were all down as much as 1.8 percent lower.

SAFETY PLAYS WELL

In the fixed income market, German bonds, considered a safe haven, hit their best levels for a month with the main Bund futures contract up 91 ticks to 143.33. The move reversed a fall seen on Wednesday and was also being supported by the approach of an Italian general election this weekend.

"Investors are becoming more and more cautious ahead of the weekend ... and altogether people decided here to pull the trigger and go risk-off," said Christian Lenk, a strategist at DZ Bank.

The dollar, another safety play, followed up its big gains on Wednesday adding a further 0.45 percent on an index value that includes most major currencies <.dxy>, although it slipped against the yen to 93.35.

The Markit composite PMI for the euro zone, which combines both services and manufacturing surveys, fell to 47.3 in February from 48.6. It had been expected to rise to 49.0.

The data also showed a growing gap between Germany and France - the two biggest economies in the euro zone - which could have implications for the European Central Bank's future monetary policy.

The survey found firms in Germany are enjoying a healthy rate of growth, while French service sector companies are in the midst of their worst slump since the financial crisis was at a peak in early 2009.

"The theme is still the very substantial divergence between France and Germany and that is going continue to be the case for much of the year," said Wattret of BNP Paribas.

"On the margins this is going to resonate with the dovish tone from the ECB at its last meeting, but I think the real swing factor for the ECB will be exchange rate factor and the tightening impact it is having."

The strength of the euro has been holding back exports.

In commodity markets, the prospect of weakening demand from Europe and a possible early end to the Fed's policy of quantitative easing sent all markets lower.

London copper struck its lowest in nearly two months, at $7,870 a tonne, while oil dropped below $114.50 a barrel for the first time this month having seen its biggest daily fall of the year on Wednesday.

Growth-attuned precious metal platinum fell 3 percent to hit a five-week low. Traditional safe haven gold popped higher, to $1,568 an ounce, after the Fed minutes had pushed it to a seven-month low.

"Long-position holders have been looking to sell for profit-taking," said Yusuke Seta, a commodity sales manager at Newedge Japan. "I guess this is a good time to sell."

(Additional reporting by Marc Jones.; Editing by Alastair Macdonald)

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Bulgarian government resigns amid growing protests

SOFIA (Reuters) - Bulgaria's government resigned on Wednesday after violent nationwide protests against high power prices, joining a long list of European administrations felled by austerity during Europe's debt crisis.

Prime Minister Boiko Borisov, a former bodyguard who swept to power in 2009 on pledges to root out corruption and raise living standards in the European Union's poorest member, now faces a tough task to prop up eroding support ahead of a probable early election.

Wage and pension freezes and tax hikes have bitten deep in a country where living standards are less than half the EU average and tens of thousands of Bulgarians have rallied in protests that have turned violent, chanting "Mafia" and "Resign".

On Tuesday, 11 people were hospitalized - including one man bleeding heavily from the head - and 11 arrested after protesters threw flares at police, who fought demonstrators with shields and truncheons.

"I will not participate in a government under which police are beating people," Borisov, who began his career guarding the Black Sea state's communist dictator Todor Zhivkov, said as he announced his resignation on Wednesday.

Parliament is expected to accept the resignation later in the day.

The spark for the protests was high electricity bills, after the government raised prices by 13 percent last July. But it quickly spilled over into wider frustration with Borisov's domineering manner and unpredictable decision making.

The prime minister made sacrifices in an attempt to cling on, sacking his finance minister, cutting power prices and risking a diplomatic row with the Czech Republic by punishing foreign-owned companies, a move that conflicted with EU norms on protection of investors and due process.

Borisov's rightist GERB party is the dominant faction in parliament but will not take part in talks to form a new government, Interior Minister Tsvetan Tsvetanov said, indicating that an election planned for July will now be held early.

"He made my day," student Borislav Hadzhiev, 21, in central Sofia said, commenting on Borisov's resignation. "The truth is that we're living in an extremely poor country."

IRE

GERB's popularity has held up well and it still leads, just, in the polls, largely because budget cutbacks have been relatively mild compared with those in many other European countries. Salaries and pensions were frozen rather than cut.

But the last opinion poll, taken before protests grew last weekend already showed the opposition Socialists were nearly tied with the ruling party and analysts said the protests had boosted the Socialists' chances.

Unemployment in the country of 7.3 million is far from the highs hit in the decade after the end of communism but remains at 11.9 percent and average salaries are stuck at around 800 levs ($550) a month.

Millions have emigrated in search of a better life, leaving swathes of the country depopulated and little hope for those who remain.

The measures announced this week has also put the country on a collision course with the EU and financial investors without easing the tension at home.

Czech Prime Minister Petr Necas demanded an explanation from Bulgaria and accused it of "politicizing" the power sector by threatening to revoke the electricity distribution license of central Europe's largest listed company CEZ, 70 percent of which is owned by the Czech state.

There have also been fines for another Czech company, Energo-Pro and Austria's EVN.

The precedent is unlikely to encourage other foreign investors, who already have to navigate complicated bureaucracy and widespread corruption and organized crime if they want to take advantage of Bulgaria's 16-percent flat tax rate.

"The resignation is the only responsible move," said Kantcho Stoychev, an analyst with pollster Gallup International. "It also gives Borisov some legitimacy to stay in political life in the future, despite the violent police actions last night."

(Additional reporting by Angel Krasimirov; editing by Patrick Graham)

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