Bulgaria Minister: Fed QE Move 'Likely To Backfire'

By Joe Parkinson

Wall Street Journal

The U.S. Federal Reserve's move to restart its bond-buying program to help spur disappointingly slow growth is likely to backfire and could compromise the resolve of European economies to continue their austerity drives, Bulgaria's Finance Minister Simeon Djankov said Thursday.

"This move is likely to backfire," Djankov said in an interview with Dow Jones Newswires. "In a period when Europe is going through fiscal consolidation, this may put at risk the resolve to return to sustainable public finances in developed economies. Even for the U.S., the benefits are probably smaller than the risk taken," he added.

Djankov, a former World Bank economist, has been Bulgaria's treasury chief since Prime Minister Boyko Borisov's center right GERB party swept to power in July 2009.

The Federal Reserve said Wednesday it would commit to buy 0 billion of U.S. Treasurys over the next eight months, in a bid to bolster U.S. economic growth.

Bulgaria plunged into recession last year when the global economic slowdown scared away foreign investors and forced businesses to halt or significantly cut operations. The economy contracted 5% in 2009.

Rising exports helped the emerging economy out of recession in the second quarter of 2010, but a slow recovery in external demand and a sharp tightening in external commercial credit are likely to keep growth stagnant this year.

Djankov's comments come shortly after Turkey's Economy Minister Ali Babacan told reporters in Istanbul that the Fed's move could do more harm than good and leaves "serious questions marks over the dollar."

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