Special Report: Global Financial Crisis
SOFIA, March 11 (Xinhua) -- The wide spreading
financial crisis has the hallmark of being "made in U.S.A." with its origin and
the disaster center all in the United States, said a leading Bulgarian economist
in a recent interview with Xinhua.
Ivan Angelov, member of the Bulgarian Academy of
Sciences, strongly criticized what he called "U.S. market fundamentalism," which
he believes triggered the global crisis.
He expressed his strong belief in government
intervention which should be made in time, rather than lagging behind until the
disaster grows bigger.
A market-oriented economy should be within the
control of the government, the free-market economy preached by the
fundamentalists will not work, he said.
The Bulgarian economist blasted the U.S. bailout
plan, saying salvaging the banks is actually footing the bills of the rich by
using the money of the struggling tax-payers.
He said it is a big irony that the Wall Street top
executives, who used to enjoy bonuses of tens of millions of dollars, could
still get a half-million-U.S. dollar compensation, higher than the annual salary
of the U.S. president.
He noted that the financial crisis spread quickly
from the United States to Western Europe within half six months and was
transmitted to Eastern Europe several months later.
This year will be difficult because massive loans,
estimated at400 billion dollars, granted by Western European banks to East
European countries, will be due, Angelov said.
These loans will prove to be too much a burden for
East European countries that are already deep in economic troubles, he said.
The countries deep in debt are those who depend
heavily on a currency board, the practice of a small country to peg its currency
to a strong, stable one, just like what Estonia, Latvia and Bulgaria are doing.
By September 2008, Estonia's foreign debt accounts
for 131 percent of its GDP, Latvia 116 percent, Bulgaria 109 percent.
Another symptom of Eastern Europe's financial crisis
is its high current account deficits, Angelov said.
The current account deficits of Bulgaria, Estonia,
Latvia and Lithuania -- whose currencies are all pegged against the euro -- are
at 15-24 percent of GDP, levels that have historically been associated with
The worsening financial instability that is troubling
the entire Eastern Europe will trigger massive foreign investments outflow,
In 2008, the capital flow from developed countries to
Eastern Europe reached 254 billion dollars, while this year, the volume will
expected to merely 30 billion dollars, Angelov said.
There were already cases that some Western European
banks pulled money out of their branches in East European countries, Angelov
He said the trend is alarming because West European
banks are holding as much as 90 percent of the capital of Bulgarian banks,
leaving the Bulgarian government little leverage to save the country's real
Even the banks have enough money, they are cautious
about providing loans to Bulgarian enterprises given the unpredictable financial
situation, Angelov said.
Still, he said he was against selling most of
Bulgaria's banks to foreign investors.
Angelov underlined the necessity to restore
confidence in Bulgaria's financial sector and encourage banks to keep money in
Bulgaria and provide loans.
He said the financial crisis has left enormous
impacts on Bulgaria, citing a fall of 10 percent in the country's industrial
production index in December, a 31-percent drop in mining industry, and a 60
percent decline in ferrous and metal production.
"That is utterly horrendous for Bulgaria," he said,
adding that the country's export-dependent metallurgical industry also suffered
an annual shrink of 35 percent.
Angelov said he believed that the shockwave of the
financial crisis began to hit Bulgaria in late 2008 and the beginning of 2009,
and will reach its peak from April to June, leading to sharp falls in exports
and production, and then quickly spread to other sectors.
Angelov said foreign investment badly needed by
Bulgaria will plummet from last year's 5.4 billion euros (6.92 billion U.S.
dollars) as foreign capital is fleeing Eastern Europe amid fear of financial
instability in the entire region.
He recommended the government to take timely and
effective measures to deal specifically with the crisis.
On Bulgaria's economic prospects, Angelov said the
crisis will last through 2010 and recovery is expected to come in 2011.
"Confidence is everything for the moment," he said.