The financial and economic crisis first changed direction. Until now, he spread from west to east and gradually reached Eastern Europe. But at this moment it turned out that the difficult situation on the eastern outskirts of Europe is a giant problem for the entire European Union. Brussels is not at all ready to solve her
A cruel joke with Eastern Europe played its dependence on exports to Western Europe. Due to the reduction in demand, the Eastern European countries encountered a sharp drop in industrial production, a decrease in GDP, and a outflow of foreign capital. The decline is the tougher the stronger the overheating in previous years was. East European countries grew like yeast, and banks (mainly from Germany, Austria, Italy, the Netherlands and the Scandinavian countries) joyfully accustomed the former residents of the social camp to live on debt. As a result, the more actively the country was integrated into Europe, the faster its external debt grew and the higher the negative trade balance (the difference between export and import).
Thunderstorm over the Baltic
The Baltic economies were most affected: Estonia GDP in the IV quarter of 2008 fell by 9.4%, Latvia by 10.5%. From July to the end of January, Latvia spent 27% ($ 1.7 billion) of foreign reserves for maintaining the Lata course. Lithuania, according to the IMF, lost 13% of reserves, Estonia - 5%. Three Baltic countries need to follow the example of Russia and Kazakhstan: stop maintaining a course of national currencies and allow them to devalue, Nuriel Rubini, professor of New York University, is sure.
But this is not easy to do: preparing for the entry into the eurozone, the Eastern European countries should demonstrate the European Commission for the stability of their currency and the balance of budgets. Only the European Union does not really want to give money for this, providing this unpleasant function of the IMF. Latvia, the Fund has already given $ 9.6 billion, and Ukraine - $ 16.4 billion. The ability to fight with a decline on its own is very limited: Latvia, for example, the budget deficit has reached 6.3% of GDP, Romania - 7.5% of GDP. In this company, Russia with a planned deficit of 8% of GDP, which was announced last week by the assistant to President Arkady Dvorkovich, looks quite decent.
Life of loan
Hungary was also in a difficult situation. The industry there in December fell by 23%, this year GDP will decrease by at least 3-3.5%, the course of Forinta by the euro has fallen by 12.6%. The forecast of a budget deficit is growing, and each new measure of economy support at the expense of the budget or tax benefits are turned into a new fall of Forint. In the salvation of Hungary, the EU could no longer ignore the EU: the amount of the Emergences issued by the IMF and the World Bank of loans reached $ 25.5 billion. The Bulgaria lives completely on the means, which Credit Suisse predicts the current account of the current account in astronomical 18% of GDP.
The euro is cheaper relative to the dollar, and East European currencies - relative to the euro. Since the beginning of the year, the Polish zloty fell to the euro by 12.2%, the Czech crown by 6.4%. Forint, Zloty and Crohn will continue to get cheaper, Goldman Sachs analysts are sure: in a situation of a decline in Eastern European countries, it is less comfortable to live with a overvalued currency. But the devaluation makes it difficult for companies and citizens to serve debt: like residents of the capital's Russian cities, the Eastern Europeans fearlessly took loans in foreign currency. Mostly, of course, in the euro. But in Poland, for example, half of the loans are in the Swiss francs, and the zloty has fallen in half of the summer. Such loans become unbearable for borrowers.
“Eastern Europe may be a subpram for the eurozone,” Adam Cole, an RBC Capital Markets currency strategist, said the other day in an interview with Bloomberg. Subprime 1 is the worst, the most problematic part of the mortgage loans in the United States, with which the financial crisis began in 2007. The debts of Eastern Europe are considerable: the whole debt reached almost $ 1.7 trillion, from which this year you need to pay off $ 400 billion, calculated the economist Morgan Stanley Stephen Jen. This is a third of the regional GDP. It is inconceivable to remove it from consumption for the year, the possibilities of “re -wrapping” are practically closed, except for the EU and international financial institutions.
When it is bad to debtors, lenders suffer. Foreign banks account for 74% of $ 4.9 trillion issued in Eastern European loans to individuals. Only Austrian banks issued € 230 billion - 70% of Austria's GDP to the region of loans. The rating agencies threatened the rating with a large European banks with a large volume of loans of eastern Europe: they, they say, underestimated the instability of the "new" markets.
Virus for the European Union
The eastern outskirts of Brussels money was called by the European Bank for Reconstruction and Development, the Minister of Finance of Austria, Joseph Prell (according to his assessment, the price of the issue is about € 150 billion), German officials. In vain. Only last week, the European Commission recognized that the region needs a single EU support program. But how to do this is incomprehensible, says the European Commissioner for Finance Hoacin Almonia: some countries enter the eurozone, others are not, but some are not part of the EU. The possibilities of the IMF, even taking into account the $ 100 billion to be recently allocated by Japan, to save Western Europe from default, are clearly insufficient in the eastern.
Without waiting for anything concrete from the EU, its strongest members joined the game. Germany will show its ability to act in a situation where help is needed, said finance Minister, Pier Steinbryuk. French officials also express in the same spirit, but they are more worried about the fate of Eastern Europe, but the growing deficits of the budgets of Spain, Portugal and Greece (the situation of these countries is a little better).
There are very few opportunities to help the eastern neighbors of the Western European economy. British budget deficit - 8.8% of GDP, France - 5.4%. Only Germany (2.9%) has a space for maneuver, but the expenses for the salvation of banks have not yet taken into account in the German budget. The EU simply did not have mechanisms and institutions for large -scale assistance to its own members, states Lars Kristensen from Danske Bank. But not to help one of the countries on the verge of default is to let the virus into the entire system.
