Reuters
LONDON (Reuters) – Global policymakers have not paid enough attention to the adverse effects of the euro zone debt crisis on southern and eastern Europe, the European Bank for Reconstruction and Development’s president said on Monday.
The European Central Bank needs to join in the discussion to look at ways to help out both euro and non-euro zone markets in the region, Suma Chakrabarti told a news briefing, after the ECB last week laid out its plan for OMTs — outright monetary transactions — to support troubled peripheral euro zone debt markets.
Eastern Europe has strong trade and financial links with the euro zone.
“The impact of the euro zone crisis on the region is something I feel has been rather neglected in the global debate. People don’t really talk enough about the impact on eastern Europe, and southeastern Europe in particular,” Chakrabarti said.
“We need a much more coordinated action plan for the region…another piece of this would have to be discussion with the ECB.”
The EBRD cut its 2012 and 2013 growth forecasts for emerging Europe and North Africa in July, to 2.7 percent and 3.2 percent respectively, mainly due to the impact of falling commodity prices on Russia, the region’s largest economy.
A further deterioration of the euro zone crisis was the biggest downside risk, the bank said at the time, forecasting a contraction this year in Croatia, Slovenia and Hungary.
“The numbers are pretty frightening,” said Chakrabarti, who took up the presidency of the bank in July.
The EBRD is spear heading the Vienna 2.0 initiative by multilateral organisations to prevent a disorderly deleveraging from the region by overstretched western European banks.
The initiative follows a successful first round to prevent western banks leaving the region after the 2008/09 financial crisis, but there have been few concrete steps from Vienna 2.0 so far.
“Vienna 2.0 has been more in the air, we want to see a more coordinated action plan off the ground,” Chakrabarti said.
The EBRD was set up in 1991 to invest in the ex-Communist states of eastern Europe and recently expanded its mandate to Tunisia, Morocco, Egypt and Jordan. It mainly invests in the private sector.
The bank will shortly seek board approval for new investments in Tunisia, Morocco and Jordan to help small and medium enterprises, Chakrabarti said, with Egyptian investment to follow later.
(Reporting by Carolyn Cohn; editing by Ron Askew)
.
