Analysts say that new members of the European Union in Central and Eastern Europe so far have avoided much of the upheaval caused by the crisis of confidence in the global financial system. Although consumer spending is falling and growth rates are declining in the Czech Republic, Poland, Slovakia, Slovenia and Estonia, analysts said the trends were not related to the banking turmoil spreading across the Continent.
One reason is that while most countries in the region opened their banking sector to foreign banks when they were preparing to join the European Union in 2004, they also strengthened their regulatory and supervisory processes.
Some foreign banks that did buy into banks in Eastern Europe, like UniCredit of Italy, are now facing serious liquidity problems at home. So far, UniCredit’s problems have not spilled over into Poland, said Maciej Krzak, macroeconomic specialist at the Center for Social and Economic Research in Warsaw.
In Poland, inflation and high interest rates have made the national currency, the zloty, stronger against the euro and the dollar. As a result, exports, which are the driving engine of Poland’s economy, are slowing. Growth this year will fall to 6 percent, from 7 percent in 2007.
“The banks in Poland have been extremely profitable because they focused on lending and had strict credit standards,” Mr. Krzak said. “These banks were not dabbling in the subprime mess.”
Many banks in Western Europe are thought to have went for lending to Eastern Europe with in general, very little exposure to the subprime lending instruments that have been so disastrous for U.S. banks.
The small and immature stock markets in Eastern Europe have been an advantage, too. “Exposure by these stock markets to the world economy is relatively small,” said Vasily Astrov, East European specialist at the Vienna Institute for International Economic Studies.
The European Bank for Reconstruction and Development has estimated that growth across Central and Eastern Europe this year will average 4.7 percent, in contrast to 5.9 percent last year. The bank said the slowdown reflects anti-inflationary tightening of monetary policies and the expected decline in exports.
Source: The New York Times
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