In wake of financial crisis, EBRD chief Mirow urges vigilance in Eastern Europe

Finance official urges vigilance in E. Europe

VIENNA — Continued vigilance is necessary to ensure growth in Eastern Europe in the wake of the financial crisis, a senior international banking official urged Friday.

While the situation has stabilized, the region is still far from returning to where it was before the economic downturn hit, said Thomas Mirow, president of the European Bank for Reconstruction and Development.

“Probably, yes, the worst is over but we need to stay vigilant,” Mirow told The Associated Press on the sidelines of an Austrian Finance Ministry conference. “Some countries obviously still are struggling, especially in Southeastern Europe.”

Romania and Bulgaria are among states having the toughest time overcoming the effects of the crisis, Mirow said.

Among the problems facing the region is the fact that countries are rather export-dependent and have much of their trade with Western Europe, he added.

“And as we have seen, apart from Germany, the economic growth prospects for Western Europe aren’t that great either,” Mirow said.

Hungary, in particular, was still struggling to cope with borrowing in foreign currencies by households because its local currency, the forint, was in a “relatively weak position.”

“What we aim to do is to work with those countries on reinforcing their local capital markets and on increasing possibilities to lend in local currency,” Mirow said.

Foreign banks, including some from Austria, offered euro or Swiss-franc loans at low rates in the region as growth boomed. That was lucrative for both banks and borrowers until local currencies plunged amid the credit crunch, sending borrowers’ payments soaring and causing defaults and losses.

In other comments, Mirow said Hungary’s medium term economic policy lines were still unclear and also had to be closely watched.

Overall, “the situation certainly has stabilized but we are rather far from returning to the growth rates in the region we have seen before the crisis,” Mirow said.

Austria promised continued support to the area during Friday’s conference, which drew policymakers and government representatives.

“I haven’t met a single banker or businessman who has decided to withdraw,” Finance Minister Josef Proell said. “Probably they have become more cautious, but they’re still committed to stay in this region.”

Proell also said he would like to set up a Vienna-based academy for Central, Eastern and Southeastern Europe to develop common standards for the education of banking supervisors.

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