Eastern Europe’s fall puts Continent on edge

How quickly the European Union will or will not rally to help its most economically crippled new states in the East is becoming a major political test for the Continent.

Crisis summits will be held this weekend in Brussels to confront the problem, which is escalating as Western banking capital flees the once red-hot economies of the former Soviet states. But the problems may quickly move West.

”œThe future of Europe may be unfolding in the East,” intoned Le Monde this week. ”œWestern Europe cannot let Eastern Europe fall apart.”

Concern is mounting over the specter of larger political instability, as well as the worries that a prolonged crisis could undercut the East’s emerging middle class. The Baltic states and Hungary, whose liberal Irish-like trade and growth models have collapsed (Latvia went belly up this week) have been hit harder than the Czech Republic and Slovakia, which had taken slower growth approaches. Poland and Romania are more protected by their size, economists say, though Poland’s zloty has lost half its value against the euro in recent months.

This week, the European Bank of Reconstruction and Development warned that the crisis ”œis threatening to throw nearly 20 years of economic reform into reverse.”

This post was read 55 times.

About author View all posts


1 CommentLeave a comment

  • The Baseline Scenario, By Simon Johnson, February 27

    The late Rudi Dornbsuch of MIT had a way of cutting to the chase, preferably in public and with a minister of finance present. He knew a huge amount about financial crisis, and could distill a lifetime of study and involvement in collapses succinctly: “it always takes longer than you think; but when it happens, it always happens faster than you can imagine.”

    The latest credit default swap data for European banks bring Rudi’s perspective to mind – for the United States. We’ve debated this week what to do about U.S. banks, arguing about which unappealing options are less bad. In my view, the choice is not “nationalize vs. don’t nationalize,” but rather “keep our current partial nationalization/bottomless pit subsidy systemvs. start down the road to reprivatization.”

    But, honestly, this entire debate may be overtaken by events.

    They sicken of the calm, who knew the storm.

Leave a Reply