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.”