EBRD Plans to Support Emerging Europe

on Oct 15, 2012

On October 13, Reuters reported that the European Bank of Reconstruction and Development (EBRD) would lend €3 billion (£2.4 billion) over the next two years to those south eastern European countries which have been hit the most by the financial crisis in the Eurozone.

**The EBRD Plans €3 Billion Assistance**
Reuters quotes the EBRD’s president, Suma Chakrabarti, who in an interview on the sidelines of the meetings of the International Monetary Fund (IMF) in Tokyo said that he wanted to convince other institutions to contribute to the “south east Europe recovery plan” for supporting countries such as Albania, Romania, Slovenia, Serbia and Macedonia.

“We keep hearing about Greece, Italy and Spain, but hardly anyone talks about other countries in direct neighbourhood of Greece that are also suffering from the spillover effects,” pointed out Mr Chakrabarti, as quoted by Reuters.
!m[The Bank Fears The Euro Crisis Impact On Vulnerable South Eastern European Countries ](/uploads/story/574/thumbs/pic1_inline.png)More specifically, the plan involves boosting employment by means of large infrastructure projects. A source with direct knowledge of the matter noted that the plan may help contribute up to €5 billion (£4 billion). In addition, the EBRD has estimated that on average, every euro it invests typically attracts on average 2.6 of private investment, meaning that the estimated initial amount might reach £12.5 billion.

**The Plan to Be Ready By Year-End**
Eric Begolf, chief economist of the EBRD told The Times that the south east Europe recovery plan was intended as a “major co-ordinated effort to help the countries that are most acutely exposed to spillovers from Greece and the Eurozone,” adding that many of those countries were “in dire straits”.
So far, the World Bank has expressed interest to participate in this major coordinated effort, with the EBRD planning to have the package ready by the end of the year. “We’ll try to agree that there is a common analysis of the problem and a common desire to do something about it together,” Mr Chakrabarti noted, as quoted by Bloomberg. “In the next two months, through to the end of the year probably, we’ll try to work up what the details of that plan would be.”

Reuters reports that Mr Chakrabarti noted that so far the EBRD, which was founded in 1991 to manage the transition of former communist countries to market economies, has been focusing on cutting deficits, but has also recognised the need for structural reforms so that the region could better benefit from a future improvement in the global economy.
**Greece’s Imprint**

While Greece in particular has become the Eurozone crisis poster child, south eastern European countries which have close trades and financial links with the Euroarea periphery have so far been receiving much less international and media attention. Reuters reports that banks in many Eastern European countries outside the Eurozone are either wholly or largely owned by Eurozone parents such as Italy and Greece, which are in turn reducing lending while trying to fix their own balance sheets. In addition, the Balkan economies are also reliant on investment from Eurozone members.
“It’s not about Greece but about its imprint on the region,” commented Mr Chakrabarti, as quoted by Bloomberg. “If you look at the banking sectors for many of these countries, Greek subsidiaries take up quite a large share, sometimes 20 to 30 percent.”