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Europe

Eastern European Economies Suffering Under Financial Crisis

Europe’s developing eastern nations have revealed their vulnerability to the finance crisis, with Hungary, Poland and the Czech Republic all brought down to earth by market shocks.

Prime Minister of Hungary Ferenc Gyurcsany

Prime Minister of Hungary Ferenc Gyurcsany said Hungary would not need IMF assistance

Budapest was offered financial help by the International Monetary Fund (IMF) on Monday, a move which followed the downscaling of the country's deficit targets and growth forecast.

The country of some 10 million was hit hard by the crisis due to its heavy reliance on foreign financing and a high public deficit, which is estimated at 3.8 percent of GDP for 2008, dropping from 9.2 percent of GDP in 2006.

Hungary's currency, the forint, plunged to two-year lows against the euro on Friday, losing about 10 percent of its value in a day before recovering slightly Monday.

The IMF said it was prepared to offer financial and technical assistance to Hungary if needed, but the government in Budapest was adamant the aid would not be needed.

"We will provide technical assistance as needed and, in the context of a supportive policy setting, are ready to undertake discussions on possible finance assistance, responding rapidly," said IMF chief Dominique Strauss-Kahn.

Hungarian Prime Minister Ferenc Gyurcsany said the IMF offer was important for showing that his country had access to such resources.

"We needed this offer so those who attack us see that we have strong allies and that Hungary in not alone," Gyurcsany said. "We needed this offer so we'd never have to resort to using it."

Polish, Czechs slow euro plans

IMF head Dominique Strauss-Kahn

IMF head Dominique Strauss-Kahn

In Poland, meanwhile, the government announced it would re-evaluate plans to introduce the euro by 2012.

"The current situation prompts a rethink of the euro entry date," Polish central bank chief Slawomir Skrzypek said Monday. "Before we enter the ERM-2 rate exchange mechanism, the global financial turmoil should be finished," he said.

Poland's currency slid against the euro Friday morning to 3.638 zlotys compared to 3.452 Thursday afternoon and later rose to 3.548 in trading..

"The weakening of the zloty is linked to the general situation, the withdrawal of capital from emerging markets, but it is also due to rumours surrounding Hungary's OTP bank that have weakened the Hungarian currency," Mateusz Mokrogulski, chief analyst with Poland's BGZ bank, told news agency AFP Friday.

In the Czech Republic, Finance Minister Miroslav Kalousek said his country would now be looking at a longer-term approach to joining the eurozone.

"At the moment, when a number of significant countries in the eurozone say that the Growth and Stability Pact does not have to be essential and important for them, then I am (cautiously) considering our entry date to the euro zone," Kalousek said.

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