Representatives from the International Monetary Fund arrived in Romania on Wednesday, March 11, to discuss a possible aid program. Bucharest has already asked the European Commission to save it from a possible financing crisis. Hungary and Latvia have grabbed at lifelines from the IMF.
Thomas Mirow, the head of the European Bank for Reconstruction and Development, explained the situation in various eastern European countries and how they can move forward.
Deutsche Welle: Romania has joined Hungary and Latvia in requesting emergency loans from the European Union. How serious is the economic situation in central and eastern Europe?
Thomas Mirow: The situation is certainly difficult. Talks have not yet been concluded, but Romania has long been seen as a country that has been at particular risk because of very high debts in foreign currencies. Its own currency has been under pressure for a long time, which makes the decision to look for help from the IMF a logical step that will contribute to stabilizing the country.
Are you afraid of the problem spreading to other countries via the domino effect?
No, I am not. The situation in other countries is completely different. I am, however, of the opinion that it makes sense to get in touch with the IMF in a timely manner. International investors usually know to respect that. When such contact is necessary, it makes more sense to do it early than to wait and, for example, have to accept longer phases of devaluation of one's own currency.
How can the situation be diffused? What's the best way forward?
That's not easy to say because the causes of the problems are different. In some countries it's just the financial sector that is suffering from a weak framework, vulnerable and susceptible to sudden crises. Other countries have a relatively robust financial sector, such as Poland, and are affected more by developments in the real economy, like the development in western European auto industry.
Should the EU emergency funds be built up in the manner some politicians are calling for?
The European Council of finance ministers debated that issue on Tuesday. First of all, I think it is important that the funds are available to the countries that want to make use of them. Should they be exhausted, then it would certainly be a good idea to have additional resources. But there are apparently still enough resources available.
Do you think the current support for eastern Europe is sufficient?
No, I think more could and should be done -- each within its own area. Most of all, I think it is important that heads of state and government of the EU, possibly when they meet in a little over a week, as well as at the G20 meeting in London in April, make it absolutely clear they are determined to represent the countries of central and eastern Europe.
It sounds as though you expect action in addition to politicians' words. What action?
The resources of the EU that have been mentioned are one element. A second element is that the IMF, the World Bank and we, as a bank that has been and continues to be active in eastern Europe, give our encouragement and support to help these countries. Additional steps by the European Central Bank could also be a topic of discussion.
Is it a good idea to accelerate the adoption of the euro to provide added security?
Yes and no. Yes in the sense that the perspective of membership in the euro zone is a positive signal. No in the sense that I do not believe the criteria for entry should be weakened, that would hurt confidence in the stability of the euro as a whole. I think one would be well-advised to think about whether, for example, certain terms of time could be shortened. But the hard criteria should remain.
You have been talking about stability. How big is the danger of a state in the region going bankrupt?
Based on current evidence, this is not a danger.
How did eastern Europe get into this situation? Many of the states reformed their financial systems according to the theories set out by Western financial experts.
Eastern Europe is, in terms of markets, every highly integrated. It has, for example, opened its borders to western European banks, but it has not advanced as far in term of politics and its opening to the euro zone. Political integration is lagging behind market integration. The second reason is that central and eastern Europe, in real economic terms, are very dependent on certain key industries, such as the western European automobile industry. Since in addition to the financial crisis and the overall economic crisis we are also dealing with a structural crisis in the global auto industry, countries like Hungary, the Czech Republic and Slovakia are hard hit because they live from exports in general and especially from the auto industry.
Is there a feeling among eastern Europeans that they are being neglected by their western neighbors?
I do not think that's the case, at the moment. But in western Europe, I believe, we have a reason to watch the situation and not allow such development to occur. It is a symbolic year that we are living in. Twenty years ago the Berlin Wall fell, and we all remember the contribution Hungary made to that event. We cannot allow the impression you mentioned to arise.
Interview: Andreas Noll (sms)
Editor: Trinity Hartman