EBRD: recession likely, but no collapse

“Some countries in eastern Europe are facing a severe recession but not a collapse,” said EBRD President Thomas Mirow in a speech to the London School of Economics.

April 2009 - From the Print Edition

Eastern Europe should emerge from crisis with long-term growth prospects intact, he argued, but growth rates of five to seven per cent will not return soon.
The banker did not predict the region will see runs on banks or sovereign defaults. But Mirow said west European countries must not prevent their bank’s funds being used to help the banks’ subsidiaries in eastern Europe. “Shutting the door to our neighbours now will also mean shutting the door to our own future,” he said.
The crisis should be the moment to lay the foundations for future sustainable growth in eastern Europe, in particular in clean energy, renewables and new technologies, argued the president. The fundamentals of the countries remain strong, he said, such as the huge market, cost-efficient factories, attractive tax regimes and labour costs and an educated workforce. But for the president, Ukraine was the biggest concern, mainly due to its political instability.
In Romania, the EBRD is doubling its planned investment by granting one billion Euro in loans to Romania over the next two years. Half of this figure will be dedicated to the financial sector, while the remainder will include lending in the energy, energy efficiency and national and local infrastructure areas.
This is part of a plan to keep the financial sector solid and cushion the blow the country has felt due to the drop in capital inflow. Thomas Mirow hopes this will help “give a new momentum to structural reforms”.
In December last year, the EBRD provided a 100 million Euro loan to Banca Transilvania, to assist lending to small and medium enterprises and is likely to give a similar loan to another Romanian-based bank.