Romania is one of the countries where the crises has not reached the climax yet

Romania is not one of the countries where the economic crises reached its climax. There are no „green shoots” of recovery in Central and Eastern Europe yet. These conclusions have been reached by two top class analysts from Great Britain: Quentin Peel (Financial Times) and Laza Kekic (Economist Intelligence Unit) – and Manfred Schepers, vice-president for European Bank for Reconstruction and Development (BERD).

Quentin Peel, Financial Times: Some of the worst consequences of this crisis have not yet been seen

Some of the most dramatic consequences of the crises have not yet been seen. We have been expecting much more popular unrest. We’ve seen demonstrations in Latvia, Bulgaria and a few other countries, but no major uprisings. One might have been expecting in Ukraine, where 30% collapse in production is dramatic and the sort of unemployment figures we are expecting to see will be dramatic.

The fragility of the governments

Thank God for European Union’s enlargement. 10 Central European countries had come into the EU, giving themselves a much stronger insurance policy than they might otherwise have had. The enlargement of the European Union has been the most successful foreign policy of the EU in the recent years.

The problem is that the process of integration is only half-way there: the transition, the process of building the institutions, infrastructure and the political practices in the new EU member states must be complete for them to become full members of the EU. Joschka Fischer compared the situation from the new member states with a group of people trying to cross a wide river and, suddenly, the recession comes like a tidal wave and catches them in the middle.

Nobody is going to emerge unscathed from this. The credit crunch hit at least 80% of the European banks that dominated the transactions in Eastern Europe: Austrian banks, Swedish and Greek. And it’s not just Government and corporate borrowing, but the willingness of the countries in the region to allow their ordinary citizens to borrow in euro, which isn’t their domestic currency.

What if all these countries will do like Montenegro and adopt the euro to protect themselves? The Central European Bank fiercly opposes. But the IMF argued that, without the euroisation, solving the external debt issue would mean drastic measures in some countries, where they could meet political resistance. My fellow economists seem to think euroisation is a very dangerous path to go because it would greatly restrict the room for manoeuvre. It might suit small countries, but it certainly wouldn’t suit big countries, like Poland or Romania.

Laza Kekic, Economist Intelligence Unit: Romania is one of the countries where the crises has not hit the climax

It is very difficult to see green shots of economic recovery in Eastern Europe

I’ve heard on the news about green shoots of the economic recovey. Perhaps there’s some substance for other parts of the world. In Eastern Europe, it is very difficult to see any green shoots. It’s more like a long winter.

The reason why I think it is very important to get the facts right and not to give in to understandable but unreasonable optimism is because if you don’t identify the problem, than it’s very unlikely you’ll be able to do anything about it. Unfortunately, the economic crisis will leave lasting consequences.

The successful growth model, inherited with the EU accession, is, in many ways, broken and associated with the economic decline. This is one history’s ironies. All the ingredients of this model have been accepted without any opposition and it wasn’t just a condition for the EU accession.

The East-European markets have opened greatly, have exposed their capital; the integration of commerce has been much higher, all the necessary ingredients for implementing the model, but which left them exposed.

According to our research, it seems that Eastern Europe has all the necessary ingredients of a vulnerable political stability. When you take into account intense economic stress, the chances maximise.

The region needs 200 billion dollars, particularly for banks’ recapitalisation. These funds will come mainly from recycling debt. Probably 50 billion will come through the IMF. The EU will give money, but using the IMF vehicle, because when the demonstrations start, they don’t want to see the Union’s flag burning, so it’s better to blame the IMF.

And we believe there will be more countries asking for an IMF bailout. Lithuania and certainly Montenegro, Croatia and Moldova. I believe that, by the end of this year, two thirds of the countries in the region will have an agreement with the IMF. Unfortunately, another grim statistics, a BIS (Bank for International Settlements) study shows high rate of funds withdrawal from the region.

Romania is undoubtedly an interesting case, also because of foreign investments. Even weeks after the fall of the Lehman brothers, Romania was still considered the place to be, the place where you could do business. But the situation has changed drastically. I believe Romania is one of the countries where the crisis has not reached its climax and where the situation will get worse. It will be a difficult year for Romania. It is also a country with social and political background that favours social unrest.

The only country that has not been badly affected by the economic crisis is Poland, and that, again ironically, because of its size. Plus, Poland has a very good PR.

Manfred Schepers, European Bank for Reconstruction and Development (BERD)

The crises has exposed vulnerable aspects that have not been solved in the past

The region will remain, undoubtedly, an attractive place for investors and entrepreneurs.

The countries rich in resources and the closed economies are more protected in the face of recession.

We expect positive signs to appear in 2010.

The most terrible predictions so far have not come true, like the collapse of the East European banking system, and we hope it will stay that way.

The crises exposed vulnerable aspects that have not been solved in the past: the lack of diversity in the employment of natural resources, especially in Russia; the dependency on an unbalanced exports structure; and total dependency of foreign capital.

BERD supports local markets, especially in the private sector, preventing governments to absorb the impact of the economic crises entirely on their own; the bank increased its investments in the region by 30% this year.