EU planning 200 billion euro package for Eastern Europe
This comes from Austrian Daily Kurier:
A plan to stabilise the economies of Eastern Europe exists. What is missing is a united EU.
During and after the Eastern Europe tour by Austrian Vice-Chancellor and Finance Minister Josef Pröll, the Ministry always profusely denied that there was a plan to support the new [EU] countries. The talk was of 150 billion euros. Well, the number was not so wrong, because -apparently with the cooperation of the National Bank [Austrian Central Bank] and the ECB – a plan to stabilize Eastern Europe is quite concrete.
Eastern Europe countries, which are members of the EU, will receive a further balance of payment support of 100 billion euros. This assistance is currently capped at 25 billion euros, of which ten for Hungary and Latvia have already been used. Above all, Romania and Bulgaria will likely need help. In Hungary, a second aid package is being considered. Because of the EU election and the change in the EU Commission, Europe will be largely incapable of decision-making in the summer. As a result, the increase should act as a protective shield.
Those countries in the region, that are non-EU countries, will be supported with 50 billion euros. this concerns mainly the southern Balkans (Serbia, Croatia), but also Ukraine. The money could also come via the European Investment Bank, which would issue a bond. As the EU’s house bank can finance itself a lot cheaper, it would be possible to give the countries more favorable terms.
The European System of Central Banks may already supply Euros to third parties. There are such agreements with Switzerland and the United States. In Eastern Europe, these so-called “repurchase agreements” could be made: Euros would flow into the area against securities in local currency as collateral. This would significantly help to stabilize crisis currencies — at a minimum because such an announcement would discourage currency speculators.
Even the International Monetary Fund (IMF) would participate in such an action. World Bank President Zoellick called for 60 billion U.S. dollars for Eastern Europe. How the amount will come together is unknown, but it [the information] comes from internal papers of the IMF. What is indisputable is that the European Central Bank (ECB) will discuss the topic of Eastern Europe in March. In general, a rate cut in the euro zone in March is considered a certainty, but there just might be additional safeguard measures.
On the other hand, European politics is moving more hesitantly. When EU finance ministers meet in March, Eastern Europe will play no role; the EU is arguing vigorously again, as to why the big EU countries have not consulted the smaller regarding the coming regulation of financial markets. Poland and Belgium are fairly put off. Economists such as the (pro-union) German Professor Gustav Horn see these delays as a real threat. “Germany is not behaving European at the moment,” he criticized. An assessment, which he shares with conservative governments like those in France.
Horn also questions the construction of the ECB. “It is not prepared for such crises.” For example, the ECB cannot buy new government bonds; the Fed can. This facilitates the financing of the massive relief and economic packages.
Hilfspaket: 200 Milliarden für Osteuropa – Kurier
Comments are closed.