The need to bailout banks for their aggressive lending in central and eastern Europe is becoming ever more apparent. An Austrian bank has taken the lead in getting a consortium of banks together to lobby the European Union for bailout funds.
This should be seen for an undeserved handout for individual banks. I like the argument used to support this request (bolded in the snippet below) — it is self servingly cynical, but could be effective. However, it remains to be seen whether entire banking systems or individual banks will be successful in getting any funds outside of those provided by their national governments.
Stay tuned.
Leading international banks operating in central and eastern Europe have clubbed together to lobby the European Union and the European Central Bank to extend their anti-crisis policies to ease the credit crunch in the region.
The group of nine, which wants action to ease liquidity shortages and help revive lending, is urging Brussels and the ECB to extend support beyond the EU’s new member states, such as Poland, to prospective members, such as Serbia, and to Ukraine, which has few prospects of joining the bloc soon.
Herbert Stepic, chief executive of Raiffeisen International, the Austrian bank, who brought the group together, said it was important that any action to support banks was not limited to western Europe.
“We fought for 50 years, many of us, to get these countries away from communism and now we have a free market economy in the region, we can’t leave them alone when there is an extremely harsh wind blowing,” he said.
The group has kept a low profile until now, but Mr Stepic told the Financial Times he was speaking out “because of the deteriorating economic circumstances”.
He said the costs of possible support would be “relatively” modest in comparison with the huge sums pledged to assist western European banks. The total gross domestic product of formerly communist central Europe was €740bn and for south-east Europe €270bn. This compared with €290bn for Austria alone.
His remarks come amid a week of fresh turmoil in the financial markets and a darkening economic outlook. The European Commission released a forecast of a 1.8 per cent decline in EU economic output for 2009, its gloomiest prediction in years, while Moody’s, the credit ratings agency, on Wednesday said the outlook for the Ukrainian banking system was negative….
As well as Raiffeisen, the banks involved are Italy’s Unicredit and Intesa Sanpaolo, Austria’s Erste Bank, Société Générale from France, Belgium’s KBC, German Bayern Landesbank, Sweden’s Swedbank, and EFG Eurobank from Greece.
Source
Banks ask for crisis funds for E Europe – FT