Rudd: Eastern Europe At Risk; Looking To China …

• March 25th, 2009
• Posted by EUEditor

The Australian Prime Minister, Kevin Rudd, has been speaking of concerns about a worsening of conditions in Eastern Europe, and possible aid from China, in his commentary on the world economy.

The Prime Minister, making his way to the London G20 summit, told a conference  in Washington (24.3.09) he was concerned about a further spread of the contagion hitting financial markets.

If more resources had to be called in, one source would have to be money from China, an engine of the economic growth of recent years.

Economic problems in countries of Eastern and Central European on the other hand had the potential to drag Western economies further into crisis, he said.

EASTERN EUROPE HARDEST HIT

Extra budget support has been dedicated to the former Eastern Bloc, where the economic crisis has hit hardest.

That has been provided by the European Union, assisting countries which are now member states, (see EUAustralia, “Getting ready for G20”, 24.3.09), and also through the World Bank, European Investment Bank and European Bank for Reconstruction and Development.

“Eastern Europe is on the brink of its own version of the 1997 Asian crisis …”, wrote  Larry Elliott, finance writer with the Guardian-Weekly (6.3.09), making a stock-take on conditions in the East:-

“Nowhere has been impact of the global crisis been felt harder than in eastern Europe …

“Russia’s reliance on exports of oil and gas has been brutally exposed by the down-turn …

“In Ukraine, things are worse. Industrial production was more than a third lower in January than a year earlier; spending in the shops has collapsed; overnight interest rates are nearly 50% …

“In Bulgaria and Romania, foreign-owned factories providing low-cost good have been shut. Their currencies are under pressure and interest rates are crippling …

“Latvia and Estonia are seeing their economies contract at an annual rate approaching 10%…

“Hungary took advantage of global capital markets to fund mortgages denominated in foreign currencies. The problem with that is that payments soar when the local currency depreciates …

“Slovakia’s euro membership has meant it has escaped the worst of the turmoil but it has been hit hard by the collapse in demand for manufactured goods …

“And so it goes. The Polish zloty has fallen sharply; industrial production in the Czech Republic has collapsed; Turkey slashed interest rates …”.

The trouble has spread to Europe-wide management of common issues, such as  pressure now coming from national Environment Ministers, to slow down moves by the European Commission to upgrade controls on air pollution.

Eastern European states dependent on coal, with some support from the United Kingdom, have sought exemptions for certain large industrial plants during the coming decade.

TROUBLE IN UKRAINE

Crisis in the Ukraine has aggravated volatile political tensions; the three-way conflict shared by the government of Prime Minister Yulia Tymoshenko (picture) with her Russian-orientated Opposition, and the liberal state President, Viktor Yushchenko.

“This combat will end in his political suicide, not in my destruction”, she said of the President this month, (European Voice, 5.3.09).

A former Foreign Minister of Ukraine, and co-chair of the EU-Ukraine Parliamentary Committee, Borys Tarasyuk, has called the crisis a “moment of truth”, testing the country’s newly made democratic institutions.

“My view is that Ukraine’s democracy has not failed; it has simply not had enough time to bear fruit…”, he wrote in European Voice.

He called for further financial aid for the country, technical assistance because “in trying times an expert opinion is needed and valued most”, and some “psychological” help as well — “because it is the mind where crises start and where they end”.

Reference:

Borys Tarasyuk, “A make-or-break moment for Ukraine’s political elite”, European Voice, Brussels, 5.3.09, p 9

Toby Vogel, “Troubled times for eastern economies”, European Voice, Brussels, 5.3.09, p 20

Jennifer Rankin, “Member states divided over industrial emissions plan”, European Voice, Brussels, 20.2.09, p 4

Larry Elliott, “A chill wind blows through the east”, The Guardian Weekly, Manchester, 6.3.09, p 17

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