Eurozone crisis takes centre stage

„Most countries have much smaller current account deficits and so are less at risk from a potential drying-up of external capital. Romania’s deficit has narrowed to less than 5 per cent of gross domestic product from almost 14 per cent, Croatia’s deficit has shrunk to 1.4 per cent from 7 per cent, and Hungary has converted a 7 per cent deficit into a 2.8 per cent surplus, according to Juraj Kotian, an analyst at Erste Group, the Austrian bank.

For the most part, the region has not seen large inflows of speculative capital in the post-Lehman era. Banking systems have been recapitalised. Another important strength is the level of public debt-to-GDP ratios. With the exception of Hungary, these are generally well below the 60 per cent stipulated in the European Union’s governing treaty as the ceiling for admission to the eurozone. In this respect the central and eastern European states are more virtuous than France, Germany, Italy and many other countries already in the eurozone. (...)

The diversity of the central and eastern European states makes it difficult to reach general conclusions about the region’s prospects. But, as Jean-Claude Trichet, the European Central Bank’s former president, told a Warsaw conference in October, the past 20 years have seen remarkable progress in modernising state institutions, improving the business environment and increasing trade integration with the eurozone.

What will be important next year is for eurozone countries, as well as other EU states and the IMF, to do whatever is necessary to support investors’ confidence in the region and avoid financial crises.”