There is little doubt the era of generous funding from Western Europe's banks to their subsidiaries in the East is over, but this doens't have to translate into a reduction of bank credit in the emerging economies of Europe. The IMF's latest analysis shows an increase in local deposits in most countries of the region has offset the withdrawal of funding from Western Europe.
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Poul M. Thomsen is the Director of the IMF’s European Department. He is currently in charge of the IMF’s programs with Greece and Portugal, and also oversees the work of other country teams, including Iceland, Romania, and Ukraine.
During the 1990s and early 2000s, Thomsen gained extensive knowledge of the economic and social problems facing the countries in Central and Eastern Europe through multiple assignments in the region, including as the IMF’s Senior Resident Representative and Head of the Fund's Moscow Office.
Almost unnoticed amidst the difficulties in western Europe, the other half of the continent has begun to recover from the deepest slump in its post-transition period. In our fall 2010 Regional Economic Outlook, the emerging economies in central and eastern Europe are projected to grow by 3¾ percent this year and next—a relief after the 6 percent decline in 2009. But the boom years before the crisis had left much of the region addicted to foreign-financed credit growth, making it very vulnerable to a disruption in capital inflows. So, as the region emerges from the crisis, the big question is how do we avoid a repeat?
Following the global economic crisis, Europe's emerging economies will need to find new sources of growth to increase their share of world markets. Marek Belka, head of the IMF's European Department, says growth will need to come from manufacturing and services, rather than, in the past, construction, real estate, and banking. But he argues that Emerging Europe has transformed itself many times before and is quite capable of doing it again.
The Program of Seminars takes place outside the formal framework of the Annual Meetings. But to many people, they were the main reason for making the trip to Istanbul.
The program's October 4 offering included a first-hand perspective of how three emerging market countries—Turkey, Slovakia, and Ukraine—have weathered the crisis. We also got a glimpse of the methodology the IMF is using to become better at sounding the alarm if it sees new vulnerabilities building up in the world economy.