Bad loans could mean trouble for western European lenders. Hungary’s prime minister is calling for $230 billion in aid for weaker E.U. members. Transcript of radio broadcast: 05 March 2009
This is the VOA Special English Economics Report.
Leaders of the European Union met Sunday in Brussels to discuss measures to deal with the world financial crisis. But the emergency meeting showed growing divisions between western European countries and newer members of the European Union.
Economies in central and eastern Europe have been hit hard by the worldwide credit crisis and less demand for exports in western Europe.
Hungarian Prime Minister Ferenc Gyurcsany, left, and Czech Prime Minister Mirek Topolanek at the E.U. meeting in Belgium
Hungary’s prime minister, Ferenc Gyurscany, has called for two hundred thirty billion dollars in aid for the weakest of the twenty-seven members of the European Union. The leader of Europe’s biggest economy, however, opposes such a large plan. German Chancellor Angela Merkel has suggested targeted aid for a few countries instead.
The European Union and the International Monetary Fund have already lent Hungary twenty-five billion dollars. Latvia received more than nine billion from the I.M.F. in December. But demonstrations fueled by the economic crisis led the Latvian government to resign last month.
The World Bank and two European development banks agreed last week to provide up to thirty-one billion dollars in aid to central and eastern Europe. A main concern is that the failure of some banks or governments to pay their debts could send a financial shock across many countries.
The effects could reach beyond central and eastern Europe. Banks in Austria, Italy and Sweden that expanded into the area during good times are now in danger of heavy losses.
Even in countries outside the euro area, like Hungary and Poland, businesses and individuals often borrowed in euros. Lower interest rates made euro loans a good deal at the time. Now, those loans have become more costly as local currencies have lost value. Chances are greater that foreign currency loans in some countries will not be paid back.
But some of the central and eastern economies in the European Union are in relatively good health. Poland is the biggest and its economy is less dependent on exports. The Czech Republic is also considered in a better position. The Czechs currently hold the E.U. presidency.
On Wednesday, banking supervisors from the Czech Republic, Slovakia, Poland, Romania, Bulgaria and Hungary released a statement. They expressed concerns that information about risks to financial systems in central and eastern Europe is “often simplified and misleading.”
And that’s the VOA Special English Economics Report, written by Mario Ritter. I’m Steve Ember.
Economic downturn means poor nations have to depend more on foreign aid.Transcript of radio broadcast: 13 March 2009
This is the VOA Special English Economics Report.
Both the World Bank and the International Monetary Fund expect the world economy to shrink this year for the first time since World War Two. As recently as January, the I.M.F. had predicted growth of one-half percent. But this week its chief, Dominique Strauss-Kahn, said the world has entered what he called “a great recession.”
A trader reacts last week to a fall in the value of South Korea’s currency, the won
A new World Bank report says the recession may hurt the developing world the most. Those countries depend on trade for economic growth. But world trade is expected to fall at the fastest rate in eighty years.
East Asia has been hardest hit. In February, exports from China fell twenty-six percent from a year ago.
Rich nations are expected to borrow heavily in world credit markets to finance spending at home. But investors are demanding very high returns if they are willing to lend to the developing world at all. Jeff Chelsky, a World Bank senior economist, says investors are avoiding higher risk debt in a flight to quality.
The bank estimates that up to three trillion dollars of public and private loans in developing countries must be repaid this year. Some nations have enough foreign currency reserves, but others will struggle to find new financing to pay their existing debts.
The World Bank estimates that developing nations will need between two hundred seventy and seven hundred billion dollars in financing. The amount depends on the depth of the recession.
The I.M.F. is seeking to expand its lending ability. And World Bank President Robert Zoellick has called on rich nations to put some of their economic recovery spending into a crisis fund to help poor countries.
Bank economist Jeff Chelsky says the poorest countries are in the greatest danger. They cannot borrow in credit markets and they depend on exports of commodities like crops or minerals. But falling commodity prices mean they now depend more than ever on foreign aid.
Finance ministers and central bankers from major industrial and developing countries meet this weekend outside London to discuss the financial crisis. President Obama wants all countries in the Group of Twenty to coordinate their separate efforts to strengthen their economies. But European Union officials have rejected American calls to spend more.
There was some good news this week, including better-than-expected reports on spending by Americans in January and February. And financial stocks rose after Citigroup reported a profit for those two months.
And that’s the VOA Special English Economics Report, written by Mario Ritter. I’m Steve Ember.
