How Emerging Europe Came Through the 2008/09 Crisis
Back Matter

Back Matter

Author(s):
Bas Bakker, and Christoph Klingen
Published Date:
August 2012
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    References

    Contributors1

    Athanasios Arvanitis, Advisor, European Department, and former Mission Chief to Ukraine

    Ruben Atoyan, Economist, Eastern European Division, European Department

    Bas B. Bakker, Division Chief, Emerging Europe Regional Division, European Department, and former Mission Chief to Bulgaria

    Gerwin Bell, Deputy Division Chief, Southeastern Europe Division II, European Department, and Mission Chief to Albania and Montenegro

    Alina Carare, Deputy Division Chief, European Division, IMF Institute, and former Senior Economist on the Hungary Team

    Chuling Chen, Economist, Euro Area Division I, European Department, and former Economist on the Albania Team

    Lone Christiansen, Economist, Emerging Europe Regional Division, European Department

    Costas Christou, Deputy Division Chief, Southeastern Europe Division II, European Department, and Mission Chief to Bosnia & Herzegovina

    Milan Cuc, IMF Resident Representative in Bosnia & Herzegovina, Southeastern Europe Division, European Department

    Xavier Debrun, Deputy Division Chief, Fiscal Policy and Surveillance Division, Fiscal Affairs Department, and former Senior Economist on the Hungary Team

    Peter Dohlman, Senior Economist, Eastern Europe Division, European Department

    Arbër Domi, Senior Economist, Fiscal Policy Unit, Department of Finance, Kosovo, and former IMF Resident Representative in Kosovo, Southeastern Division II, European Department

    Christoph Duenwald, Senior Economist, Middle East & Central Asia Department, and former Senior Economist in the Emerging Europe Regional Division

    Natan Epstein, Senior Economist, Central European Division, European Department

    Jeffrey Franks, Division Chief, Southeastern Europe Division I, European Department, Mission Chief to Romania

    Michael Gorbanyov, Economist, Eastern Europe Division, European Department

    Manuela Goretti, Economist, Emerging Markets Division, Strategy, Policy, and Review Department

    Mark Griffiths, Deputy Division Chief, Central European Division, European Department, and Mission Chief to Latvia

    Nikolay Gueorguiev, Deputy Division Chief, Eastern Europe Division, European Department, and Mission Chief to Moldova

    Anne-Marie Gulde-Wolf, Deputy Director, African Department, and former Deputy Director, European Department

    David Hofman, Senior Economist, Eastern European Division, European Department

    Plamen Iossifov, Economist, Southeastern Europe Division, European Department

    Albert Jaeger, Senior IMF Resident Representative in Portugal, and former Mission Chief to Serbia

    Christopher Jarvis, Division Chief, Eastern Europe Division, European Department, and Mission Chief to Belarus

    Phakawa Jeasakul, Economist, Emerging Europe Regional Division, European Department

    James John, Senior Economist, Immediate Office, European Department, and former Economist on the Latvia Team

    Yuko Kinoshita, Senior Economist, Emerging Europe Regional Division, European Department

    Christoph Klingen, Deputy Division Chief, Emerging Europe Regional Division, European Department

    Dmitriy Kovtun, Economist, Eastern Europe Division, European Department

    Julie Kozack, Advisor, European Department, and former Deputy Division Chief in Russia Team

    Mark Lewis, Senior IMF Resident Representative in Turkey

    Eliza Lis, Economist, Eastern Europe Division, European Department

    Ricardo Llaudes, Economist, Emerging Markets Division, Strategy, Policy, and Review Department, and former Economist on the Poland team

    Wes McGrew, Deputy Division Chief, Southeastern Europe Division II, European Department, and Mission Chief to Macedonia

    Tokhir Mirzoev, IMF Resident Representative in Moldova

    Pritha Mitra, Economist, Eastern Europe Division, European Department

    James Morsink, Assistant Director, Immediate Office, Monetary and Capital Markets, former Mission Chief to Hungary

    Zuzana Murgasova, Division Chief, Southeastern Europe Division II, European Department, and former Mission Chief to Croatia

    Jürgen Odenius, former Mission Chief to Kosovo

    Catriona Purfield, Advisor, Immediate Office, European Department, and former Mission Chief to Lithuania

    Jesmin Rahman, Senior Economist, Emerging Europe Regional Division, European Department

    Christoph Rosenberg, Advisor, Immediate Office, European Department, and former Mission Chief to Estonia

    Stephane Roudet, Senior Economist, Euro Area Division II, European Department

    Linda Spahia, Economist, Southeastern Europe Division II, European Department

    Gabriel Srour, Senior Economist, Eastern Europe Division, European Department

    Alexander Tieman, IMF Resident Representative in Macedonia

    Anita Tuladhar, Senior Economist, Southeastern Europe Division I, European Department

    Jérôme Vandenbussche, Economist, Emerging Europe Regional Division, European Department

    Delia Velculescu, Senior Economist, Euro Area Division I, European Department

    Johannes Wiegand, Deputy Division Chief, Southeastern Europe Division II, European Department, and former Senior Economist on the Hungary Team

    Daria Zakharova, Deputy Division Chief, Eastern Europe Division, European Department

    Reflects contributors’ positions as of February 2012.

    Index

    Note: Page numbers followed by b, f, n, or t refer to boxed text, figures, footnotes, or tables, respectively. Number following n indicates the footnote number.

    A

    Accrual deficit, in Bulgaria, 240

    Acquis communautaire, 235

    Albania, 253–60

    • background, 253–54

    • domestic demand in, 3

    • economic and financial indicators 2003–11, 259–60t

    • economic outcomes 2009–11, 257

    • economic recovery in, 69n10

    • future challenges, 258

    • IMF-supported programs, 253, 254

    • impact of global financial crisis, 49, 254–56

    • macro-prudential measures, 255b

    • NPL ratio in, 73

    • policy responses to global financial crisis, 256–57

    • public finances in, 72, 259t

    • run-up to global financial crisis, 254

    Allied Irish Banks, 84

    Almunia, Joaquin, 117

    Argentina

    • financial crisis of 2001–02, 75, 82f, 83f

    • IMF support for, 79

    Asia

    • external position of Western banks, 27f

    • financial crisis of 1997–98, 75, 193

    • real GDP 2005–11, 68f

    Association Agreement with European Union, Moldova and, 179

    B

    Balance-of-payments crises, 28, 78b

    Baltics. See also Estonia; Latvia; Lithuania

    • bank funding pressures in, 42, 44t

    • capital inflows to, 7

    • credit default swap spreads and, 33f, 41f

    • credit growth in, 16

    • currency board arrangements in, 76

    • domestic demand in, 3, 49

    • economic recovery in, 69–70

    • effect of global crisis on, 33–35

    • exports from, 290f

    • market bond index spreads and, 42f

    • nominal effective exchange rates and, 47f

    • overheating in, 10

    • real credit stock in, 50f

    • real exports 2007–11, 66f

    • real GDP 2007–11, 67f

    • real private credit in, 288f

    • stock market indices in, 34f, 43f

    Bank-by-bank credit ceilings, 21

    Bank credit, in Lithuania, 226

    Bank deposits. See also Deposit insurance

    • in Albania, 255, 256f

    • in Bulgaria, 238f

    • development in Montenegro, 269, 270f, 271

    Bank failures, in Russia, 196

    Bank for International Settlements (BIS), 42

    Bank funding, in Hungary, 93

    Bank Gospodartstwa Krajowego, 158

    Bank Guarantee Fund Law, in Poland, 158

    Banking crises, 56–57, 57t

    • defined, 57

    • in Latvia, 76–77, 114, 118

    • in Lithuania, 225

    • in Ukraine, 76–77, 105, 106–7

    Banking regulation, 296–97

    Banking sector

    • in Albania, 255b

    • in Bosnia and Herzegovina, 163–64, 165, 166–67, 168

    • in Estonia, 220

    • in Kosovo, 183–84, 187

    • in Lithuania, 230

    • in Macedonia, 262, 264

    • in Moldova, 177, 178

    • in Montenegro, 269, 271

    • in Romania, 149–50

    • in Russia, 194, 199, 202

    • in Turkey, 209–10

    Banking system liquidity policy measures, 54–56, 55t

    Bank lending, 7–8

    • in Croatia, 249

    • in Kosovo, 184–85, 185f

    • in Turkey, 206

    Bank liquidity support, in Ukraine, 106

    Bank of Albania, 255b, 257

    Bank of Estonia, 214, 216

    Bank of Japan, 81

    Bank of Latvia, 114

    Bank of Lithuania, 228

    Bank recapitalization, in Ukraine, 106

    Banks. See also Foreign banks; Western banks

    • strengthening of capital positions, 54, 56t

    Bank Snoras, 230

    Bank solvency

    • in Hungary, 96

    • policy measures to protect, 54, 56t

    Bank stress tests, 63, 166

    Bayerische Landesbank of Germany, 43

    Belarus, 125–33

    • background, 125–26

    • currency crisis in, 125, 130

    • economic and financial indicators 2003–11, 132–33t

    • economic outcomes 2009–11, 129–31

    • effect of global financial crisis on, 49

    • exchange rate peg, 76

    • fiscal balance in, 19

    • future challenges, 131

    • IMF-supported programs in, 128–29, 129f

    • impact of global financial crisis, 127

    • international official financing and, 60

    • policy interest rates in, 82

    • policy response to global financial crisis, 128–29

    • run-up to global financial crisis, 126–27

    • stabilization of financial sector in, 57

    BIS. See Bank for International Settlements (BIS)

    Bond markets, response to global financial crisis, 40, 42f

    Bond spreads, global crisis and, 32

    Boom years (1995–2007), 3–28

    • credit booms, 6–14

    • introduction, 3–6

    • mispricing of risk, 22–28

    • policy reactions, 14–22

    Borg, Anders, 117

    Borisov, Boiko, 239–40

    Bosnia. See Bosnia and Herzegovina

    Bosnia and Herzegovina, 163–71

    • background, 163–64

    • capital inflows and credit in, 16

    • currency board, 76

    • domestic demand in, 3

    • economic and financial indicators 2003–11, 170–71t

    • economic outcomes 2009–11, 167–68

    • future challenges, 168–69

    • IMF-supported programs, 163, 165–67

    • impact of global financial crisis, 165

    • international official financing and, 61

    • policy responses to global financial crisis, 165–67

    • run-up to global financial crisis, 164

    • western bank support in, 84, 86

    Brcko District, 163, 166

    Budget deficit. See also Fiscal deficits in Kosovo, 185, 186b

    Budget process transparency, in Hungary, 94

    Budget reductions, in Lithuania, 228–29

    Budgets, in Bulgaria, 240

    Bulgaria, 235–44

    • background, 235

    • credit controls in, 20–21

    • credit growth in, 16

    • currency board, 76

    • domestic demand in, 3, 70

    • economic and financial indicators 2003–11, 243–44t

    • economic outcomes 2009–11, 241

    • economic recovery in, 67

    • fiscal balance in, 19

    • future challenges, 241–42

    • impact of global financial crisis, 237–38

    • overheating in, 10

    • policy responses to global financial crisis, 238–40

    • run-up to global financial crisis, 236–37

    • stabilization of financial sector, 58

    • unemployment in, 72

    Bulgarian National Bank, 238, 239

    C

    Capital adequacy ratios, 74f, 294, 295t

    • in Albania, 255b

    • in Bulgaria, 239

    Capital flows. See also Capital inflows; Capital outflows

    • 1995–2007, 11t

    • economic recovery and, 68n9

    • effect of global financial crisis on, 41–42, 46–47, 46f

    • net (2000–07), 10f

    Capital inflows

    • 2006–08, 32t

    • benign view of, 23–24

    • to Bulgaria, 236, 237

    • during credit boom, 6–14

    • to Croatia, 245, 248

    • fixed exchange rates and, 16–17

    • to Lithuania, 226

    • managing, 279, 280–81

    • mispricing of risk and, 22–28

    • to Moldova, 174, 175

    • to Montenegro, 267–68

    • net (2003–08), 12f

    • to Poland, 156, 157, 160

    • private, 286f

    • private sector credit and, 14f

    • to Romania, 146, 147, 151

    • to Russia, 201

    • to Serbia, 137

    • to Turkey, 210

    • to Ukraine, 105

    Capital injection, 56t

    Capital outflows

    • from Russia, 196

    • from Turkey, 210

    Central and eastern Europe (CEE). See also individual countries

    • cross-border production and, 3

    • foreign banks in, 22

    Central bank foreign assets, Bosnia and Herzegovina, 167f

    Central Bank of Montenegro, 268, 271

    Central Bank of Russia, 194, 196, 199

    Central Bank of Sweden, 56, 80, 81, 115

    Central Bank of the Republic of Kosovo, 184, 186b

    Central Bank of Turkey, 209

    Central bank reserves, Bosnia and Herzegovina, 166

    Central Europe. See also Czech Republic; Hungary; Poland

    • credit default swap spreads, 33f, 41f

    • exports, 290f

    • market bond index spreads, 42f

    • nominal effective exchange rates, 47f

    • real credit stock, 50f

    • real exports 2007–11, 66f

    • real GDP 2007–11, 67f

    • real private credit, 288f

    • stock market indices, 34f, 43f

    CIS. See Commonwealth of Independent States (CIS) countries

    Citigroup, 75

    Cohesion policy of European Union, 230

    Commodity prices, 64f, 65

    • vulnerability to drop in, 290

    Commonwealth of Independent States (CIS) countries. See also individual countries

    • bank funding pressures in, 42, 44t

    • credit default swap spreads in, 33f, 41f

    • domestic demand in, 3

    • exports, 290f

    • fiscal adjustments in, 71

    • GDP growth projections, 31

    • market bond index spreads in, 42f

    • nominal effective exchange rates in, 47f

    • overheating in, 10

    • real credit stock, 50f

    • real exports 2007–11, 66f

    • real GDP 2007–11, 67f

    • real private credit, 288f

    • stock market indices, 34f, 43f

    Consensus Economics, 24–25

    Consumer confidence

    • in Albania, 255

    • in Lithuania, 227

    • rebound in, 63, 64f

    Consumer price inflation

    • 2006, 2008, 35f

    • 2006 and 2008, 16f

    Consumption, in Bosnia and Herzegovina, 165

    Consumption-based growth model, in Serbia, 135, 141

    Convergence, vision for broader, 297–99

    Countercyclical policy

    • in Montenegro, 271

    • in Poland, 157

    • in Turkey, 207–8

    Credit, private sector, 6, 6f, 8f

    Credit boom

    • in Bulgaria, 236, 237

    • nature and origins of, 6–14

    Credit controls, 20–22

    Credit crunch, in Montenegro, 269

    Credit default swap (CDS) spreads, 24, 26f

    • in Croatia, 247

    • in emerging Europe, 41f

    • in Estonia, 215

    • European banks and, 292b

    • global crisis and, 32, 33f

    • in Hungary, 97, 98f

    • rebound of, 63

    Credit growth

    • in Albania, 254

    • in Belarus, 129f, 130

    • in Bosnia and Herzegovina, 164

    • change in, 286–87, 288f

    • in Croatia, 245–46

    • effect of global financial crisis on, 36f, 48

    • in Kosovo, 184

    • nonperforming loans and, 296f

    • risk premiums and, 23

    • in Romania, 146

    • safeguards against excessive, 281–83

    • slowdown in Baltics and, 34

    • in Turkey, 206, 210

    Credit inflows, to Russia, 194

    Credit-to-GDP ratios, 6, 9f

    • in Albania, 254

    • floating exchange rate countries and, 16

    • global financial crisis and, 50–51, 53f

    • in Russia, 194

    Croatia, 245–52

    • background, 245

    • credit controls in, 20–21

    • domestic demand in, 3, 70

    • economic and financial indicators 2003–11, 251–52t

    • economic outcomes 2009–11, 249

    • economic recovery in, 67

    • fiscal balance in, 19

    • fiscal deficits in, 72

    • future challenges, 249–50

    • impact of global financial crisis, 247–48

    • policy interest rates in, 82

    • policy responses to global financial crisis, 248–49

    • run-up to global financial crisis, 245–47

    Croatian National Bank, 247, 248

    Currency boards, 76

    • in Bulgaria, 235, 238n2

    • in Lithuania, 227

    Currency crisis

    • in Belarus, 125, 130

    • in Lithuania, 225

    • in Ukraine, 105, 109

    Currency rate peg, in Lithuania, 227, 228

    Currency risk, debt exposed to, 294f

    Current account balance

    • in Moldova, 174

    • in Serbia, 140

    Current account deficits

    • in Albania, 253, 255

    • in Belarus, 127, 130

    • in Bosnia and Herzegovina, 164

    • in Bulgaria, 236, 241

    • credit booms and, 10

    • in Croatia, 246, 249

    • in Hungary, 91

    • in Latvia, 35, 114, 118

    • in Macedonia, 261, 262

    • in Moldova, 173, 176

    • in Montenegro, 268–69

    • as precrisis vulnerability, 75, 76f

    • reduction in, 286, 287f

    • risk premiums and, 23, 27–28, 28n26

    • in Romania, 61, 146, 151

    • in Serbia, 137

    • in Turkey, 206, 207, 208

    Current account surpluses

    • in Estonia, 220

    • in Lithuania, 231

    Czech Republic

    • balanced growth in, 281

    • capital inflows to, 7

    • domestic demand in, 3, 49

    • fiscal balance in, 19

    • nominal exchange rates and, 16

    • stabilization of financial sector, 58

    • trade-oriented growth pattern in, 279

    D

    Dayton Peace Agreement, 163

    Debt guarantee schemes, 54, 55t

    Debt markets, response to global financial crisis, 40

    Debt service burden, 82

    Debt-to-GDP ratios

    • in Romania, 148

    • in Turkey, 208

    Deficit ratio, in Albania, 254

    Denmark, support for Latvia, 115

    Deposit Guarantee Fund, in Romania, 150

    Deposit insurance

    • in Bosnia and Herzegovina, 166–67

    • in Bulgaria, 238

    • in Estonia, 216

    • increase in, 54, 55t

    • in Romania, 150

    • in Ukraine, 106

    Deposit Insurance Agency, in Bosnia and Herzegovina, 166–67

    Deutsche Bank, 75

    Development Policy Loan, for Bosnia and Herzegovina, 166

    Directorate-General for Competition, 78b

    Dombrovskis, Valdis, 119

    Domestic consumption, convergence and, 298

    Domestic currency, lack of trust in Serbia’s, 136

    Domestic currency deposits, 45t

    Domestic currency liquidity injections, 54, 55t

    Domestic debt markets, rollover risk in, 289

    Domestic demand

    • in Bulgaria, 237, 241

    • credit booms and increase in, 10

    • effect of global financial crisis on, 34, 36f, 48–49, 53f, 54f

    • in emerging Europe, 3, 5f, 6, 6f

    • in Estonia, 215, 219

    • growth in 2003–08, 15f, 20f

    • in Lithuania, 227

    • in Montenegro, 269

    • rebound in, 68–70, 68f

    • in Russia, 196

    Domestic deposits, in Bulgaria, 238

    Domestic imbalances, global financial crisis and, 50–51

    Domestic savings, convergence and, 298

    E

    EBRD. See European Bank for Reconstruction and Development (EBRD)

    ECB. See European Central Bank (ECB)

    Economic and financial indicators 2003–11, 142–43t

    • for Albania, 259–60t

    • for Belarus, 132–33t

    • for Bosnia and Herzegovina, 170–71t

    • for Bulgaria, 243–44t

    • for Croatia, 251–52t

    • for Estonia, 222–23t

    • for Hungary, 100–1t

    • for Kosovo, 188–89t

    • for Latvia, 122–23t

    • for Lithuania, 233–34t

    • for Macedonia, 265–66t

    • for Moldova, 180–81t

    • for Montenegro, 274–75t

    • for Poland, 161–62t

    • for Romania, 153–54t

    • for Russia, 203–4t

    • for Serbia, 142–43t

    • for Turkey, 211–12t

    • for Ukraine, 111–12t

    Economic and Monetary Union of the EU, 71

    Economic outcomes 2009–11

    • in Albania, 257

    • in Belarus, 129–31

    • in Bosnia and Herzegovina, 167–68, 167f

    • in Bulgaria, 241

    • in Croatia, 249

    • in Estonia, 219–20

    • in Hungary, 97–99

    • in Kosovo, 187

    • in Latvia, 118–19

    • in Lithuania, 230–32

    • in Macedonia, 263

    • in Moldova, 177–78

    • in Montenegro, 272

    • in Poland, 159

    • in Romania, 151–52

    • in Russia, 200–1

    • in Serbia, 139–41

    • in Turkey, 208–10

    • in Ukraine, 109–10

    Economic recovery, 64–70

    Economic Recovery Program, Croatian, 250

    The Economist, 75

    EMBI. See Emerging Markets Bond Index (EMBI)

    Emerging Europe. See also individual countries and regions

    • 2009 economic projections, 39

    • August 2007–September 2008, 31–37

    • avoidance of financial meltdown, 75–88

    • banks, effect of global financial crisis on, 41–46

    • boom years (See Boom years (1995–2007))

    • domestic currency deposits, 45t

    • economic growth in, 1995–2007, 3, 4f, 5f

    • exchange rate pressure index, 48t

    • exports, 3, 4t

    • external position of Western banks, 27f, 42, 44t

    • global financial crisis and (See Global financial crisis)

    • impact of euro area crisis, 292–93b

    • international sovereign bond issuance, 40, 44t

    • international syndicated loans, 45t

    • per capita GDP growth, 3, 4f

    • progress toward reducing vulnerabilities, 285–87

    • real GDP growth, 281f

    • reform and capital flows, 11f

    • Vienna Initiative and, 84, 85–86b

    Emerging Markets Bond Index (EMBI), 39, 64f

    Energy sector

    • in Belarus, 126, 126f, 127, 130–31

    • in Lithuania, 225, 227, 230

    • in Moldova, 173, 177

    • in Russia, 193–94, 195, 196, 201

    • in Turkey, 208, 210

    • in Ukraine, 105, 108, 108f, 109

    Equity markets

    • rebound in, 63

    • response to global financial crisis, 39

    Estonia, 213–23

    • absence of financial crisis in, 87

    • background, 213

    • decline in output in, 49

    • economic and financial indicators 2003–11, 222–23t

    • economic outcomes 2009–11, 219–20

    • economic recovery in, 69n11

    • euro and, 216

    • fiscal adjustments in, 71

    • fiscal performance, 217–19b

    • fiscal performance compared to Latvia and Lithuania, 218–19t

    • foreign currency liquidity support in, 56

    • future challenges, 220–21

    • IMF support for, 80, 81

    • impact of global financial crisis, 214–15

    • labor costs, 231f

    • policy responses to global financial crisis, 215–19

    • run-up to global financial crisis, 214

    • slowdown in, 34–35

    • stabilization of financial sector, 57

    Estonia 2020, 297

    EurAsEC Anti-Crisis Fund, 131

    Euro adoption

    • Bulgaria and, 241–42

    • capital inflows and expectation of, 7

    • Estonia and, 216, 220

    • Latvia and, 113, 115, 119–20, 121

    • Lithuania and, 225

    Euro area

    • as emerging Europe’s trading partner, 3

    • imports to, 83f

    • policy interest rates in, 82f

    Euro area crisis, 292–93b

    • monetary integration and, 298

    Eurobond issue

    • Albania and, 257

    • Belarus and, 130

    • Lithuania and, 231

    • Montenegro and, 272

    Eurobond market, 40

    European Bank Coordination Initiative, 85b, 97, 139, 167

    European Bank for Reconstruction and Development (EBRD), 77

    • Latvia and, 115, 116

    • Macedonia and, 262

    • Vienna Initiative and, 85b

    European Banking Authority, 296

    European Central Bank (ECB), 24, 80, 81, 96, 292b

    • foreign currency liquidity support from, 56

    • lack of access to, 76n2

    • response to global financial crisis, 54

    European Commission

    • financial support for Hungary and, 97, 99

    • Vienna Initiative and, 85b

    European Exchange Rate Mechanism II

    • Bulgaria and, 235, 239, 240

    • Estonia and, 213

    European Investment Bank, 77, 85b, 230

    European Systemic Risk Management Board, 296

    European Union (EU)

    • cohesion policy, 230

    • cross-border financial system supervision, 296

    • external position of Western banks in new members, 27f

    • financial support for Romania, 148, 149

    • IMF-supported programs and, 77, 78b

    • loan for Bosnia and Herzegovina, 166

    • Stabilization and Association Agreement, 164

    • support for Latvia, 115, 117

    • Vienna Initiative and, 85–86b

    European Union (EU) integration

    • capital inflows and, 7

    • Romania and, 146

    Eurozone manufacturing purchasing managers index, 48

    Excessive Deficit Procedure, Poland and, 157

    Exchange rate depreciation, 57

    • capital flows and, 13

    • in Russia, 197

    • in Turkey, 207

    Exchange rate movements

    • in Albania, 255, 256f

    • in Belarus, 128

    Exchange rate peg, 76

    • in Estonia, 213, 215, 220

    • in Latvia, 115, 118

    • in Lithuania, 225

    • in Macedonia, 261, 263, 264

    • in Ukraine, 106

    Exchange rate policy

    • in Hungary, 95–96

    • maintenance of frameworks, 57

    • in reaction to 2008–09 crisis, 15–17

    Exchange rates

    • in Albania, 255

    • credit booms and, 282

    • effect of global financial crisis on, 47–48, 47f, 48t

    • financial crises and, 75–76

    • foreign currency loans and, 288–89

    • global interest rates and, 81–82

    • in Moldova, 178

    • in Poland, 157

    • in Romania, 146

    • in Russia, 201–2

    • in Serbia, 140

    Excise taxes, in Estonia, 220

    Expenditure growth, fiscal policy and, 284–85

    Exports

    • from Albania, 254, 257

    • from Belarus, 127

    • from Bulgaria, 238

    • change in, 287, 290f

    • from Croatia, 246

    • direction of, 3, 5t

    • effect of global financial crisis on, 48, 49f

    • in emerging Europe (1995–2007), 3, 4t

    • from Estonia, 215, 219

    • from Macedonia, 262–63

    • from Moldova, 174, 175

    • from Poland, 156–57

    • recovery of, 64–65, 65f, 66f

    • from Romania, 147

    • Serbia’s uncompetitive, 135–36

    • from Turkey, 207, 208

    Export-to-GDP ratio

    • capital inflows and, 279

    • in Poland, 155

    • in Serbia, 135

    Exposure, precrisis and postcrisis, 86–87, 87f

    Extended Credit Facility, 61

    Extended Fund Facility, 61

    External debt, 287, 291f

    • 2003–08, 17f

    • in Bulgaria, 236–37

    • credit boom and, 10, 12, 13

    • risk premiums and, 23

    External deficit, Serbia and, 135

    External financing, in Serbia, 140, 140t

    External positions of western banks, 14f, 27f, 32t, 42, 44t

    External sector indicators 2003–11

    • in Albania, 259t

    • in Belarus, 132t

    • in Bosnia and Herzegovina, 170t

    • in Bulgaria, 243t

    • in Croatia, 251t

    • in Estonia, 222t

    • in Hungary, 100t

    • in Kosovo, 188t

    • in Latvia, 122t

    • in Lithuania, 233t

    • in Macedonia, 265t

    • in Moldova, 180t

    • in Montenegro, 274t

    • in Poland, 161t

    • in Romania, 153t

    • in Russia, 203t

    • in Serbia, 142t

    • in Turkey, 211t

    • in Ukraine, 111t

    F

    Federation of BiH, 163

    Financial crises

    • absence of, 87–88

    • previous, 75–76

    Financial markets 2003–11

    • in Albania, 260t

    • in Belarus, 133t

    • in Bosnia and Herzegovina, 171t

    • in Bulgaria, 244t

    • in Croatia, 252t

    • in Estonia, 223t

    • in Hungary, 101t

    • impact of global crisis, 32

    • in Kosovo, 189t

    • in Latvia, 123t

    • in Lithuania, 234t

    • in Macedonia, 266t

    • in Moldova, 181t

    • in Montenegro, 275t

    • in Poland, 162t

    • rebound of, 63–64

    • in Romania, 154t

    • in Russia, 204t

    • in Serbia, 143t

    • in Turkey, 212t

    • in Ukraine, 112t

    Financial meltdown, avoidance of, 75–88

    • global macroeconomic policy setting and, 81–83

    • international support and, 77–81

    • role of foreign parent banks, 83–88

    Financial sector

    • balance sheets, 294–96

    • strengthening in Romania, 149–50

    Financial sector indicators 2003–11

    • in Albania, 260t

    • in Belarus, 133t

    • in Bosnia and Herzegovina, 171t

    • in Bulgaria, 244t

    • in Croatia, 252t

    • in Estonia, 223t

    • in Hungary, 101t

    • in Kosovo, 189t

    • in Latvia, 123t

    • in Lithuania, 234t

    • in Macedonia, 266t

    • in Moldova, 181t

    • in Montenegro, 275t

    • in Poland, 162t

    • in Romania, 154t

    • in Russia, 204t

    • in Serbia, 143t

    • in Turkey, 212t

    • in Ukraine, 112t

    Financial sector policy

    • in reaction to 2008–09 crisis, 20–22

    • in Russia, 199

    Financial sector reform

    • in Belarus, 128

    • in Latvia, 116–17

    Financial sector stabilization

    • response to global financial crisis and, 54–58

    Financial soundness indicators

    • 2007–11, 295t

    • 2011, 74f

    Financial stability, in Estonia, 214–15

    Financial Stability Pact, in Bulgaria, 297

    Financial supervision

    • in Hungary, 96

    • in Poland, 158

    Financing requirements, 287

    Firms, credit to, 6, 8f, 9f

    Fiscal adjustment

    • in Hungary, 93–94, 95f

    • in Lithuania, 229t

    • in Serbia, 138–39, 141

    Fiscal balance, 19–20, 21t, 294f

    Fiscal consolidation, 70–71

    • in Romania, 148–49

    • in Russia, 201

    Fiscal crisis, in Bosnia and Herzegovina, 165

    Fiscal decentralization law, in Serbia, 141

    Fiscal deficits

    • in Albania, 256, 257, 258

    • in Bulgaria, 240

    • as continuing problems, 294

    • in Croatia, 248

    • global financial crisis and, 70–72, 71f

    • in Hungary, 92

    • in Latvia, 117–18, 120

    • in Lithuania, 232

    • in Moldova, 176, 177–78

    • in Montenegro, 269–70

    • in Poland, 159

    • in Romania, 147, 148–49, 152

    • in Russia, 200–1

    Fiscal imbalance

    • risk mispricing and, 23–28

    • strength of recovery and, 65–67, 68f

    Fiscal measures, discretionary, 70f

    Fiscal performance

    • of Bosnia and Herzegovina, 168

    • of Estonia, 217–19b

    Fiscal policy

    • in Belarus, 129f

    • in Bosnia and Herzegovina, 166

    • changes in, 297

    • in Croatia, 248, 250

    • expenditure growth and, 284–85

    • in Kosovo, 184, 185

    • in Latvia, 116, 297

    • in Lithuania, 226, 228, 297

    • in Moldova, 176, 177

    • in Montenegro, 268

    • in reaction to 2008–09 crisis, 17–20

    • in Romania, 147

    • in Russia, 194–95, 199–201

    • in Turkey, 209

    • in Ukraine, 107–8, 109

    • wage growth and, 280

    Fiscal responsibility laws

    • in Croatia, 250

    • in Hungary, 94

    • in Romania, 149

    • in Serbia, 138–39

    Fiscal stimulus schemes, 82–83

    Fixed exchange rate countries

    • avoidance of financial meltdown, 76

    • credit booms and, 282

    • 2008–09 crisis and, 15–16

    Fixed exchange rates

    • capital inflows and, 16–17

    • in Estonia, 214

    • in Latvia, 113, 119–20

    • in Lithuania, 225

    Flexible Credit Line, for Poland, 77, 155, 158–59, 289

    Flexible exchange rate countries

    • credit booms and, 282

    • foreign currency loans and, 288–89

    Flexible exchange rates

    • in Albania, 255–56, 257

    • in Belarus, 130

    • in Moldova, 177

    Floating exchange rate countries

    • avoidance of financial meltdown, 76

    • 2008–09 crisis and, 15–16

    Floating exchange rates, in Poland, 156

    Foreign banks. See also Western banks

    • bail-in in Serbia, 139

    • in Bosnia and Herzegovina, 167

    • in Bulgaria, 237

    • credit expansion and, 283

    • in Croatia, 245

    • in Estonia, 214–15, 216, 220

    • in Hungary, 97

    • in Kosovo, 183–84

    • in Montenegro, 272

    • role in preventing financial meltdown, 83–88

    Foreign currency funding costs, 292b

    Foreign currency lending, 76f

    • in Albania, 255b

    • in Poland, 156

    • risk of, 283–84

    • as vulnerability, 288–89, 291f

    Foreign currency liquidity support, 56

    Foreign currency mortgages, 59b

    Foreign currency risk, 195, 288–89

    Foreign currency shortages, 59b

    Foreign currency swaps, 59b

    Foreign debt policy, convergence and, 298

    Foreign direct investment

    • 2003–07, 13f

    • 2003–08, 12f

    • in Belarus, 127

    • in Bulgaria, 236, 236f, 237

    • capital inflows and, 7–8

    • in emerging Europe, 1995–2007, 3

    • in fixed exchange rate countries, 15n10

    • flow (2007), 18f

    • foreign debt and, 298

    • in Kosovo, 187

    • in Macedonia, 261, 262, 263

    • in Moldova, 174

    • nontradable, 12

    • in Poland, 61

    • in Romania, 146

    Foreign exchange crisis in Belarus, 130

    Foreign exchange interventions, 54, 55t

    Foreign exchange liquidity injections, 54, 55t

    Foreign exchange swaps, IMF-supported programs and, 80–81

    Forward exchange rate, in Estonia, 215

    G

    GDP (gross domestic product)

    • in Belarus, 129

    • in Bosnia and Herzegovina, 171t

    • effect of global financial crisis on, 50–52, 52f, 53f, 54f

    • in Estonia, 219

    • in Hungary, 98

    • in Latvia, 241

    • in Lithuania, 231–32

    • in Macedonia, 266t

    • in Moldova, 177

    • in Montenegro, 272

    • in Romania, 147, 154t

    • in Russia, 200

    GDP (gross domestic product) 2003–11

    • in Albania, 260t

    • in Belarus, 133t

    • in Bulgaria, 244t

    • in Croatia, 252t

    • in Estonia, 223t

    • in Hungary, 101t

    • in Kosovo, 189t

    • in Latvia, 123t

    • in Lithuania, 234t

    • in Moldova, 181t

    • in Montenegro, 275t

    • in Poland, 162t

    • in Russia, 204t

    • in Serbia, 143t

    • in Turkey, 212t

    • in Ukraine, 112t

    GDP (gross domestic product) growth, 281f

    • 2003–08, 5f

    • in Albania, 253, 257

    • in Baltics, 36, 36f

    • belief in continued, 24–25

    • in Bosnia and Herzegovina, 163, 164, 167–68

    • in Bulgaria, 236, 241

    • consensus forecast, 28t

    • credit booms and, 10

    • in Croatia, 245, 248

    • in Hungary, 92

    • in Kosovo, 187

    • in Latvia, 114

    • in Macedonia, 262

    • in Moldova, 174

    • in Poland, 156

    • projections for 2004–09, 39, 40f

    • projections for 2007–10, 40t

    • projections for 2008, 31, 31t

    • rebound of, 65, 65f, 67f

    • in Romania, 146, 152

    • in Russia, 194, 195

    • in Serbia, 136

    • in Turkey, 205, 206

    • in Ukraine, 104

    German automakers, outsourcing to CEE, 3

    Germany, fiscal stimulus in, 82–83

    Global financial crisis

    • August 2007–September 2008, 31–37

    • economic recovery, 64–70

    • effect on Baltics, 33–35

    • effect on financial institutions, 39–48

    • effect on real economy, 48–52

    • global macroeconomic policy setting and, 81–83

    • impact on Albania, 254–56

    • impact on Belarus, 127

    • impact on Bosnia and Herzegovina, 165

    • impact on Bulgaria, 237–38

    • impact on Croatia, 247–48

    • impact on Estonia, 214–15

    • impact on Hungary, 93

    • impact on Kosovo, 184–85

    • impact on Latvia, 114

    • impact on Lithuania, 227

    • impact on Macedonia, 262–63

    • impact on Moldova, 175

    • impact on Montenegro, 269

    • impact on Poland, 156–57

    • impact on Romania, 147

    • impact on Russia, 196

    • impact on Serbia, 137

    • impact on Turkey, 207

    • impact on Ukraine, 104–6

    • initial policy lessons from, 279–85

    • legacies of, 70–74

    • policy response to (See Policy responses to global financial crisis)

    • rebound of financial markets, 63–64

    • recognition of vulnerabilities and, 25–26

    • role of international official financing, 77–81

    Global macroeconomic policy setting, 81–83

    G-20 meeting, 63

    Golden threshold rule, in Serbia, 139

    Government funding, in Hungary, 93

    Greek financial crisis, 140

    • Albania and, 258

    • IMF financial support, 80n3

    • Romania and, 149, 152

    Gross public debt, 294f

    Growth. See also Credit growth; GDP (gross domestic product) growth

    • balancing, 279–81

    • economic (1995–2007), 3, 4f, 5f

    • policies to support broader-based, 298

    • revenue (2003–08), 20f

    H

    Headline inflation

    • in Bosnia and Herzegovina, 168

    • in Moldova, 178

    • in Romania, 151–52

    • in Russia, 195

    Herzegovina. See Bosnia and Herzegovina

    Household debt, 69f

    • restructuring in Ukraine, 109

    Households, credit to, 6, 8f, 9f

    Housing prices. See also Real estate

    • in Baltics, 34, 36f

    • in Bulgaria, 237

    • effect of credit boom on, 10

    • in emerging Europe’s boom years, 6, 7f

    • in Lithuania, 226

    Hungarian Financial Supervisory Agency, 96

    Hungary, 91–101

    • background, 91–92

    • banking crisis in, 57

    • economic and financial indicators, 100–1t

    • economic outcomes 2009–11, 97–99

    • effect of global crisis on, 33, 35–37

    • financial support from IMF, 59, 78, 80, 81, 91, 93–94, 95f, 97, 99

    • fiscal balance in, 19

    • fiscal policy in, 18

    • foreign currency mortgages in, 59b

    • future challenges, 99

    • impact of global financial crisis, 93

    • international portfolio flows to, 40

    • liquidity risk in, 284

    • NPL ratio in, 73

    • policy interest rates, 82

    • policy responses to global financial crisis, 93–97

    • portfolio inflows to, 8

    • public debt, 36–37

    • public finances in, 72

    • rebound in exports, 65

    • run-up to global financial crisis, 92–93

    • stabilization of financial sector, 54, 57

    • unemployment in, 72, 98

    • western bank support in, 84, 86b

    Hypo Alpe Adria, 269

    I

    Iceland, capital inflows and, 17n12

    Ignalina Nuclear Power Plant, 227

    IMF (International Monetary Fund)

    • Estonia and, 214, 217, 220

    • external funding for emerging Europe and, 53

    • Macedonia and, 262

    • Vienna Initiative and, 85b

    IMF-supported programs, 58–62

    • in Albania, 253, 254

    • avoidance of financial meltdown and, 77–81

    • in Belarus, 60, 128–29, 129f

    • in Bosnia and Herzegovina, 61, 163, 165–67

    • in Bulgaria, 235

    • in Hungary, 59, 91, 93–94, 95f, 97, 99

    • in Kosovo, 62, 183, 185, 186b, 187

    • in Latvia, 60, 115–18

    • in Macedonia, 264

    • in Moldova, 61, 173, 174–75, 176

    • in Poland, 61, 155, 158–59

    • in Romania, 61, 145, 148, 149, 151, 152

    • in Serbia, 60–61, 135, 137–39

    • in Turkey, 205

    • in Ukraine, 60, 106–9

    • western banks in emerging Europe and, 84–85

    Imports

    • to Albania, 254

    • to Belarus, 130

    • change in, 287, 289f

    • contraction of, 83, 83f

    • to Romania, 147

    • to Turkey, 206, 207

    Indonesia, IMF support for, 79f

    Indonesia crisis, 82f, 83f

    Inflation. See also Headline inflation

    • in Albania, 254, 257

    • in Belarus, 125, 127, 129

    • in Bosnia and Herzegovina, 168

    • in Bulgaria, 236, 241

    • consumer price (2006, 2008), 16f, 35f

    • credit booms and, 10

    • in Estonia, 216

    • global crisis and emerging European, 32–33

    • in Hungary, 91

    • in Kosovo, 184

    • in Lithuania, 226

    • in Macedonia, 262

    • in Moldova, 173, 178

    • in Montenegro, 269, 272

    • in Poland, 156

    • reduction in, 286

    • in Romania, 145, 150, 151–52

    • in Russia, 194, 201

    • in Turkey, 205, 206, 207

    Interbank market liquidity, in Romania, 149–50

    Interest rates, policy (1995–2010), 81–82, 82f

    Internal devaluation, 215

    • in Latvia, 116, 119

    International investment position (2003–08), 17f

    International official financing

    • avoidance of financial meltdown and, 77–81

    • global financial crisis and, 58–62

    International reserves, 76f

    International sovereign bonds, 40

    • issuance (2008–10), 40, 44t

    International syndicated loan markets, 42, 43f

    International syndicated loans (2008), 45t

    Ireland, financial support for, 80n3

    J

    Japan

    • imports to, 83f

    • policy interest rates, 82f

    K

    Kosovo, 183–89

    • background, 183–84

    • economic and financial indicators 2003–11, 188–89t

    • economic outcomes 2009–11, 187

    • future challenges, 187

    • IMF-supported programs, 183, 185, 186b, 187

    • impact of global financial crisis, 184–85

    • international official financing and, 62

    • policy responses to global financial crisis, 185–86

    • run-up to global financial crisis, 184

    Kubilius, Andrius, 228

    L

    Labor costs, 231f

    Labor force

    • participation rate in Croatia, 250

    • policies to encourage flexibility in, 298–99

    Labor law, in Montenegro, 268

    Labor markets

    • in Bosnia and Herzegovina, 168–69

    • effect of credit boom on, 10

    • in Estonia, 215–16

    • in Lithuania, 230, 231f

    • reform of in Turkey, 210

    Latin America

    • external position of Western banks, 27f

    • recovery in, 65, 68f

    Latvia, 113–23

    • background, 113

    • banking crisis in, 56–57, 76–77, 114, 118

    • economic and financial indicators 2003–11, 122–23t

    • economic outcomes 2010–11, 118–19

    • economic recovery in, 67, 69, 70

    • euro adoption and, 115, 119–20, 121

    • fiscal performance compared to Estonia and Lithuania, 218–19t

    • foreign currency liquidity support in, 56

    • future challenges, 119–21

    • GDP in, 241

    • IMF-supported programs in, 60, 78, 80, 115–18

    • impact of global financial crisis, 114

    • internal devaluation in, 116, 119

    • labor costs, 231f

    • NPL ratio in, 73

    • output in, 49

    • policy responses, 115–18

    • public finances in, 71

    • run-up to global financial crisis, 114

    • slowdown in, 34–35

    • stabilization of financial sector, 54–56

    • unemployment in, 72

    • western bank support in, 84, 86

    Law on Public and Financial Management and Accountability, in Kosovo, 186b

    Lehman Brothers bankruptcy, 13n9, 31, 39

    Liquidity injections, 54, 55t

    • in Russia, 197, 197f

    Liquidity measures, in Hungary, 96

    Liquidity risk, foreign currency lending and, 284

    Lithuania, 225–34

    • absence of financial crisis in, 87

    • background, 225

    • decline in output in, 49

    • economic and financial indicators 2003–11, 233–34t

    • economic outcomes 2009–11, 230–32

    • fiscal deficits in, 72

    • fiscal performance compared to Estonia and Latvia, 218–19t

    • future challenges, 232

    • impact of global financial crisis, 227

    • NPL ratio in, 73

    • policy responses to global financial crisis, 227–30

    • public finances in, 71

    • run-up to global financial crisis, 226–27

    • slowdown in, 35

    Loan classification rules, 54

    • in Albania, 255b

    Loan-to-deposit ratio

    • in Albania, 254

    • in Hungary, 93

    • in Lithuania, 226

    Long-Term Refinancing Operation, 292b

    M

    Maastricht ceiling, Estonia and, 213

    Maastricht Treaty, 115

    Macedonia, 261–66

    • background, 261–62

    • capital inflows and credit in, 16

    • domestic demand in, 3

    • economic and financial indicators 2003–11, 265–66t

    • economic outcomes 2009–11, 263

    • effect of global financial crisis on, 49

    • future challenges, 264

    • IMF-supported program, 264

    • impact of global financial crisis, 262–63

    • policy responses to global financial crisis, 263

    • run-up to global financial crisis, 262

    Macroeconomic policies, in Croatia, 246–47

    Macroeconomic policy space, foreign currency lending and, 284

    Macroeconomic tightening, in Belarus, 128

    Macroprudential measures

    • in Albania, 254, 255b

    • in Hungary, 96

    • in Poland, 156

    Market bond index spreads, 42f

    Market economy, transitions to, 3

    Mazaikiu refinery, 230

    Mispricing of risk, 22–28

    Moldova, 173–81

    • background, 173–74

    • economic and financial indicators 2003–11, 180–81t

    • economic outcomes 2009–11, 177–78

    • future challenges, 178–79

    • IMF-assisted programs, 61, 78, 173, 174–75, 176

    • impact of global financial crisis, 175

    • policy responses to global financial crisis, 175–77

    • run-up to global financial crisis, 174–75

    Monetary policy

    • in Albania, 257

    • in Bulgaria, 238–39

    • credit growth and, 283

    • in Hungary, 95–96

    • in Lithuania, 228

    • in Moldova, 174, 175–76, 177

    • in Poland, 157–58

    • rate changes, 57, 58t

    • in reaction to 2008–09

    • crisis, 15–17

    • in Romania, 150

    • in Russia, 197–98, 201–2

    • in Turkey, 208, 209

    • in Ukraine, 107, 109

    Monetary sector indicators 2003–11

    • in Albania, 260t

    • in Belarus, 133t

    • in Bosnia and Herzegovina, 171t

    • in Bulgaria, 244t

    • in Croatia, 252t

    • in Estonia, 223t

    • in Hungary, 101t

    • in Kosovo, 189t

    • in Latvia, 123t

    • in Lithuania, 234t

    • in Macedonia, 266t

    • in Moldova, 181t

    • in Montenegro, 275t

    • in Poland, 162t

    • in Romania, 154t

    • in Russia, 204t

    • in Serbia, 143t

    • in Turkey, 212t

    • in Ukraine, 112t

    Montenegro, 267–75

    • background, 267

    • credit growth, 16

    • domestic demand in, 3, 70

    • economic and financial indicators 2003–11, 274–75t

    • economic outcomes 2009–11, 272

    • fiscal balance in, 19

    • fiscal deficits in, 72

    • future challenges, 272–73

    • impact of global financial crisis, 269

    • NPL ratio in, 73

    • overheating in, 10

    • policy responses to global financial crisis, 269–71

    • run-up to the global financial crisis, 267–69

    MSCI Emerging Europe Index, 63, 64f

    N

    Naftogaz, 108, 109

    National Bank of Hungary, 56, 80, 81n4

    National Bank of Moldova, 173, 174, 175–76, 177, 178

    National Bank of Poland, 59b, 157–58

    National Bank of Romania, 150, 152

    National Bank of Serbia, 139, 140

    National Bank of the Republic of Belarus, 125, 130

    National Bank of the Republic of Macedonia, 262

    National Bank of Ukraine, 106–7

    National Investment and Privatization Agency, 128

    Net capital flows (2000–07), 10f

    Net capital inflows (2003–08), 12f

    Net private capital flows (2003–09), 11t

    90 percent rule, 239

    Nonperforming loans (NPLs), 70

    • credit growth and, 296f

    • increase in, 294, 295t

    • rise in, 73–74, 74f

    Nordic-Baltic Agreement, 296n13

    NPLs. See Nonperforming loans (NPLs)

    Numerical fiscal balance rule, in Serbia, 139

    O

    Off setting measures, in Estonia, 217b

    Oil prices, Russia and, 193–94, 195, 196, 201

    Oil Stabilization Fund, Russian, 194

    Oresharski, Plamen, 239

    OTP Bank, 22n19, 76n2, 91, 93, 96

    Output, effect of global financial crisis on, 49–50

    Overheating

    • in Albania, 253, 254

    • in Bulgaria, 236

    • in Estonia, 214

    • in Lithuania, 226

    • as result of credit boom, 10

    P

    Parex Bank, 22n19, 76, 113, 114, 116, 118

    • stabilization of, 54, 56

    Pension systems

    • in Bulgaria, 239

    • in Kosovo, 187

    • in Latvia, 120

    • in Romania, 149

    • in Serbia, 139

    • in Turkey, 209

    Per capita income

    • for emerging Europe, 1995–2007, 3

    • for Serbia and new EU members, 135, 136f

    Per capita GDP growth (1995–2007), 3, 4f

    Poland, 155–62

    • background, 155

    • capital inflows to, 7, 68n9

    • domestic demand in, 3, 49, 69

    • economic and financial indicators 2003–11, 161–62t

    • economic outcomes 2009–11, 159

    • economic recovery in, 66

    • effect of global financial crisis on, 49

    • financial support for, 80, 81

    • fiscal deficits in, 72

    • Flexible Credit Line and, 77

    • foreign currency mortgages in, 59b

    • future challenges, 159–60

    • IMF-assisted programs, 61, 155, 158–59

    • impact of global financial crisis, 156–57

    • liquidity risk in, 284

    • nominal exchange rates and, 16

    • NPL ratio in, 73

    • policy responses to global financial crisis, 157–59

    • run-up to global financial crisis, 156

    • stabilization of financial sector, 57

    • trade-oriented growth pattern in, 279

    Policy interest rates, 57, 58t, 81–82, 82f

    Policy lessons from the global financial crisis, 279–85

    • need for more-balanced growth, 279–81

    • need to discourage foreign currency lending, 283–84

    • need to keep credit growth in check, 281–83

    • need to limit expenditure growth, 284–85

    Policy responses to global financial crisis, 14–22, 52–62, 157–59, 175–77

    • in Albania, 256–57

    • in Belarus, 128–29

    • in Bosnia and Herzegovina, 165–67

    • in Bulgaria, 238–40

    • in Croatia, 248–49

    • in Estonia, 215–19

    • financial sector policy, 20–22

    • fiscal policy, 17–20

    • global macroeconomic policy, 81–83

    • in Hungary, 93–97

    • international official financing, 58–62

    • in Kosovo, 185–86

    • in Latvia, 115–18

    • in Lithuania, 227–30

    • in Macedonia, 263

    • monetary and exchange rate policy, 15–17

    • in Montenegro, 269–71

    • in Romania, 147–50

    • in Russia, 196–200

    • in Serbia, 137–39

    • stabilization of financial sector, 45–58

    • in Turkey, 207–8

    • in Ukraine, 106–9

    Polish National Bank, 56, 80

    Portfolio inflows, 8

    Portfolio investment, 92f

    • 2003–07, 13f

    • 2003–08, 12f

    Portugal, financial support for, 80n3

    Portuguese trap, 214

    Poverty Reduction and Growth Facility, 174

    Precautionary Credit Line, for Macedonia, 264

    Price competitiveness, Croatia and, 249–50

    Price liberalization, in Belarus, 128

    Price stability, in Moldova, 177, 178–79

    Private capital inflows, 286f

    Private sector credit, 14f, 282f

    • in 2003, 2008, 19f

    • in Bosnia and Herzegovina, 164

    • change in 2003–08, 15f

    • by currency, 18f

    • growth in, 6, 6f, 8f, 164

    • in Kosovo, 184

    • in Romania, 146

    Private sector vulnerabilities, in Bulgaria, 236–37

    Procyclical fiscal policy, 18, 19n13, 19n14

    • in Moldova, 174

    • in Russia, 195, 200

    Prominvest, 77, 106b

    Provisioning ratio, 74f

    Public debt

    • in Albania, 258

    • in Croatia, 247

    • in Estonia, 217b

    • in Hungary, 36–37, 92–93

    • in Montenegro, 273

    • in Russia, 196

    • short-term, 294f

    • in Turkey, 205–6

    Public debt ratios (2003–07), 24, 25t

    Public expenditures

    • in Bosnia and Herzegovina, 164

    • growth in, 18–19

    • overheating and, 285

    Public finance laws

    • in Poland, 297

    • in Romania, 149

    Public finances

    • in Bulgaria, 239

    • global financial crisis and, 70–72

    • in Kosovo, 184

    • in Latvia, 117–18, 118–19, 122t

    • in Macedonia, 262

    • in Poland, 155, 156, 159

    • in Russia, 195f

    • in Serbia, 138

    • in Ukraine, 106b, 110, 111t

    • weakness of, 293–94, 294f

    Public finances 2003–11

    • in Albania, 259t

    • in Belarus, 132t

    • in Bosnia and Herzegovina, 170t

    • in Bulgaria, 243t

    • in Croatia, 251t

    • in Estonia, 222t

    • in Hungary, 100t

    • in Kosovo, 188t

    • in Lithuania, 233t

    • in Macedonia, 265t

    • in Moldova, 180t

    • in Montenegro, 274t

    • in Poland, 161t

    • in Romania, 153t

    • in Russia, 203t

    • in Serbia, 142t

    • in Turkey, 211t

    Public sector wages, in Moldova, 176

    Purchasing Managers Index, 48, 64f

    Pyramid schemes, in Albania, 253

    R

    Real estate. See also Housing prices

    • economic recovery and, 68–69, 69f

    • effect of global financial crisis on, 48, 51f

    Real sector crisis, in Turkey, 207

    Real sector indicators 2003–11

    • in Albania, 259t

    • in Belarus, 132t

    • in Bosnia and Herzegovina, 170t

    • in Bulgaria, 243t

    • in Croatia, 251t

    • in Estonia, 222t

    • in Hungary, 100t

    • in Kosovo, 188t

    • in Latvia, 122t

    • in Lithuania, 233t

    • in Macedonia, 265t

    • in Moldova, 180t

    • in Montenegro, 274t

    • in Poland, 161t

    • in Romania, 153t

    • in Russia, 203t

    • in Serbia, 142t

    • in Turkey, 211t

    • in Ukraine, 111t

    Recapitalization funds, 54, 56t

    Recession

    • inescapability of, 87–88

    • in Moldova, 175

    Regional Economic Outlook: Europe, 9n6, 25

    Regulatory changes, 296–97

    Remittances

    • to Albania, 255, 256

    • to Kosovo, 184, 187

    • to Moldova, 173, 174, 175, 178

    Repo arrangements, IMF and, 80–81

    Republika Srpska, 163, 165, 166

    Reserve requirements, relaxation of, 54, 55t

    Return on assets, 295t

    Revenue growth (2003–08), 20f

    Revenue performance, in Estonia, 217, 217b

    Rijecka, 43

    Riksbank, 54, 216, 220

    Risk, mispricing of, 22–28

    Risk premium, Romanian, 147

    Rollover risk in domestic debt markets, 289

    Romania, 145–54

    • background, 145–46

    • domestic demand in, 3

    • economic and financial indicators 2003–11, 153–54t

    • economic outcomes 2009–11, 151–52

    • economic recovery in, 67

    • fiscal adjustments in, 71

    • fiscal deficits in, 19–20

    • future challenges, 152

    • IMF-assisted programs, 61, 78, 145, 148, 149, 151, 152

    • impact of global financial crisis, 147

    • policy responses to global financial crisis, 147–50

    • run-up to global financial crisis, 146–47

    • stabilization of financial sector in, 54

    • western bank support in, 84, 86

    Ruble revaluation, 197–98, 198f

    Russia, 193–204

    • absence of financial crisis in, 87

    • background, 193–94

    • banking crisis in, 57

    • capital flows in, 7, 46–47

    • commodity price risk and, 290

    • domestic demand in, 69

    • economic and financial indicators 2003–11, 203–4t

    • economic outcomes 2009–11, 200–1

    • economic recovery in, 66n7

    • energy trade with Belarus, 126, 127, 130–31

    • energy trade with Moldova, 173

    • energy trade with Ukraine, 103, 105, 108

    • exchange rate devaluation in, 76

    • fiscal balance in, 19

    • future challenges, 201–2

    • impact of global financial crisis, 196

    • NPL ratio in, 73

    • policy interest rates, 82

    • policy responses to global financial crisis, 196–200

    • rebound in exports, 65

    • run-up to global financial crisis, 194–96

    • stabilization of financial sector, 54, 56, 57–58

    • unemployment in, 72

    S

    Safety net measures, in Latvia, 116

    Savings, domestic, 298

    SBA. See Stand-by arrangement (SBA)

    Sberbank, 199

    SDRs. See Special drawing rights (SDRs)

    SEE. See Southeastern Europe (SEE)

    Serbia, 135–43

    • background, 135–36

    • credit controls in, 20–21

    • economic and financial indicators 2003–11, 142–43t

    • economic outcomes 2009–11, 139–41

    • future challenges, 141

    • IMF-supported programs, 60–61, 135, 137–39

    • impact of global financial crisis, 137

    • NPL ratio in, 73

    • policy interest rates, 82

    • policy responses to global financial crisis, 137–39

    • run-up to global financial crisis, 136–37

    • western bank support in, 84, 86

    Short-term public debt, 294f

    Slovak Republic balanced growth in, 281

    • domestic demand in, 3, 6

    • exports, 290f

    • nominal exchange rates and, 16

    • real private credit in, 288f

    • trade-oriented growth pattern in, 279

    Smaghi, Lorenzo Bini, 24

    Social benefit spending

    • in Estonia, 217b

    • in Lithuania, 226

    Southeastern Europe (SEE). See also Bulgaria; Croatia; Romania; Serbia

    • bank funding pressures in, 42, 44t

    • capital inflows to, 7

    • credit default swap spreads in, 33f, 41f

    • exports, 290f

    • market bond index spreads in, 42f

    • nominal effective exchange rates, 47f

    • real credit stock, 50f

    • real exports 2007–11, 66f

    • real GDP 2007–11, 67f

    • real private credit in, 288f

    • stock market indices in, 34f, 43f

    Sovereign bond spreads, 137

    Sovereign credit default swap spreads

    • in Europe, 292b

    • response to global crisis, 39–40, 41f

    Sovereign debt crisis, 71, 292b

    S&P 500, volatility index on, 64f

    Special drawing rights (SDRs), 80

    • for Macedonia, 264

    • for Ukraine, 108

    Stability and Growth Pact, 139

    • Poland and, 159

    Stabilization and Association Agreement, between EU and Bosnia and Herzegovina, 164

    Stand-by arrangement (SBA)

    • for Bosnia and Herzegovina, 163, 165–67

    • for Hungary, 93–94

    • for Kosovo, 183, 186

    • for Romania, 148

    • for Serbia, 137–38

    • for Turkey, 206

    • for Ukraine, 60

    Stanishev, Sergey, 239

    Stimulus measures, in Turkey, 208

    Stock markets

    • effect of global crisis on, 32, 34f

    • indices, 43f

    Stocks, external positions, 32t

    Stress testing of banks, 63

    • in Bosnia and Herzegovina, 166

    Structural adjustment, 297

    Supervisory changes, 296–97

    Swap markets, 59b

    Swedish banks, in Baltics, 33–34

    Swiss National Bank, 56, 80, 81

    T

    Tax measures

    • in Estonia, 217

    • in Latvia, 120

    • in Lithuania, 228, 229–30

    • in Moldova, 177

    • in Poland, 157

    • in Turkey, 210

    Tax-to-GDP ratio, in Serbia, 138

    The Telegraph, 75

    Terms-of-trade shocks, in Montenegro, 269

    Thailand crisis, 82f, 83f

    Third country shocks, 24

    Turkey, 205–12

    • background, 205

    • capital inflows to, 7, 68n9

    • credit default swap spreads in, 33f, 41f

    • crisis of 2001, 75, 83, 83f, 205

    • economic and financial indicators 2003–11, 211–12t

    • economic outcomes 2009–11, 208–10

    • economic recovery in, 66–67

    • exports, 290f

    • fiscal adjustments in, 71

    • fiscal balance in, 19

    • future challenges, 210

    • IMF-assisted programs, 79f, 205

    • impact of global financial crisis, 207

    • market bond index spreads in, 42f

    • nominal effective exchange rates in, 47f

    • NPL ratio in, 73

    • policy responses to global financial crisis, 207–8

    • real credit stock, 50f

    • real exports 2007–11, 66f

    • real GDP 2007–11, 67f

    • real private credit, 288f

    • run-up to global financial crisis, 205–7

    • stabilization of financial sector, 57–58

    • stock market indices, 34f, 43f

    • unemployment in, 72

    U

    Ukraine, 103–12

    • background, 103

    • banking crisis in, 56–57, 76–77, 105, 106–7

    • commodity price risk and, 290

    • credit growth, 16

    • domestic demand in, 49

    • economic and financial indicators 2003–11, 111–12t

    • economic outcomes 2010–11, 109–10

    • economic recovery in, 66n7

    • exchange rate devaluation in, 76

    • future challenges, 110

    • IMF-supported programs, 60, 78, 106–9

    • impact of global financial crisis, 104–6

    • output in, 49

    • policy responses, 106–9

    • portfolio inflows to, 8

    • recession in, 105

    • run-up to global financial crisis, 104

    • stabilization of financial sector, 54, 56, 57

    Uncollateralized loans, Russia and, 197

    Unemployment, 72, 72f

    • in Belarus, 129

    • in Bosnia and Herzegovina, 164

    • in Hungary, 98

    • in Montenegro, 272

    • in Poland, 155

    • in Turkey, 207, 208

    United States

    • bank rescue plans, 63

    • imports, 83f

    • Lehman Brothers bankruptcy, 13n9, 31, 39

    • policy interest rates, 82f

    U.S. Federal Reserve, 63, 81

    V

    VEB, 199

    Vienna 2, 297

    Vienna Initiative, 84, 85–86b, 296–97

    • Bosnia and Herzegovina and, 167

    • Romania and, 150

    • Serbia and, 139

    Volatility index on S&P 500, 64f

    VTB, 199

    W

    Wages

    • in Belarus, 128

    • in Bulgaria, 241

    • in Croatia, 246, 246f

    • in Estonia, 215

    • global crisis and emerging European, 32–33

    • in Lithuania, 226–27

    • in Moldova, 176

    • in Montenegro, 269, 272

    • public sector, 280

    • in Romania, 147

    Western banks. See also Foreign banks

    • avoidance of financial meltdown and, 75

    • in Bosnia and Herzegovina, 163–64

    • capital flows from, 9–10

    • control over subsidiaries in emerging Europe, 21–22

    • credit default swap spreads and, 292b

    • effect of global financial crisis on emerging European subsidiaries, 41–42, 43–46

    • external positions of, 14f, 27f, 32t, 42, 44t

    • in Latvia, 113

    • in Lithuania, 225, 226, 227

    • role in preventing financial meltdown, 83–88

    • in Romania, 152

    • in Ukraine, 105b

    World Bank, 77, 250

    • Bosnia and Herzegovina and, 165–66, 167

    • Hungary and, 97

    • Kosovo and, 183, 185

    • Latvia and, 115

    • Macedonia and, 262

    • safety net measures in Latvia and, 116

    • Vienna Initiative and, 85b

    World Economic Outlook, 31, 39, 40t

    World Trade Organization, Russia and, 202

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