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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