Abstract

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

References

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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

1

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

An Account by the Staff of the IMF's European Department
  • Abiad, A., D. Leigh, and A. Mody, 2007, “International Finance and Income Convergence: Europe Is Different,IMF Working Paper No. 64 (Washington: International Monetary Fund).

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  • Allen, W., and R. Moessner, 2010, “Central Bank Co-operation and International Liquidity in the Financial Crisis of 2008–09,BIS Working Paper No. 310 (Basel: Bank for International Settlements).

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