World Bank - euro zone threatens emerging Europe, Asia

WASHINGTON Sat Sep 24, 2011 4:26am IST

Euro and Swiss Franc notes are seen in this illustration picture in Lausanne August 9, 2011. REUTERS/Denis Balibouse/Files

Euro and Swiss Franc notes are seen in this illustration picture in Lausanne August 9, 2011.

Credit: Reuters/Denis Balibouse/Files

Related Topics

WASHINGTON (Reuters) - The euro zone debt crisis threatens the mild recovery underway in emerging European and Central Asian nations, the World Bank said on Friday, adding that main risks for parts of the region come from their exposure to banks in cash-strapped Greece and Italy.

"The region has strong financial linkages to Western Europe, which were source of growth. These linkages were a very big positive in the 2000-2008 period," Philippe Le Houerou, the World Bank's vice president for the ECA region, said during a briefing.

"But they are now becoming sources of vulnerabilities for our countries."

The ECA region, which includes 30 countries, stretches from Poland and the Balkans through Ukraine and Russia to the post-Soviet republics in Central Asia.

"Given the importance of the Greek banks in the Balkans and the Italian banks in Central Europe any problem that they may have could have direct effects in those countries," Le Houerou said.

Greek and Italian banks own about 60 percent of Bulgaria's total banking system assets and more than a third of Albania's, according to the World Bank. Nearly half of Croatia's banking assets belong to Italian banks.

"There is a risk that problems in the Southern European zone will spillover and weaken the financial sector and slow down growth first in the Western Balkans, then possibly in Central Europe and then maybe in Eastern Europe and even Russia," Indermit Gill, the World Bank's chief economist for the region, said.

Some of the French, Austrian and Swedish banks that are active in Emerging Europe also have exposure in Ireland and the troubled countries of the southern part of the euro zone.

"The problem is not the long term," Gill said. "The problem is how disruptions will be managed in the short-term."

Contagion effects in the ECA region can also be triggered by weaker economic prospects in some of the euro zone's strong economies, such as Germany, which would dampen demand for exports from the ECA region, the World Bank said.

The World Bank envisages the ECA region gross domestic product will grow 4.3 percent this year, slowing from 4.5 percent last year and one of the slowest expansions of any developing region.

(Writing by Lidia Kelly; Editing by Neil Stempleman)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Public Health

REUTERS SHOWCASE

Cost Cutting

Cost Cutting

PM Narendra Modi boots officials out of the first class cabin  Full Article 

Airtel Profit Jumps

Airtel Profit Jumps

Bharti Q2 net profit more than doubles   Full Article 

Leisure Riding

Leisure Riding

Harley-Davidson woos affluent young Indians with bike culture  Full Article 

Maruti Earnings

Maruti Earnings

Maruti Suzuki net profit up 29 percent, beats estimates.  Full Article 

ICICI Results

ICICI Results

ICICI Bank Q2 profit up 15 percent, beats estimates.  Full Article 

Moody's on India

Moody's on India

Moody's welcomes India's policy steps, but wants to see more.  Full Article 

End Of QE

End Of QE

U.S. Fed ends bond buying, exhibits confidence in U.S. recovery.  Full Article 

Cook Comes Out

Cook Comes Out

Apple's Cook: "I'm proud to be gay"  Full Article 

Refining Margins

Refining Margins

BPCL aims to double refining margins with refinery expansion.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage