Are Eastern Europes Economic Problems Overstated?
This week, many markets woke up to the fact that Eastern Europe was having severe problems. Moody’s said the recession in the region could be more severe than previously thought. Economies, especially in the Baltic countries, in Hungary and Ukraine are contracting at an alarming rate. This has brought to the markets’ attention that many European Banks have a large exposure to Eastern Europe. The exposure to Eastern Europe, including Turkey, is estimated to be $1.5 trillion. The problems with European banks’ eastern loans have been touted as major threat to the financial stability of Europe and the euro. It has been compared to the Asian crises of 1997, when many banks in Asian countries made loans in foreign currencies that could not be serviced when their currencies collapsed. Although the economic situation in Eastern Europe looks pretty bleak, what appears to be a major risk may have another effect. One of the best things that happened to the banking sector of EU Eastern Europe is t
