EU Commission worried over forex, banks in E.Europe

14:55, 18 February 2009
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In Romania, Ukraine, Croatia and Serbia

The European Union voiced concern on Wednesday over the fall of currencies in the bloc`s eastern European members outside the euro zone, urging their authorities to avoid statements exacerbating the problem, Reuters reported.

EU Economic and Monetary Affairs Commissioner Joaquin Almunia said he was worried about the situation of banks in central, eastern and southern Europe, pointing to EU member Romania as well as non-EU states -- Ukraine, Croatia and Serbia.

Presenting the European Commission`s assessments of EU members` mid-term fiscal plans, Almunia said the bloc was ready to help, although aid would be different in the case of EU and non-EU members.

The comments came as central and eastern Europe emerged as especially hard hit by the global financial crisis, prompting currency and stock sell-off in the region.

The Polish zloty fell to near all-time lows against the euro this week before regaining some ground on Wednesday while the Hungarian forint set a new record low. The Czech crown has also been under pressure.

"I am ...concerned about the volatility of the exchange rate in EU countries with floating regimes," Almunia told a news conference in a reference to Poland, Hungary, Romania and the Czech Republic.

He urged authorities in those countries to stop making public statements that might be harming investor sentiment and the financial market.

"I am also concerned by the possibility that some public statements have accelerated this evolution," he said.

"I would ask all the authorities ... to be careful when they make public statements because the markets are very nervous, and sometimes they don`t understand very well some of the statements," he said.

Almunia did not elaborate.


In Poland, central bank governor Slawomir Skrzypek has publicly questioned the government`s goal to join the euro zone in 2012 and to lock the zloty in the ERM2, a two-year currency stability test, in the first half of 2009.

Polish Prime Minister Donald Tusk took a rare step on Tuesday of disclosing the level of the zloty exchange rate at which the government would be ready to defend the currency. [ID:nLH310660]

On Wednesday, a senior ruling Polish party official surprised the markets by saying Poland had already started official talks joining the ERM2 with the European Central Bank, negotiations that are usually very discreet.

Almunia said he shared the concern of Austria about the deteriorating economic situation of some central and eastern European countries, which is putting pressure on local units of some big Western banks, such as Austria`s Erste (ERST.VI).

"I fully share their concern, everybody shares their concern about the risks involved in the situations of countries such as Ukraine, or Serbia, or Croatia, or Romania," he said. He added he heard of no official plan from Austria to help those countries and their banks. Diplomats say Austria has been lobbying for such aid, but has not won much support.

Almunia said the EU was ready to help those countries, although he did not elaborate how.

"We cannot give to all of them the same kind of support. We have to differentiate in terms of the different positions of each one of these member states regarding our own instruments," he said.


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