No risk of default seen in Eastern Europe: IMF

12:42, 24 February 2009
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A senior IMF official said

There is no risk of a payment default in eastern and central European countries hardest hit by the global financial crisis, a senior International Monetary Fund official said on Monday, Reuters reported.

Asked if there was a possibility of a default, IMF European Department Director Marek Belka said: "I don`t think so."

"This is something that happens last. I don`t see the danger of even the fiscally embattled (countries) not being able to make their repayments," he told an audience at George Washington University`s School of International Affairs.

Eastern European currencies have tumbled against the euro as fears rise that the financial crisis could spread and deepen, causing a crisis the scale of the Asian crisis of the late 1990s.

Belka`s views were also shared by Anders Aslund, a senior fellow for Eastern Europe, Russia and Ukraine at the Peterson Institute. Ukraine, one of the countries hardest hit by the global financial crisis was unlikely to default on its external debt obligations, Aslund said.

"Defaulting is highly unlikely for Ukraine. Ukraine is likely to weather this financial crisis as it has taken the right steps earlier on," Aslund said, but cautioned that more economic and social reform was needed.

Among the countries that have sought IMF financial aid in recent months, Hungary and Latvia are both European Union members but do not use the euro.

Belka, who was Poland`s prime minister from 2004-05, said the European Union should beef up its balance of payments fund to bolster fragile member states and those outside the euro zone.

"This is the first line of defense they should do," Belka said, adding that it was also important to strengthen the supervisory system to identify speculative bubbles.

Belka said the European Central Bank should make available swap lines to countries that are preparing to join the euro.

Earlier on Monday, EU Monetary Affairs Commissioner Joaquin Almunia said the EU may have to extend its emergency aid to more countries from central and eastern Europe but help might be needed for countries outside the euro area.

Some analysts and politicians are speculating that Lithuania and Romania may be next in line for EU and IMF aid, but Almunia refuse to discuss any names. "Right now, there are no other candidates," he said.


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