East European banks get euro24.5 billion support

[February 27, 2009]  LONDON (AP) -- Eastern Europe's struggling banks will receive euro24.5 billion ($31.1 billion) worth of emergency help from leading international financial institutions to shore up their battered finances, the European Bank of Reconstruction and Development said Friday.

The bank said that it was joinig with the World Bank and the European Investment Bank to support the region's banking sector to fund lending to businesses hit by the global economic crisis.

The EBRD, set up in the early 1990s to help countries in the region make the transition from commmunist rule, will be providing up to euro6 billion for the financial sector in 2009-10, while the EIB will commit euro11 billion and the World Bank the remaining euro7.5 billion.

The financial support will include equity and debt finance, credit lines, and political risk insurance.

"We are acting because we have a special responsibility for the region and because it makes economic sense," said EBRD President Thomas Mirow.

The previously fast-growing East European economies have been hit particularly hard by the downturn in the world economy as their cheap lines of credit dried up and many export markets shrank. Many have seen their currencies slide and their debt ratings downgraded, threatening further financial turmoil in the future.

While the economies of the region have seen their heady growth rates come to a standstill, fears have grown about the exposure of many Western banks to Eastern Europe, particulary from Austria and Sweden.

"This is a time for Europe to come together to ensure that the achievements of the last 20 years are not lost because of an economic crisis that is rapidly turning into a human crisis," said World Bank President Robert Zoellick.

The three institutions said the initiative goes beyond the pure provision of finance and that all parties concerns will have to find "appropriate" solutions to the problems caused by the global economic crisis.

They said the coordinated action among themselve, the bank groups, governments across Europe and the European institutions will help the financial sector in the region emerge robustly from the current crisis.

[Associated Press; By PAN PYLAS]

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